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October 5, 2011

The Durbin Predator Fees

Kevin E. Dayhoff

Last week Bank of America announced it was going to further bite into the neck of the consuming public with a predatory “Durbin Fee” of $5 per month to use its debit card.


The news caused a tsunami of bad press as the consumer public reacted with displeasure to the latest assault of the extraterrestrial xenomorphic endoparasitoid business class of vampire squids.


Yes, gentle reader, journalists who write about economics for a living will be eternally jealous of Rolling Stone writer Matt Taibbi. It was he who coined the phrase “vampire squid” in a piece he wrote on April 5, 2010, “The Great American Bubble Machine.”


Although the object of his keyboard was Goldman Sachs, the term is easily applicable to any of the parasitic, predatory, blood-sucking class of corporate vampires that have grown so ginormous that they have become totally unaccountable to the public upon which they prey and feast.


Whether it is the giant telecommunications companies, the health care polyglot, the banking industry or big government, they no longer care if they kill their hosts.


As exemplified with their ravenous foraging for foreclosure mania, the “Invasion of the Home Snatchers,” the vampire squids now like to kill whether or not they are hungry. Like most parasitoids, a biological term first used in 1913 by German writer O. M. Reuter, the slow death of the host on which they feed is secondary to its lust.


At a time when public opinion of the large mega-banks hovers just above whale droppings, it is curious as to why Bank of America has drawn the particular ire of the nation’s consumers.


One may only imagine it is because Bank of America has become the poster child of Mr. Tiabbi’s vampire squid that has “wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.”


Bank of America can easily be lumped into the same horror movie described by Mr. Taibbi:


“What you need to know is the big picture: If America is circling the drain, Goldman Sachs has found a way to be that drain — an extremely unfortunate loophole in the system of Western democratic capitalism, which never foresaw that in a society governed passively by free markets and free elections, organized greed always defeats disorganized democracy.”


Then again, it was just last week that Citibank disclosed that in December it will begin charging customers $20 per month for having a checking account “unless the customer has combined balances of $15,000 (that’s not a typo) or more in checking, savings and investment accounts or loan balances.”


Moreover, according to an article in The Washington Post by financial writer, Ylan Q. Mui, “The move by Bank of America, the nation’s second-largest bank by number of locations, could clear the way for other banks to institute similar charges. Wells Fargo, the country’s biggest bank, will begin testing a $3 monthly transaction fee in five states starting Oct. 14. Chase piloted a $5 fee in February for some customers in Wisconsin but has not expanded the program.”


Although the acidic vitriol spewed on these parasitic polyglots is well deserved, any meaningful discussion in search of solutions simply must investigate the source of the radioactivity that has caused the genetic mutation, which gave birth to this predatory class. That is big intrusive government.


Be reassured that whatever systematic institutional reverence I still harbor for free markets and the engines of capitalism will not stop me from expressions of outrage against the oppressors. I take no pleasure in this. It is, at this point, a heavy burden from which I wish I could be unyoked.


Yet, for every mean thing I have said about the vampire squids, ever more salty language has been stifled by my shriveled – but nevertheless functional – sense of decency.


And I clearly understand that “the world is a vampire, sent to drain… despite all my rage, I'm still just a rat in a cage.”


That said, as Ms. Mui noted, “Banks argue that the fees are among the unintended consequences of the wide-ranging financial overhaul passed by Congress last year. One provision, sponsored by Sen. Richard J. Durbin (D., Ill.), directed the Federal Reserve to set new guidelines for the fees that banks charge merchants each time a debit card is swiped.”


As much as one may argue, as does Mr. Taibbi, that free markets breed such monsters; that is only partially true. What we have here is a bad combination of “disorganized democracy” and a market place genetically altered by the radioactivity of the unintended consequences of over-regulation.


Again, understand that it is well accepted that the reaction from big business is worse than the problem…


The Washington Examiner explained the phenomena now called a “Durbin Fee” well: “If we had a "Dim Bulb of the Year" award, we would give it to Sen. Dick Durbin, D., Ill. How better to honor someone who so ostentatiously proposes a policy with obvious unintended consequences, then gets angry when they predictably come to pass?”


Remember, it was the Durbin amendment to the mega-set of regulations called the Dodd-Frank financial reform bill which “granted regulators the authority to establish price controls on what banks could charge merchants that accepted their customers' debit cards as payment. The resulting regulations, which took effect Oct. 1, limit what banks can charge merchants to no more than 24 cents per debit card transaction,” explained The Washington Examiner.


Bear in mind, Bank of America’s reaction to Dodd-Frank is only the tip of the iceberg.


According to Speaker of the House John Boehner’s press office on August 26, 2011: “A simple scan of the Obama Administration’s current regulatory agenda indicates that the administration currently has 4,257 new regulatory actions in the works, of which at least 219 will have an economic impact of $100 million or more.”


You ain’t seen nothing yet.


. . . . . .I’m just saying…


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