Durbin Amendment Decision — Good Law, Bad Policy

Last week, a federal district court threw out a regulation implementing the so-called Durbin Amendment to the Dodd-Frank financial sector reform law.  This amendment imposes limits on the fees banks and other issuers may charge merchants for the use of debit cards.  The amendment is bad policy, for reasons Todd Zywicki explained here.  Likely because it recognized the economic irrationality of the requirement, the Federal Reserve  adopted a fairly loose regulation implementing the amendment.  The only problem is that, in doing so, the Federal Reserve violated the relevant statutory provisions.  For this reason, Judge Leon threw out the rule.  The result will be tighter price controls on debit card interchange fees.  This may be bad policy — I believe it is — but it is what the law requires.

UPDATE: More from Richard Epstein here.