To the shock of pundits and commentators used to the business-as-usual routine in the Washington beltway, Donald Trump is keeping his word on his campaign promises.
One of his paramount campaign promises was to reform of the job-killing Dodd-Frank legislation. Mr. Trump has already issued an executive order to re-write the bill, which he accused of damaging small business, killing the IPO market in the United States, and unjustly costing consumers billions of dollars. Now Congress appears to be ready to join the fight as free market advocates demand quick action.
Rep. Jeb Hensarling (R-Texas), the Chairman of the House Financial Services Committee, is championing the CHOICE Act, a bill that would repeal and replace Dodd-Frank, providing “economic growth for all, bank bailouts for none.” Hersarling’s legislation would end the taxpayer-funded bailouts of large financial institutions; relieve strongly capitalized banks from the “growth-strangling regulation” that slows has slowed the economy and harmed consumers; and impose tougher penalties on those who commit fraud.
The bill also contains a critical provision that is targeted at ending what is known as the Durbin Amendment, a crony provision inserted at the behest of Walgreens — the billion-dollar retailer conveniently based out of Sen. Dick Durbin’s home state of Illinois. The Durbin Amendment imposed government price controls on debit card fees that retailers are charged when consumers use their debit cards. This was a lose-lose for consumers: The revenue losses associated with the government-imposed price cap led many banks to eliminate free checking and limit awards programs like airline mileage bonuses for purchases.
A coalition of free market organizations recently released a letter urging repeal of the Durbin Amendment. They noted the obvious: “The federal government should never be in the business of price-setting, a function better performed by the market.” Signed by groups like Americans for Tax Reform and Freedom Works, the letter noted:
Durbin Amendment advocates, of course, claim the regulation aids consumers by lowering retail prices. Their reasoning runs something like this: if stores are able to pay less to accept debit cards, this savings will be passed on to consumers. But a 2014 study by George Mason University found the promised price drop never materialized. Meanwhile, as banks were forced to accept less than market rates for debit interchange fees, margins shrank, forcing a reduction in benefits for bank customers. In the aftermath of Durbin Amendment passage, consumers saw a reduction in free checking offerings and debit card reward offerings. In sum, in contrast to the promises, the Durbin Amendment has come at the expense of consumers rather than a helping them, just as we would expect when bureaucracy replaces competition.
To liberal stalwarts like Sen. Elizabeth Warren (D-Mass.), Dodd-Frank is the congressional version of the Ten Commandments. It is a regulatory bill written by god that cannot be amended or reformed. Any effort to change to law is, of course, a giveaway to “Wall Street,” “the rich,” and the “big banks.” Warren and her ilk will never acknowledge the damage the law has done to the very people that it was supposedly intended to help — small banks and consumers like you and me.
The time has come for a wholesale rewrite of the law. Efforts by lobbyists for the big retailers to keep provisions like the Durbin Amendment in the rulebooks should not stand in the way of action. The best time to reform Dodd-Frank is now, so Republicans in Congress best go all-out, guns blazing and all.