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HuffPo Expose on Swipe Fees Blows the Lid off Lobby Culture in DC

There’s a conceit that Congress is where public servants go to improve the quality of American life. OK, nobody has that conceit anymore. But surely many believe Congress has a set of priorities other than what Zach Carter and Ryan Grim describe in a spectacular piece today, which is as a mediator between competing corporate interests. The story concerns the lobbying around swipe fees, which was included in the Dodd-Frank financial reform law. Under the new law, debit card swipe fees would be lowered by about 75% on average, ending a pure profit stream for banks. This snuck into Dodd-Frank courtesy of Dick Durbin, while the banks concerned themselves with neutering other parts of the law. But now, they’ve concentrated fire on this, setting up a huge lobbying fight between financial interests and retailers. This quote is emblematic of the modern Congress:

“Every time we go in to an office and tell them we’re here to talk about interchange, they cringe,” says Dennis Lane, who makes regular lobbying trips to Washington and has owned a Massachusetts 7-Eleven for 37 years. “I think there’s been more lobbying — there’s been more hours and minutes spent on Capitol Hill discussing interchange reform — than there has been talking about a shutdown of the government.”

This is the real work of Congress: determining how to divy up money between corporations. I believe swipe fee reform makes a lot of sense, because there’s no social benefit to Wall Street getting $16 billion a year for using existing infrastructure at virtually no cost to themselves. The $230 a year we all pay in swipe fees, because the fees are passed on to the customer, represent a hidden tax. So I do think there’s a good side here. But that doesn’t mean that the outsized attention, lobbying money and effort on this issue bodes well for American political life.

I can’t summarize this herculean effort from Grim and Carter, with lots of newsworthy pieces. Yves Smith has a few of them over at her site. Let me focus on Durbin’s work to flip alleged progressive organizations on the swipe fee issue:

With a vigor that would make Tom Delay proud, Durbin has confronted just about anybody who is taking the other side of his swipe fee issue, including lobbyists, civil rights organizations, editorial boards and public interest groups. Even the NAACP was on the receiving end of his ire, an official there says. An assistant Senate majority leader lobbying interest groups to switch sides may seem backward, but it reflects a Washington reality in which lobbyists, not politicians, frequently wield the real power.

“If you scratch the surface, guess what you’re going to find? They have other causes but they’re also debit card issuers,” Durbin says of the NAACP and many of the other progressive groups siding with the banks. “They have a financial interest in keeping the status quo.”

The NAACP doesn’t have its own debit card, but does have a relationship with Visa and U.S. Bank through its credit card. And its top corporate donors include players on both sides of the debate — Bank of America, Walmart, Wachovia, Best Buy and Target have all given generously in recent years. And like Ellmers, the NAACP has changed its position on swipe fee reform multiple times and is having a hard time explaining it.

In recent weeks, NAACP Washington Bureau Director Hilary Shelton has been besieged by lobbyists on swipe fees, meeting with as many as four groups about the issue in a single day. After backing the Durbin amendment throughout 2010, Shelton penned a letter to House Speaker John Boehner (R-Ohio) in March, saying the NAACP supported a study on the Fed’s swipe fee rule to ensure that it would have no harmful effects on consumers.
Immediately after the letter became public knowledge, Shelton says he got a call from Durbin’s office. Two days later, he was meeting with an official from Walmart. In April, Shelton clarified his letter to Boehner, insisting that the NAACP continues to support swipe fee reform, but wants to see a study completed prior to July 21.

With all the effort on swipe fees, I hope Durbin hardly has any time left to gut Social Security!

This is an ugly yet necessary story about how Congress really works these days. I urge you to read it if you have the time.

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boycott anyone?

David Dayen

David Dayen