Setting the Record Straight

Pogie at Intelligent Discontent has a great piece up explaining how Jon Tester is looking out for Montana community banks. You should read it, as it explains that Tester’s position on the swipe fee issue is about keeping Montana banks and credit unions from failing.

The issue is complex, and the way it has been reported hasn’t helped.  Jon Tester is siding with Montanans in an issue that pits the well-funded Walmarts of the world, who stand to benefit from the fee change, against Montana consumers and small businesses, who will lose out.  Lowering the swipe fees to a level below the cost of administering the transactions would put smaller banks and credit unions out of business–or force them to drastically raise other costs for them to stay open.  The Chairman of the Federal Reserve says our small Main Street banks and credit unions could fail if this government price-fixing moves forward.

That leaves fewer banks and credit unions in Montana – we’d be left with only a couple  of banks, and those would likely be of the big Wall Street variety. This hurts Montana customers and businesses.

It’s like what Montana farmers have seen with consolidation in agri-business and family farming in rural America.  When big agri-businesses consolidated, they were able to dictate to farmers an ranchers how much (or rather how little) they would pay for the products of family farmers and ranchers, and because there was no where else to go, family farms had to take it.

With banks, we’d have a similar problem.  With less to choose from, we’d give the fewer big banks that remain more power to set and raise prices on services we need, checking accounts, car loans, mortgages, and nowhere else to go if we didn’t like what they were charging.  So it’s a good thing that Tester’s doing what he is doing – even though it’s hard to explain.


27 Comments on "Setting the Record Straight"

  1. Well, let’s see what happens now. I suspect that no mom and pops, no credit unions are going to go out of business. Tester likes to pretend that he hasn’t gone all DC on us and forgot who brung him to the dance, but he has. That happened around December of 2006.

    And anyway, isn’t public policy about working for the big guys but making it appear that it’s for regular folks? This scam only fooled mainstream Dems.

  2. I have seen a couple of additional points of confusion out there on this issue on other blogs and the twitter.

    First, there was a poll that said Montanans are opposed to Tester’s position–did anyone bother to follow the money? It was commissioned by the National Retail Federation (Wal-Mart, Home Depot and a host of other Big Boxes).  The questions were outrageously loaded… along the lines of “Would you rather give 12 cents or 44 cents to Big Banks every time you use your debit card?”  that’s worse than the Chamber of Commerce polls! (Would you rather drill in some seldom visited backwater or have your children grow up to be poor and illiterate?)

    Critics keep pointing to the fact that small banks are technically exempted from the 12-cent limit.  The problem is, the exemption is window dressing.  If you allow a small bank to have higher fees while big banks have lower fees, the industry standard will automatically shift to the lower fees–thus putting the small guys at a disadvantage via market forces. 

    This issue doesn’t break down along party lines, as you can see from the vote, but that didn’t stop Rehberg from using progressives to attack Tester once again.

  3. Wow, Mark. That’s one of the snarkiest Straw Men you’ve ever built. I am glad to know that only “mainstream Dems” were fooled. That certainly explains the vote of “mainstream Dem” Bernie Sanders.

    But still, Yay! Wells Fargo lost and Wal-Mart won. What exactly should we be celebrating again?

  4. So I guess all these so called true progressives will be out there calling out Bernie Sanders for being a sell-out no-good Republican too! I know how true progressives love Walmart. (sarcasm) The thing is, how do these people keep getting played by Rehberg. I know there are some smart people out there who got this wrong, but this isn’t the first time this has happened. It’s embarrassing.

  5. The big get bigger and small die out that my friends is the Republican way.

  6. Where’s Denny’s position on all this I wonder? For rural, community banks or the the ‘Too Big to Fail’ friends?

  7. Matthew Koehler | June 9, 2011 8:28 AM at 8:28 AM |

    Sen Bernie Sanders voted against the Tester amendment, right? Do you really think he voted against the amendment because of his undying support of Wal-Mart? And I fail to see how in some minds those progressives who are upset with the Tester amendment are being “played by Rehberg.”

    Sure, we can simply boil this issue down to Wells Fargo/Visa/Mastercard lost and Wal-Mart/Home Depot won. Hmmm…tough to pick sides in that battle.

