As everyone knows, the purpose of the financial regulation reform bill is to prevent another financial crisis from occurring. That must be why Senator Richard Durbin felt it so urgent to attach an amendment to the Senate version of the bill that places new price controls on the interchange fees that can be charged on debit and prepaid cards, requiring that they be “reasonable and proportional” to the incremental cost of processing those transactions. The amendment was adopted with no hearings or serious fact-finding (that I am aware of) and minimal debate and discussion.
Yes, you read that right–the amendment regulates the fees on debit and prepaid cards, not credit cards. What debit and prepaid cards have to do with the financial crisis has not yet been explained.
By pegging the price to only the “incremental” cost, the price commissars at the Fed who will be required to set these prices are required to ignore the fixed costs of operating the system. Which guarantees that debit cards will not be a money-losing proposition.
In order to offset the ruinous effect this would have on smaller banks the Durbin amendment carves out an exception that provides that any issuers of debit and prepaid cards with assets of under $10 billion would be exempted from the price control provisions. This was intended to protect credit unions and community banks from the legislation.
The problem is that Visa and Mastercard have suggested that it simply is not wise for them to set two prices for those with whom they do business–a money-losing price for their biggest card issuers and a profitable price for smaller issuers that would essentially provide a subsidy for smaller issuers to cannibalize the larger, regulated issuers. So they’ve suggested that if the Durbin amendment is adopted, they will be forced by competitive pressures to reduce the interchange fee for smaller issuers down to the rate that the Federal Reserve’s central planners will set pursuant to the law.
Senator Durbin responded with this amazing letter to Visa and Mastercard, in which he expresses his frustration when the real world won’t do whatever he tells it to do. As he explains, if Visa and MC reduce interchange fees on small issuers, that of course, won’t be his fault, but theirs.
It certainly does give rise to a handy excuse for future politicians. “Sure, we raised the minimum wage, but we specifically didn’t want unskilled workers to be laid off, so if unemployment rises, it is the fault of the businesses, not us.” “Sure, we raised taxes on everyone, but we specifically said that we didn’t want people to work less, so it is their fault, not ours.” Good intentions don’t make for good results.
Senator Durbin’s letter here brings to mind Adam Smith’s famous “man of the system” quote:
The man of system, on the contrary, is apt to be very wise in his own conceit; and is often so enamoured with the supposed beauty of his own ideal plan of government, that he cannot suffer the smallest deviation from any part of it. He goes on to establish it completely and in all its parts, without any regard either to the great interests, or to the strong prejudices which may oppose it. He seems to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chess-board. He does not consider that the pieces upon the chess-board have no other principle of motion besides that which the hand impresses upon them; but that, in the great chess-board of human society, every single piece has a principle of motion of its own, altogether different from that which the legislature might choose to impress upon it. If those two principles coincide and act in the same direction, the game of human society will go on easily and harmoniously, and is very likely to be happy and successful. If they are opposite or different, the game will go on miserably, and the society must be at all times in the highest degree of disorder.
Unintended consequences virtually always follow from an enterprise in economic planning such as the Durbin amendment. And this one, by guaranteeing that debit card issuers will now lose money, will have more unintended consequences than most. The result inevitably will be to transfer some of the costs now borne by merchants onto consumers. It is one thing to acknowledge the presence of unintended consequences and conclude that the benefits of the action exceed those costs. But it is still another to stand like King Canute and pretend that you can hold back the tide of unintended consequences just because you are a Senator.
Oops: Major typo–I meant “will be” a money-losing proposition.
Anderson says:
requiring that they be “reasonable and proportional” to the incremental cost of processing those transactions
TZ thinks it important that the fees be unreasonable and disproportionate?
