-
WASHINGTON — As Congress continues to struggle over whether to delay a pending Federal Reserve Board plan to cap interchange fees for debit cards, a key question remains unresolved: How far is the central bank prepared to go on its own to modify the rule?
April 19 -
Sen. Jon Tester took to the Senate floor to lobby for support of his bill to delay the Durbin interchange rule by two years, arguing it would hurt small business and community banks.
April 14 -
Fed Chairman Ben Bernanke said the central bank required more time to review the more than 11,000 comment letters it has received on its interchange proposal issued in December.
March 29 -
Sen. Richard Durbin added one more reason to quickly implement a statute that will limit interchange fees on debit cards: what's good for Canada and the European Union is good enough for the United Sates.
March 24 -
Speaking at the annual ICBA convention, Ben Bernanke assured community bankers the Fed will attempt to protect them as it finalizes its rule capping debit interchange fees.
March 23 -
The banking industry saw the first tangible signs of progress Tuesday in its fight to overturn the Durbin amendment, as lawmakers officially introduced bills that would delay ...
March 15
WASHINGTON — Although it's rare to have a financial services issue play much of a role in a local political campaign, the battle over the Durbin interchange amendment has become an unusually prominent part of the re-election race of Sen. Jon Tester.
The Montana Democrat has been deluged by attack ads protesting his bill to delay proposed debit interchange fee restrictions by two years while regulators study their impact, as his opponent seeks to portray Tester as a tool of large banks.
But the close reelection race may ultimately help the bill's chances, as Democratic leadership looks for ways to give Tester a legislative victory on a controversial issue.
In an interview Tuesday, Tester said he believes he has the 60 votes necessary to pass his bill, but acknowledges he is still seeking a legislative vehicle that could be enacted before the Durbin amendment is scheduled to go into effect on July 21.
"The truth is I think we have the votes," Tester said. "If I was going to bet, I'd say we've got the votes."
Tester is currently eyeing attaching his bill to an energy appliance measure, but he is uncertain if that will work.
"If we are dealing with an energy bill and we put it on an energy bill and it passes and the amendment passes, then we have victory," Tester said. "If the bill fails then we just fail. What's the right vehicle? The problem is going to be timing, because time is of the essence and at this point and time I don't know if anything is going to pass the Senate."
Tester is locked in a dead heat with his Republican challenger Rep. Denny Rehberg, with each having the support of 45% of Montana voters according to a Billings Gazette poll in March. Tester won his first time five years ago with only 49% of the vote, and is considered key to Republican chances to take back the Senate in 2012.
As a result, most observers said Democratic leadership, including fellow Banking Committee member Sen. Charles Schumer, who recruited Tester to run five years ago, have a vested interest in helping the Montana lawmaker win his fight.
"It will help him," said Charles Gabriel, a managing director at Capital Alpha Partners LLC. "We hear Sen. Schumer's invisible hand is involved... The fact that Tester is an endangered species is important. And there's apparently still ill will over how Sen. Durbin forced a vote on his bill last year. That, plus the political cover provided by Bair and Bernanke, all suggest that if Tester can get a vote on the bill the tide could turn and he will succeed."
For his part, Tester said comments by Federal Deposit Insurance Corp. Chairman Sheila Bair and Federal Reserve Board Chairman Ben Bernanke that the Durbin amendment could hurt small banks despite a technical exemption in the law were the reason why he introduced a bill.
"This amendment for me was generated because of answers that were given to me by Sheila Bair and Ben Bernanke and those answers were 'we don't know how to implement the exemption for banks and credit unions under $10 billion,'" Tester said. "Bingo, that's what I thought when we passed the [Durbin] amendment and that's why I asked them. Now we have to figure out how to fix it because if we don't we are going to create a bunch more problems."
But Tester seems likely to pay a political price for his support. Retailers, who are fighting to ensure the Durbin measure is not delayed, have launched a full scale assault on Tester with TV, print and radio ads. Groups including the Montana Convenience Store Association, Montana Retail Association and several national merchant advocacy groups are portraying Tester as a friend of Wall Street banks.
They are being countered by ads from the Montana Bankers Association as well as community bank and credit union groups, who have launched their own TV, radio and print ads on the issue.
David Parker, a Montana State University political science professor who is writing a book on Tester's race, said the interchange measure is probably a popular issue in the state because Republicans need Tester's seat to regain control of the Senate and advertisements are cheap.
"If you look at a lot of policy a lot of it does not resonate at the local level but to make a political point - really this is esoteric," he said. "The average consumer doesn't understand this. This is an example that you can take a policy that seems irrelevant to the average retailer and make it relevant."
But he wasn't sure if Tester had the experience to move the bill.
"If you look at Tester's record, he is not a legislator," he said. "On the one hand it might pass but on the other hand he doesn't have the experience under his belt of shepherding a bill completely to passage. This is not a knock on him. One of the things we know is the more experienced we are the more likely you are to get a bill to pass."
Steve Turkiewicz, president and chief executive of the Montana Bankers Association, said his group became involved in reaction to the negative interchange ads in Montana.
"It's more of an interchange issue than the election with the election so far off.... We ended up reacting to the ads and radio ads and activity of the supporters from Durbin and that activity in Montana," he said. "We didn't feel it was appropriate to let those wild and baseless accusations against Tester to go on unanswered."
Lyle Knight, president and CEO of $7.5 billion- asset First Interstate Bank of Billings, Mont., is among the bankers who have written op-eds in the Billings Gazette in support of Tester and his bill.
"It was really more to educate the people who are our customers," Knight said. "I think the retailers are fairly well organized. If the Durbin amendment stays intact, it's not going to put any money back in the consumers pocket…. This is actually going to hurt the consumer in the long run than help them. If we can get a couple of years delay, all the crazy stuff the banks are talking about doing, it would give them more time to be thoughtful and more consumer-minded in how we implement these changes to the Durbin amendment."
Tester dismissed the attack ads claiming his interchange position makes him a friend of Wall Street.
"This is about community banks and credit unions and informing rural America, access to capital, making sure this thing works," Tester said. "It's not about Wall Street. In fact, I'm the only Democrat who opposed the Wall Street bailout and auto bailout. I'm not a bail out guy…. This is about rural America... This is going to create more problems than it is going to solve so we need to study the problems and see if we can solve the problems and not create a bunch more."
Gabriel said Tester is betting that community bankers can help him more than merchants.
"I think he must have made the calculation that community bankers could help him in the state more than merchants and retailers could hurt him," he said. "He obviously is in a tight race, and these guys didn't get to the U.S. Senate by being poor politicians. He must have made the calculation that by becoming a standard bearer for community bankers, especially with cover from the Federal Reserve and FDIC, that the bankers could help him more in the state than retailers could hurt him."
But Ronna Alexander, executive director of the Montana Convenience Store Association, said the interchange issue could hurt Tester.
"Unfortunately for Sen. Tester, there are many more small business people affected by this issue in this state than there are small banks and that I believe will hurt him in the long run in the election in Montana because they are not going to forget it," Alexander said. "I think he's made a mistake."
Other retail industry representatives are not so sure.
"It might be one of those arcane arguments that two industries are having with each other that the public isn't registering with," said Brad Griffin, president of the Montana Retail Association. "I don't know how it's going to play out or register with voters."
Tester said the bill is not about his reelection race.
"If I made decisions or carried bills based on how it was going to impact the next election I guarantee I'd be doomed to fail," he said. "If this thing passes and it has a negative impact on me in the election, so be it; it's the right thing to do."
