Wednesday, April 13, 2011

Senator Durbin Lashes Out Against Jamie Dimon

Senator Dick Durbin is a key player behind the new regulations that will control what fees banks can charge businesses as transaction fees when debit cards are used. In fact, the regulations are detailed in what is known as the "Durbin Ammendment" the the Dodd-Frank Act.

It is amazing that we are so far from free markets that no one is outraged at the fact that Congress is now regulating such a micro piece of the economy as these fees. Why shouldn't banks be able to set any fees they damn well please?

Senator Durbin has a different view. Durbin wrote to JPMorgan CEO Janmie Dimon:
There is no need for you to threaten your customers with higher fees when you and your bank are already making money hand-over-fist.
Of course, banks are "already" making money "hand-over-fist" because of the bailouts, implied bailouts and special trading privileges that big banks get with the Fed. You would think Durbin would understand this, since it appears he adjusted his portfolio to gain from the benefit Berkshire Hathaway received from these bailouts.

Dimon is rightfully upset by these new regulations. Jamie is usually on the beneficial end of government interventions in the economy. This time he is getting smacked around and he doesn't like it. This is what he wrote in his annual shareholder letter:
The Durbin Amendment was passed with no fact-finding, analysis or debate, had nothing to do with the crisis and potentially will harm consumers….It is an example of a policy that has little basis in fact or analysis. …The harm will fall largely on consumers; banks will be forced to lose money on debit interchange transactions and likely will compensate by increasing fees in some way for deposit customers…..The Durbin Amendment is price fixing at its worst. It is arbitrary and discriminatory – it stipulates that only large banks (those with assets of $10 billion or more) will be affected by its price fixing.

Jamie has a point, though when regs appear with little fact-finding or analysis that hinder small banks, to the advantage of big banks, Jamie doesn't comment.

In any case, it looks like we have a nice battle going on between an elitist banker and a powerful Senator. It should be noted that the elitist bankers usually win these battles, ask Eliot Spitzer.

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