Really, this kind of lazy bullshit analysis, in which “interchange fees” could be replaced with ANY OTHER REFORM OVER THE PAST 70 YEARS and it would read exactly the same, should not be something the VC conspirators are proud to see on their website. Anderson(Quote)
ShelbyC says:
I’d say pot...kettle, except that in this case the kettle isn’t terribly black. ShelbyC(Quote)
Phil Smith says:
The lazy bullshit analysis is from the guy who keyed in on “reasonable and proportionate” instead of “incremental”. Phil Smith(Quote)
t1 says:
I’m curious — does Mr. Zwicki himself, or any “think tank” or other entity with which he is affiliated receive contributions from Visa/Mastercard? t1(Quote)
Steve says:
This argument is unsound. Sometimes government reforms force companies to change things. Sometimes companies decide to change things and then blame them on government reforms. As shown over and over by his posts, Todd does not believe the latter category exists, but it does. The laws of supply and demand may be inexorable, but even so companies have a lot of choices regarding how they do business.
The other day I passed a store with a sign, “We would love to have your dogs and other pets... but state law won’t allow it, so please leave them outside.” This is a fib. They do not want your pets shedding in the aisle, it just comes across more nicely if they blame the government instead. (This is a rather harmless example of the genre, by the way.)
The claim that Visa and MasterCard, if they are forced to set a supposedly money-losing price for big banks, will have no choice but to set that same money-losing price for small banks, seems more implausible than not. Durbin thinks they are lying, in effect using the small banks as hostages in order to force Congress to drop the provision. Maybe he’s right, maybe he’s not, but there’s certainly no way Todd Zywicki knows for sure.
It is the same tactic management has used since the end of time — gosh fellas, if the union vote passes then we’re gonna have to close this plant. Sometimes it’s a statement of economic reality, sometimes it’s just a threat. Only a fool would think that it’s never done as a tactic. Steve(Quote)
ShelbyC says:
Betchya he has some kind of rewards card. Does that count? ShelbyC(Quote)
EMB says:
How is encouraging small banks over big banks not related to the financial crisis? If “too big to fail” banks are to be avoided, it’s necessary to create various new incentives to counter economy of scale. (Not that I really think this was the reason for this provision...) EMB(Quote)
Alex says:
Blech. This article is awful.
Personally, I find myself creeping towards favoring more regulation of big business after being traditionally fairly liberal (in the classical sense). Overly behemoth corporations just seem too prone to producing outcomes that are not economically desirable for society, let alone their effect on actual quality of life.
This is actually a good example. Society would be a lot better off Visa couldn’t use its market dominance to leverage all manner of undesirable actions, like forbidding merchants from making customers pay more to use a Visa than cash. So we all end up subsidizing Visa fees, even if we don’t use them. I don’t have a tremendous amount of faith that Durbin’s going to outsmart Visa’s lawyers, but I can at least applaud the effort. Alex(Quote)
roy says:
Why so much criticism of TZ’s leap to a conclusion, and so little criticism of Durbin’s? One is a blogger expressing his opinion, the other is a legislator forcing others to act is accordance with his opinion. roy(Quote)
ShelbyC says:
That may be, but the tone of the letter is a little more threatning than you’d like to see a Senator adopt when responding to comments on pending legislation. ShelbyC(Quote)
roy says:
TZ is scheduled to receive a monthly check from the government after he retires — clearly he’s in the pocket of the liberals.
Shorter Durbin: discriminatory pricing is wrong, except when it’s my idea. roy(Quote)
Anderson says:
Durbin is not “leaping to a conclusion.” There’s a little history here.
Kevin Drum has some context, for people able to imagine that Visa and MasterCard do not necessarily have our best interests at heart.
TZ is always like this — look up the posts he had when the credit card folks rewrote the bankruptcy laws. Anderson(Quote)
aeolius says:
Dear Mr Zwicki
Before commenting on this rather minor part of the Credit Card financial structure.
Lets start at basics.
Do you in general feel that the fee structure of MC/Visa is reasonable?
I do not.
In 1978, a Supreme Court case, Marquette National Bank of Minneapolis v. First of Omaha Service Corporation,overthrew the traditional ability of individual states to enforce usury laws against any lender doing business with its citizens. Thus opening up a loophole through which big national banks have been able to avoid state law interest rate caps.( The recent Whitehouse amendment to close this loophole was unable to reach the supermajority currently needed in the Senate.)