    However, having worked plenty of retail jobs in my life, I was always struck by the way all the mom-n-pop businesses I worked for would always go to great lengths to avoid having to take credit cards from customers because of all the fees the credit card companies would collect from the sale/transactions. On the flip side, during the college school year I worked retail at an outlet mall near campus (for Eddie Bauer, Gap, North Face), and never once did I hear any of the managers for these big retail companies complain about the credit card fees or try and get us to convince customers to pay with cash or check. Two of my good friends run a mom-n-pop Missoula bike shop and they too are pretty adamant about taking cash/check over credit cards because they lose so much money in credit card fees.

    I understand how everything done over the next 18 months by Tester or Rehberg will be viewed in the context of the 2012 election; however, I’m really not sure there are any mom-n-pop businesses out there today who are crying over the fact that the Tester amendment failed.

  8. Dude this isn’t about credit card fees to businesses. Figure out what the topic is before you open your mouth.

  9. This is about retailers vs. small banks. Folks in rural areas generally supported the small banks. This Koehler individual is constantly wrong.

  10. Matthew Koehler | June 9, 2011 8:54 AM at 8:54 AM |

    So, Corrina, are you saying that Bernie Sanders supports large retailers over small banks? Isn’t Vermont (pop. 625,000) generally considered a “rural area?” Yeah, that Bernie Sanders…always fighting for the big guy and against the little guy!

  11. It’s not that mainstream Dems are played. It’s really just how easy it is to play them. Right Corrina?

  12. The retail industry pumped MILLIONS into this PR effort in order to paint this as “Tester hates mom and pop businesses and is siding with Big Banks.” Of course that’s not true. Tester’s amendment proposal was only against limiting swipe fees to 12-cents per transaction because it would devastate “small issuers” (community banks and credit unions, defined as having less than $10b in assets. In Montana, all but US Bank and Wells Fargo are considered small issuers.) 12-cents-per-debit-transaction is less than what it costs small banks to offer debit cards, meaning they would have to discontinue debit cards, or raise fees elsewhere. Then those banks become less competitive with Wells Fargo and US Bank and… as even Ben Bernanke himself said… the small banks could even go out of business!

    Of course the Big Banks support Jon’s position because it’s good for them. That’s why they’re funding their own multimillion-dollar PR effort to support it. But that’s not why Tester is on this issue, it’s because he’s a rural state senator in a state where small banks are vital to our economy. I’m sorry that all issues aren’t as simple as a two sentence bullet point.

    • Banks are guarded about that information, so you can’t possibly know what it costs them to process a transaction. If indeed small rural banks are threatened by this legislation, they ought to be forthcoming on their costs, but they are not.

      Credit unions are a little more willing to share data, and say that it typically costs them in the area of 2 cents per transaction. Swipe fees have been a gold mine for banks, and since they don’t compete with one another, there is no market pressure to bring costs down.

      Again, Tester is gaming you.

  13. Matthew Koehler | June 9, 2011 9:23 AM at 9:23 AM |

    Snip: “I’m sorry that all issues aren’t as simple as a two sentence bullet point.”

    Yeah, like Tester’s mandated logging bill, right Corrina?

    And is Bernie Sanders not a “rural state senator” that has made an entire career out of fighting the good, progressive fight?

  14. The discussion of this issue doesn’t make sense.

    Small community banks don’t issue and administer their own debit cards: they contract with service providers to do this, then they use the swipe fees to use debit cards as a revenue source. Compared to the costs of hiring additional tellers, debit cards are an amazingly inexpensive way to disburse the customer’s own money back to them, and in recent years, (especially when coupled with overdraft fees and penalties) have been a growing source of revenue for banks.

    In all the articles that have been written about this issue, I have yet to see a breakdown of what it costs to distribute and administer debit cards (as opposed to doing away with ATMs altogether and going back to the days of when you could only get your cash from a teller). I suspect these costs vary dramatically based on volume issued, and can see where small banks would pay more per unit than large banks. But if I add up all the debit card transactions my own family uses in a year, multiply it by .12 per transaction, I have a very difficult time figuring out how a bank could fail to make money on our debit transactions, (in our case, it probably averages out to over $120/yr). The only scenario where this doesn’t work is when the bank has had to reissue debit cards due to security breaches in its systems (or those of participating retailers). And even then, I can’t imagine they lose money unless it happens a couple times each year.

