Several months ago I recall getting a letter from my bank, informing me that as a result of the Durbin Amendment to the “Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010” passed last year by the Democrat “supermajority,” I would no longer be getting rewards points for using my debit card. I looked up the amendment—which limits how much banks can charge other companies for debit transactions—and said to myself, “Wow, that’s really going to mess up their revenue system… I wonder what they’ll start charging for to make up for it.” When a bill has something like “consumer protection” in the name, duck.
The signs of change are surfacing: Bank of America will now be charging customers for using their debit card. Actually, the signs have been evident for months in the poor performance of big bank stocks. No one wants to invest in companies that have their revenue streams cut off by a cantankerous Illinois Senator. The new fees are causing customers to flee and protestors to get out their craft supplies.
Yesterday I watched both CNN and FOX News cover the story. The CNN coverage made a very brief mention of the regulation, which can be paraphrased as “the government isn’t letting banks ripoff merchants anymore, so their going to rip you off instead.” The FOX coverage went into more detail, and at fault in this version was the government, not B of A.
This chain of events offers a great example of policymaking in America today. Let’s examine the steps:
First, the housing bubble burst, and because it was tied to all sorts of other investments, the whole market crashed.
Next, a debate sprung out across the country over the cause of the collapse—whether it was greedy bankers, decades of poor housing legislation, or both. The media pushed more of the second explanation, and democrats in Congress rushed to save the world from corporate greed. Dick Durbin tacks on what he believes is a fair restriction on a certain bank fee, which has nothing to do with the Dodd-Frank legislation.
Then, financial markets freeze up, the economy slows back down, and banks start charging customers for things that were previously free.
Now, consumers are angry and sending in complaint letters to… the banks.
I can’t help but see government regulations as the root of the problem here, but most people are blaming the very companies that are trying to take care of their customers. And YES, that is what they do… that is what all successful companies do in order to stay in business. That’s common sense, though it would be easy to forget when listening to the president explain his agenda by making villains of anyone with authority in business.
So who do I blame in this? I blame the sad state of economic education in America. Too many people lack a core understanding of the relationship between producers and consumers, and it’s the fault of both teachers and parents. I don’t blame politicians—they’re just doing what their constituents elected them for. And I certainly don’t blame businesses, who require profit to grow. The sad thing is that unintended consequences like this are abundant in our society, and they are entirely avoidable.
Americans need a conversation on economic decision-making, from the household to the board room to the legislature. Hopefully, that’s exactly what we’ve headed into, which is why the GOP presidential nominee absolutely must be someone who can articulate the principles of a free economy and the damage done by an overreaching government.