We have here a real Libertarian issue here. The will of a small minority (here the residents of South Dakota and Delaware)have been able to thwart the laws of the other 48 states which have Usury laws. And the effect on millions of Americans has been devastating.
Interestingly it is the Republican party which blocked the Whitehouse amendment. And it got little Media attention
So Sir, it seems to me that you froth at seeing the pimple while condoning the whole bare ass of shame aeolius(Quote)
Hans says:
The effect of such regulations is to harm customers.
Thanks to Durbin, and similar legislation, some of my wife’s credit cards are starting to charge an annual fee (which leads her to cancel them), and my cash-back and rewards programs are getting less generous.
Such federal meddling is already causing harm.
Federal restrictions on credit card late fees and penalties are leading to the return of annual fees for credit cards.
Such regulations are wiping out some cash-back and rewards programs.
Limits on credit card late fees and penalties force responsible card holders to subsidize irresponsible ones. Hans(Quote)
Steve says:
Why so much criticism of TZ’s leap to a conclusion, and so little criticism of Durbin’s? One is a blogger expressing his opinion, the other is a legislator forcing others to act is accordance with his opinion.
First, as I already said, I find Visa and MasterCard’s claim to be more implausible than not, and thus I think Durbin is the one drawing a reasonable inference here.
Second, as I also said, this is part of a predictable pattern for Zywicki. Every single time a corporation says they’ll do something bad to consumers if a law passes, it’s always just a declaration of the immutable laws of the marketplace. Never does it even cross his mind that companies might lie about their intentions as a tactic.
That may be, but the tone of the letter is a little more threatning than you’d like to see a Senator adopt when responding to comments on pending legislation.
I respect your opinion, but I disagree. I am sick and tired of seeing corporations get away with these scare tactics, compelling their customers to lobby against legislation through the threat that something bad will happen to them if the legislation passes.
Consider, for example, this little-mentioned story from last week regarding the tactics of the payday loan industry, which Todd has spilled much ink defending over the years:
Let’s be clear about this. The legislation they were talking about hadn’t passed yet. It was merely at the stage of being voted on in committee. Yet a customer walks in the door, a person who might need money urgently, and they lie to them and say they can’t make a loan in order to scare them into signing an angry letter to Congress on the spot. No one can defend that tactic. No one should try. Steve(Quote)
TGT says:
Raising taxes causes people to work less? Sure, if you’re raising them to 100%. Raising them a couple percent? Not a chance. Bad economic policy is bad economic policy even if it would support (or be necessary for) your desired political philosophy. TGT(Quote)
Chris Travers says:
I think that’s really misrepresenting the problem. I read Drum’s articles and concluded that I had walked into a parallel direction where Mother Jones was defending corporate America against the consumers.....
The basic issue here is that none of this necessarily addresses discount rates, which means that acquirer banks would be able to charge based on either a low-cost model or a higher cost, higher services model (keeping more of the money to themselves). As long as merchants generally accept a 3% discount rate, this will do nothing to drive processing costs down– it will just shift them around. This whole debate ends up being eventually about the balance of revenues between acquirers and issuers.
But there’s a big problem here which I don’t thing TZ mentions: the balance between acquirers and issuers is fundamentally about the balance between merchants and consumers. Merchants will pick up perks from this in some way (because banks will compete for merchant accounts more), and consumers will pay the price (because consumers will be less of a money-maker). Is this what we want?
I generally favor a consumer-centric market. I think Durbin’s amendment essentially undermines that and shifts us towards a corporation-centered market. Chris Travers(Quote)
MatthewM says:
The question is not whether Visa or MasterCard have “our best interests” at heart. The issue is whether government regulation of interchage fees between wholly private actors is justified. It isn’t. First on the basis that government should not be allowed to dictate the economic terms under which free individuals and businesses should act; and second, it is indefensible on the more pragmatic ground that such meddling will tend to lower economic benefits for all. This post provides good facts supporting the second ground, which nobody here has come close to refuting.
