Imagine if an agent of the federal government showed up at your local grocery store and instructed the owner that the government would now determine the price of the food they sell. What would happen if a federal agency announced that it would begin dictating the price of the wood sold at Home Depot? I have no doubt the store owner and Home Depot’s board would emphatically decry this as authoritarianism that undermines our free markets and the American economy, and they would be right. I would do everything I could to put an end to it.
Some people may argue that American families lack the sophistication or resources to negotiate the price of goods and, therefore, need the federal government to intervene on their behalf. After all, how is a Missouri family supposed to negotiate with Home Depot, which, as I’m writing this, has a market cap of $377.5 billion?
Again, I find that level of government intervention in our economy to be anti-American, and I’m sure retailers of all sizes would agree. They would be forced to eliminate product lines and offer lower-quality products and services just to keep costs below the government cap. Massive layoffs would take place, and the prices of products that are not subject to the cap would have to rise just so those businesses could afford to stay open, which would harm lower-income families the most. It would be an economic disaster.
Obviously, the government is not going to start dictating the price of retail goods anytime soon. However, I don’t have to tell you that the government has no problem setting prices in certain areas, but they’re not doing it on behalf of American families. It’s done on behalf of those retailers because, according to them, Home Depot and Walmart lack the sophistication and resources to negotiate interchange fees for debit card services. That is honestly the argument they make on Capitol Hill.
As you know, the Durbin Amendment in Dodd-Frank directed the Fed to cap interchange fees on debit cards. That led to the Fed issuing Regulation II in 2011. We know what happened after that cap went into place: Access to free checking declined while the price of other banking services rose. According to studies from the Government Accountability Office and the Federal Reserve, the Durbin Amendment has disproportionately harmed low-income consumers’ access to affordable banking products. Further, the savings realized by retailers, which Home Depot’s CFO celebrated as a $35 million boost to profits in 2011, were not passed onto consumers. In fact, in many cases, retail prices went up. Not to mention, the services that interchange fees pay for, like data security, fraud detection and card replacement, were put at risk.
Despite all these facts, the Fed recently announced it is revisiting Reg II and will likely issue a rule to tighten government controls on debit services even further.
On March 5, I introduced H.R. 7531, the Secure Payments Act, which directs the Federal Reserve Board of Governors to perform a thorough economic analysis of its proposed changes to Reg II before finalizing the rule. Specifically, the analysis must measure the impact on consumers, including access to affordable debit accounts and a review of the primary beneficiary of the interchange cap.
The intent of this bill is simple: Let us understand the true effects this rule will have on everyday Americans before the Fed moves forward. Not only will that be beneficial to policymakers, but it is also the most basic requirement of responsible government.
Not surprisingly, I’ve received some pushback on this bill. This is certainly not the first time someone who benefits from big government has been upset with me. However, regardless of the industry, I will always push back on government price setting and interference in negotiations between private entities. Until someone comes to me and says they want the government to control the prices of their own products, I can’t take seriously their calls for the government to do it to someone else.