    To me, this was a smoke and mirrors battle between lobbying groups representing retail merchants (keeping in mind that retail represents one of the largest employment sectors in Montana’s economy) and financial institutions (i.e. Visa and MasterCard especially, but debit-card issuing institutions as well).

    That Tester chose to champion the cause of bankers simply shows that he knows who pays best in DC. Unfortunately for him, bankers tend to pay best to friends who deliver.

    I suspect that given the number of retailers v. banks here in Montana, that it was a good thing that his bill didn’t pass. But I have no way of knowing this without seeing the actual numbers and economic models involved. Given the other challenges facing our nation, I would have much rather our Senator focus his efforts on more fundamental and pressing issues: transparency and accountability in financial institutions, commodity markets and the federal government; improving transparency and accountability in DHS; figuring out how to reduce the size of our defense expenditures; improve the rigor of federal agency accounting and oversight functions, use his position on appropriations to bolster R&D in renewable and clean energy technologies, and advocate for the US adoption of the UN Declaration on the Rights of Indigenous Peoples. Ensuring the profit margins of one line of banking business should be pretty low on his list of priorities.

  15. Indeed Bob-you don’t know. But those most impacted by the issue, the small credit unions and banks, do have the analyses and they urged Tester to oppose the bill. I trust the people who have the most at stake

  16. Mr. Koehler, with Cowgirl’s permission: The format at LitW is difficult (though i link to it at my own pile) for a ignoramus like myself to navigate.

    Did you see this story this morning? Your input would be appreciated as historic runoff from beetle kill isn’t addressed in the US Army Corps of Engineers’ Master Manual.

  17. Matthew Koehler | June 9, 2011 11:50 AM at 11:50 AM |

    Larry, Not sure what the format at LiTW has to do with 1) this blog post on the swipe fee legislation or 2) with me…I was removed from front page posting status over there a few months ago.

    Regarding the story, no I didn’t see it. Thanks for sharing…again, not sure what bark beetles have to do w/ swipe fee legislation.

    I’ll try and track down the actual study, as the article really doesn’t say too much. However, it does mention that pine beetle outbreaks may trigger earlier snowmelt.

    Yet, it’s my impression that the current flooding around Montana isn’t due to “earlier snowmelt” (it’s almost mid-June after all) but do to 1) record breaking snowpack in many locations and 2) record breaking rains over the past week.

    Are you really suggesting the current flooding around Montana is due to bark beetles?

    The study author also said the bark beetles could increase water availability, which I thought for arid Montana (and much of the arid interior West) was a good thing….current floods not withstanding.

    • Matthew,

      I know that this topic is actually off topic but, in truth, much of the snow hasn’t even started runoff. In fact, according the article printed in this week’s Dillon Tribune, snow levels are actually rising because of the unseasonably cold and wet weather we have been experiencing in West and Southwest Montana. The Floods on this side of the state are only going to get progressively worse – unmanagably worse if there is a sudden warm snap – and many in Western and Southwestern Montana are being told to prepare now for some interesting times.

      • Matthew Koehler | June 9, 2011 8:30 PM at 8:30 PM |

        Moorcat: I’ve been watching the weather/snow pack/river situation too. I’m addicted to and all the snowtel site info, etc. I’ve always been into the weather, even as a kid. Anyway, I agree that this year much of the snow in the high country hasn’t even started runoff. I disagree that the reason for this is some areas of bark beetle mortality, which are fairly small and isolated, especially when taken in the context of entire watersheds on the landscape level.

        • Thanks for clarifying. I misunderstood your responce. Things are really tense here in Beaverhead County with rivers already in flood stage before runoff begins. My wife works for the B-D National forest and they are VERY concerned right now. They just got a report that the new snow pack dropped this last week has increased snowpack beyond 200% and rising. This does not bode well. I am VERY glad we are not anywhere near floodplain.

  18. Cowgirl is a great sport; my apologies to her for jumping the shark. interested party has a series on flooding; you are welcome to post there. 15% seems substantial, especially in light of Senator Tester’s forest bill.

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