This whole incident is also very revealing about the thuggish garbage which currently constitutes our “ruling class.” And about its enablers. MatthewM(Quote)
lgm says:
Many (myself included) believe that stronger consumer protections on financial products would have prevented lessened the present crisis. Part of preventing the next crisis is strengthening such consumer protections. As long as you’re doing that, you might as well do it right. That means looking at the range of consumer financial products and services, and fixing them all.
I understand if you’re a laissez faire capitalist who doesn’t think regulations ever fix things. Go ahead and argue that position. But that’s not what America thinks.
Unintended consequences happen from lots of things. Oil drilling leads to unintended spills. Cars lead to unintended global warming. Debit cards lead to unintended (by the user of the card) overcharging.
I doubt this is true, but if it is, the bill is sure to be corrected before it’s finished. lgm(Quote)
LarryA says:
Maybe you should look at a few of those reforms. You’ll find that fees regulated by government tend to be higher than those regulated by competition. In this case:
So we have First BigBank and Trust and its competitor, Second Small LocalBank. Right now 1BB&T makes slightly more on debit and prepaid card fees because the much bigger number of cards they issue enable them to administer their system with lower fixed cost per card. However, 2SLB still issues cards, because though they make less on them, it attracts customers to their bank, where their smaller size gives them more flexibility and enables economies the larger bank can’t manage.
But Sen. Durbin thinks this isn’t fair, and wants to force Visa and MC to make 1BB&T charge lower fees, and thus make their cards less profitable.
But 2SLB can’t afford to charge the lower fees without losing money, because of their higher per-card fixed costs. So Sen. Durbin is exempting them from the requirement, enabling them to charge higher, but still “reasonable and proportionate” (for them) fees.
Now the unintended consequence kicks in. 2SLB’s cards will have higher fees than the 1BB&T cards. When you need a credit card, you aren’t going to go to 2SLB, because those higher fees will cost you more. Everyone will take out 1BB&T cards to save money. Many customers, having their debit and prepaid cards at 1BB&T, will also choose the convenience of having all their accounts there.
2SLB is screwed. Hence:
In order to leave 2SLB some hope of competing, Visa and MC will use the same government-regulated fees for small banks as for the large ones. Unfortunately, because 2SLB has higher fixed costs per card, they will lose money on the cards they issue. 2SLB is still screwed.
The only way the central planners can keep 2SLB in business is to raise the “reasonable and proportionate” fees high enough to absorb 2SLB’s higher fixed costs. But because
1. Government-regulation costs money and
2. Government regulation cannot be as flexible as a competitive market,
The “reasonable and proportionate” fees will have to be higher than the fees now charged.
As a result, government regulation designed to protect consumers will nail you in your pocketbook. Again. LarryA(Quote)
Steve says:
Merchants will pick up perks from this in some way (because banks will compete for merchant accounts more), and consumers will pay the price (because consumers will be less of a money-maker).
You seem to assume that consumers aren’t already paying the price for the current system. I assure you that they are, unless you think merchants are paying the fees with magical free money that they pick up at the discount window on Fridays. The reason we see the present system as more consumer-friendly is that the costs are largely hidden to the consumer.
That’s how you know that someone who makes an argument that it’s bad for annual fees to return is making a political argument rather than a free-market one. Transparency is good, hidden costs are not. Steve(Quote)
PlugInMonster says:
Once again the Marxist Fabian-Socialists can’t lay their greasy, grubby paws off private industry. PlugInMonster(Quote)
Steve2 says:
LarryA, thanks. I was having trouble understanding what was going on and how those fees all worked until I read your comment. Steve2(Quote)
Steve says:
Maybe you should look at a few of those reforms. You’ll find that fees regulated by government tend to be higher than those regulated by competition.
The business I’m most familiar with is the retail securities industry. Over the past decade, the typical commission or mark-up charged to a retail investor has declined precipitously, and it is indisputable that the principal reason has been regulation rather than market forces. The free market works pretty perfectly for sophisticated institutional investors (and for this reason, there’s effectively no regulation concerning what those investors can be charged), but when you’re talking about the typical individual investor, even the presence of cheap online brokerages that will process trades for a couple bucks did not have nearly the downward impact on prices as did regulation by the SEC and FINRA.
