Friday, May 14, 2010

Interchange Fees

I'm studying nonstop for the CFA, so my posing will be sporadic, but I wanted to make a note on the Durbin amendment to financial reform to restrict interchange fees on debit cards.
I'm concerned about giving the Fed power to limit debit interchange fees. Not because the issue didn't require regulator intervention - in my opinion, the three biggest anti-trust issues that aren't being addressed right now are the Apple store, wireless companies (AT&T, Verizon, etc) and Mastercard/Visa - but because I think this shouldn't be a power given to the Fed, it should be a FTC action. It fits every definition of antitrust-  it's a collusive oligopoly, and the problems aren't the business model but with the prices they charge and the way they pressure their "customers" - in this case, merchants - to not work with "competitors" - in this case, cash. This is CLASSIC anti-trust. The FTC is well equipped for that. The Fed is already overstretched as it is, and it has a different set of desired outcomes than the FTC. The Fed is looking for financial and economic stability, and the FTC is looking for functional markets. In this case, financial stability is not the issue, it's a functional markets issue.

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