Some industries have much more transparent pricing than others. It makes a huge difference. Steve(Quote)
Huh? says:
Steve,
I don’t doubt your expertise, but I don’t quite understand your claim. Given the history of deregulation of brokerage commissions from 1975 onwards, it would seem fairly clear that regulation has not exactly been the driving factor behind substantial declines in commissions (see Schwab, et al), at least for equities. Which regulations are you referring to regarding which fees for which financial products? Huh?(Quote)
Tatil says:
Yes, I am curious as well. The recent regulations forced the brokers and exchanges to use “to the penny” prices, so that reduced the mark-ups automatically from 6(?) pennies per share or so down to 1 penny per share, but I thought online brokerages made a much bigger difference before then. Which other regulations were there? Tatil(Quote)
Chris Travers says:
I accept credit cards. I am aware of discount fees. I just don’t think that most merchants, particularly smaller ones, will see much of a benefit from lower interchange fees in terms of lower discount rates. Instead the acquirer rate will probably rise to fill in that gap and banks will start treating merchant accounts much better.
Remember interchange rates are wrapped into discount rates. A merchant doesn’t see them. Also remember that a service is worth what someone will pay for it.
Accepting credit cards is generally worth the discount rate and transaction charges. If it wasn’t, you’d see a lot more businesses refusing to accept them. Also remember that if everything tended towards marginal cost, lawyers would take home as much money as day laborers..... Chris Travers(Quote)
Urso says:
This, I think, is a feature rather than a bug. Urso(Quote)
raoul says:
I really can’t believe companies charge you to use your own money-that and the lesser amount of protection vis-a-vis a credit card is the reason I have never gotten one. When the companies claim the higher fees are needed to support the reward programs then you know the game is over. raoul(Quote)
Dilan Esper says:
Thanks to Durbin, and similar legislation, some of my wife’s credit cards are starting to charge an annual fee (which leads her to cancel them), and my cash-back and rewards programs are getting less generous.
Translation:
Thanks to Congress, my wife is being forced to pay the actual cost of providing her with a credit card, rather than being able to shift that cost onto other cardholders. She is so upset at having to pull her own weight that she has canceled the cards.
[As for the lack of “rewards”, I defy anyone to tell me with a straight face that consumers were getting more back in “rewards” than they were paying in increased prices, fees, and interest.] Dilan Esper(Quote)
ShelbyC says:
Aren’t cardholders who have become higher risks shifting their costs onto her? ShelbyC(Quote)
Dilan Esper says:
Shelby:
No. People who pay their bills in full every month cost the banks money. If they get “rewards” they cost even more.
If everyone were paying the true cost, Hans’ wife would need to pay a fee. Dilan Esper(Quote)
Stephen Lathrop says:
Sounds like they have it sorted out. Obviously a mistake to let the blogger force others to act in accordance with his opinion. Stephen Lathrop(Quote)
1040 says:
does anybody think tz has any credibility after the tripe he wrote about the housing bubble (or as he saw it, the lack of one)? 1040(Quote)
Mac says:
Yes!
I watched the hearing in Congress when Congress was told that if they passed that legislation, the customers who pay their bills on time will have to subsidize deadbeats. Congress ignored them and everyone got charged higher rates and fees. Of course, it is all “evil” bankers and Wall Street” types who are at fault. Not, of course, Congress for failing to listen and take what the credit card issuers were saying into account. This is just more of the same.
I suggest that someone look into who has made recent campaign contributions to Durbin. Or, is this just a shakedown to get campaign contributions from this industry in lieu of regulations?
The people in Congress are too stupid to find their way out of a paper bag, let alone write competent and meaningful regulations. Remember the Georgia Congressman who thought Guam would tip over if we added 20,000 more Marines? No, he was not joking. Mac(Quote)
geokstr says:
Gosh, you think this “hiding” trick might work in other arenas too, like, say, taxes? Withholding vs one annual payment, “employer share” of FICA/Medicare, real estate taxes buried in mortgage payments and rents, corporate taxes built into prices paid by consumers, a small percent on every purchase, a giant percent “hidden” in the price of gasoline, alcohol and cigarettes and the high prices then blamed on the evil corporations, etc, ad nauseum. And now there’s lots of talk about adding the really well-hidden tax, the VAT, on top of all the rest. Maybe we should look at that as being “taxpayer-friendly”, eh?
The Collectives in Russia and China and other Marxist wonderlands do it up right. They claimed to not have any taxes at all. Just reduce the wages paid to their liberated workers to pennies a day, and don’t take any taxes out. See how easy it is to have a gargantuan government without any taxes at all?
The ultimate free lunch. geokstr(Quote)
Steve says:
Given the history of deregulation of brokerage commissions from 1975 onwards, it would seem fairly clear that regulation has not exactly been the driving factor behind substantial declines in commissions (see Schwab, et al), at least for equities. Which regulations are you referring to regarding which fees for which financial products?
I’m talking mainly about stocks. Through the first part of the last decade, commissions were more or less determined by the so-called Five Percent Rule (NASD IM-2440), which wasn’t a rule so much as a set of guidelines. Everyone understood, though, that 5% was as high as they would let you go without trouble.
As time went on, the rule itself remained unchanged (I understand the proposed revision spent many years going through the SEC process), but the regulators engaged in a lot more of what I like to call back-door regulation, where they just tell you on an ad hoc basis when you’ve gone too high. Not the optimal way of doing things, to say the least, but it worked on the whole in that word would get around the industry and everyone would pretty much recalibrate their thinking to the new ad hoc rules. During this period, I very rarely saw my broker-dealer clients adjust their commission schedules in response to pure market forces; it was almost entirely regulator-driven.
Another thing that happened on an ad hoc basis during this period was the virtual elimination of markups on listed securities. Markups (which are more commonly used for bonds) are just a different way of expressing the commission; instead of paying a commission of 5% which comes out to so many dollars and cents, you pay a markup/markdown of however many cents per share which comes out to so many dollars and cents. The regulators came to believe there was no good reason to express it as a markup, other than in an effort to obscure the true cost, and so on an ad hoc basis they started giving firms trouble for overuse of markups. This may have become a rule at some point but it was enforced by the regulators a long time before it became a rule.
Ultimately the regulators came to a point where they started to frown on the concept of commission-based accounts altogether, presumably because they are too prone to churning and the customer doesn’t realize how hard it is to beat the rake. So firms would get audited and even though the customers were perfectly happy paying the commission schedules, the regulators would give them a hard time for not having more customers in fee-based accounts.
Although I wish there had been a more rule-based approach to give everyone better guidance, I think all of this was pretty much pro-consumer and very little of it would have happened in the absence of strict regulation. About the only “choice” consumers were denied was the ability to pay high per-trade commissions to a savvy broker who researches stocks day and night in order to provide you with awesome picks that other brokers don’t know about. The guy who can do that well enough to justify the high commissions basically doesn’t exist. Anyway, this is all pretty much a 30,000 foot view but I hope the basic point comes across. Steve(Quote)
Steve says:
Gosh, you think this “hiding” trick might work in other arenas too, like, say, taxes?
Yep, absolutely. Steve(Quote)
Splunge says:
Lab rats are smarter than Dick Durbin. The man is an embarassment to his genome. Splunge(Quote)
Cornellian says:
The problem is that Visa and Mastercard have suggested that it simply is not wise for them to set two prices for those with whom they do business–a money-losing price for their biggest card issuers and a profitable price for smaller issuers that would essentially provide a subsidy for smaller issuers to cannibalize the larger, regulated issuers.
And of course they’d never, ever threaten something they didn’t really believe just in order to try to intimidate Congress into backing off from a measure they didn’t like. And I’m sure someone smart enough to be a VC blogger would never be so gullible as to accept that threat as unquestionable truth. Cornellian(Quote)
Steven Appelget says:
We know what Faust got. What did Zywicki get? Steven Appelget(Quote)
Chris Travers says:
Of course, if they don’t set a single rate, the overall discount rates merchants pay aren’t going to go down. This would make acquirers more money, and it would allow small issuers to continue making the same rates.
If I were a small bank, I’d like that arrangement quite a bit. Chris Travers(Quote)
Chris Travers says:
One moment he wished would last forever? Chris Travers(Quote)
The Unbeliever says:
And of course Dick Durbin wouldn’t lash out at the whipping boy of the moment, threatening them with investigations** and such, when they merely pointed out regulations have unintended consequences!
I’m confident someone with the intelligence of the average Congresscritter would never get economics and fundamental pricing theory so very, very wrong. Surely this letter is a plant by some evil Republican operative... hey, where’d Karl Rove sneak off to?
**From the text of his letter:
It’s the political equivalent of nice army base... we wouldn’t want anything to happen to it! The Unbeliever(Quote)
King Canute says:
“All the inhabitants of the world should know that the power of kings is vain and trivial, and that none is worthy the name of king but He whose command the heaven, earth and sea obey by eternal laws.” King Canute(Quote)
David Welker says:
This whole “unintended consequences” line constantly used by certain libertarians is lame.
If the consequence is known and predictable, it is not an “unintended consequence.” It is a known cost.
As for having a debate, what a waste of time. We don’t need to have a debate to know that Todd Zywicki is going to try to carry the water of these financial institutions no matter what. Like he always does. It is so predictable, it is sad.
The day that Todd Zywicki says something that is not utterly predictable will be the day that it is worth debating him on anything. David Welker(Quote)
Largo says:
And what did you get? Largo(Quote)
H. Lime says:
So if there is no point in having a debate, and you won’t even debate TZ because he is a shill for the financial industry, what’s the point of your post? Why not just ignore him?
I really wish the VC would have a more aggressive commenting policy and eliminate personal attack comments like these. H. Lime(Quote)
Andrew J. Lazarus says:
Say, did we ever manage to make flyer miles and rewards programs taxable to the recipients for charges made on business accounts? Andrew J. Lazarus(Quote)
BobDoyle says:
I really don’t understand why these pikers in the Senate and House don’t get off their duffs and do real legislating. I mean really, why haven’t these idiots made cancer illegal yet? And what’s with all this complicated nonsense about cap and trade, just make a law that global warming cease. And this gravity thing gets me down sometimes. Ya, I know we need it, but couldn’t we pass a law cutting it in half or something? BobDoyle(Quote)
Chris Travers says:
I don’t think the consequences are unintended. They’re just a giveaway to big box stores. Chris Travers(Quote)
Andrew J. Lazarus says:
Costco Warehouses don’t accept credit cards (except their own partnership with AmEx). In any event, small businesses seem to be in favor of this law. It seems to me that it’s the big banks, always looking for a way to nickel-and-dime a cushion for themselves to cover speculative losses, that are behind the opposition. Andrew J. Lazarus(Quote)
Chris Travers says:
My small business isn’t in favor of it. Of course, my small business mostly does financial software development and ends up having to have much greater knowledge of how financial planning has to take place in these areas than most. (IANACPA, but I find my accounting standards tend to be higher than most CPA’s I ask for advice.)
Of course speculative losses will be covered. They’ll be covered in one way or another. It’s just a question of how and who pays the immediate bill. The problem with this bill is it adds MORE uncertainty to questions of speculative losses rather than less. If MC/Visa decide to have a two-rate track, acquirers will assume every transaction costs them the higher rate. If it’s one rate, it squeezes out the little banks. There’s no two ways about it. This becomes especially true with lower-volume accounts. If the merchant accounts prove more valuable, then the money will be spent on programs that merchants value in order to compete over these accounts.
Acquirers already have tiered rates for volume, and I don’t see the lower-volume tiers changing much due to this.
So what this means is that if you have a truly high-volume account, the merchant may be able to negotiate a better rate, but smaller accounts probably won’t be able to. It’s worth noting that I work with customers and recommend credit card payment gateways. I will say that we recommend more higher-priced options than lower-priced options just because the services are better, and usually worth paying for. Furthermore the very high priced options (for high-risk customers) aren’t going to be affected by this.... Chris Travers(Quote)
Glen says:
Mind-reader! Glen(Quote)
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