U.S. Senator Jon Tester – Interchange Floor Remarks

U.S. Senator Jon Tester
Interchange Floor Remarks
May 18, 2011


Madame President, I rise to share my perspective in the debate over debit interchange.

In a matter of weeks, the government is planning to price-fix debit card swipe fees below the cost of doing businesses.

On the surface, the plan might make sense.  But peel back the layers, and you’ll see why a whole bunch of folks – on both sides of the aisle – have raised a flag.

Now, I’m not asking to repeal these rules – or even change them.   All I’m asking for is that we take a closer look – so that we truly understand all impacts, intended and unintended.

I’ve listened to the feedback my colleagues have shared on this issue.  I’ve heard their concerns.

While it’s important to stop and examine the impact of limiting debit card swipe fees – some have said two years is too long.

I am willing to adjust my legislation to address these concerns.

Senator Corker and I have decided to shorten the timeframe from 24 months to 15 months.

Here’s how the 15 months will be used: 15 months will provide the agencies with six-months for a study.  It will provide the Federal Reserve six months to re-write the rules using that study.  And it will allow three months to implement the final rules.

15 months is the bare minimum to get this study right.  And we want to get it right.

For me, stopping and studying the unintended consequences of government price-fixing has everything to do with access to capital for small businesses and consumers in rural America.

Make no mistake, the big banks are going to do fine no matter what.  That is why I opposed bailing them out. 

But Madame President, all but two banks in my entire state are considered small “community banks” that will be affected by debit interchange.

All of Montana’s credit unions will be affected as well.

They will feel the pinch.  And they will lose because the government is going to set a price for doing business that does not cover their costs.

Let me say that again:  The federal government is going to tell these folks what price to set on interchange rates.

And it will not be enough for the little guys to compete in the marketplace.

Let me ask this: How would Big Box retailers react if we set the price of t-shirts below what it costs to make, ship and market them?

You can bet retailers would be up in arms about the government setting prices.  And telling them how to run their business.

Some have suggested that the only way to have a competitive marketplace is by capping rates.  That kind of reasoning doesn’t make any sense to a farmer like me.

When you slant the playing field against small banks, they can’t compete with big banks.  And if they go under, the businesses and consumers that rely on them are left hanging.

That, Madame President, is why a populist farmer from rural America is on the side of common sense in this debate.  I’m on the side of Montana’s small businesses.  And consumers.

Last Thursday, I asked Fed Chairman Ben Bernanke about the impact of government price-fixing as it applies to rural America. 

He’s not the only major regulator who has raised serious questions about whether the supposed exemption for small banks will work.

Last week Chairman Bernanke said – quote – “it could result in some smaller banks being less profitable or even failing.”

Let me repeat that.  In the words of Chairman Bernanke, the small banks in Montana and across America… could fail under this planned rule.

And what does it mean if small banks fail?  It means more consolidation in the banking industry.

How in the world is that good for consumers?

How is it better for a small business in Glendive, Montana, to have to ask a bank headquartered on Wall Street for a loan, instead of going to the bank on Main Street?

Are big banks going to provide the same level of service as community banks?  I think not.

Will they be able to evaluate the prospects of a small business by looking only at data… without understanding the communities that it serves?

Will big banks create strong relationships with the people in a rural community… who are looking to start a small business?

We know that credit unions are one of the few financial institutions to ever consider going into Indian Country to help bring investment to some of the most impoverished areas in this country.

Do you think that if these small folks go under, that anyone else will be willing to lend on the reservations? 

No way.

During last week’s hearing, FDIC chairwoman Sheila Bair said that this new rule is – quote – “going to reduce revenues at a number of smaller banks, and they will have to pass that on to customers in terms of higher fees.”

Rural America – especially in this fragile economy, can’t afford that, Madame. President.

Today, I want to share why a few businesses in Montana are opposed to government price-fixing.  Their stories are not uncommon.  They’re quite ordinary.

I heard from a woman named Doris Rocheleau.  She runs “Doris’s Day Care” in Great Falls, Montana.  Doris has been doing business with her community bank for nearly 30 years.

She tells me she is struggling to make ends meet.  And paying more in monthly checking fees would hurt her very much.

Also in Great Falls, there is a small business owner named Mark Voyles.  Mark owns Y-Not Trucking.

His reason for supporting my amendment to stop and study the government limit?  Because he – quote – “doesn’t want to pay more fees on his money in his bank.”

Cabela’s is a large retailer with a popular sporting goods store in Billings, Montana.

Cabela’s is wary of the Durbin Amendment because they offer their customers a rewards credit card.

They have real concerns with government price controls and what they will mean for their ability to serve the needs of their customers.

Bottom line is this: Allowing the government to price-fix debit card swipe fees is a slippery slope.

Maybe that’s why my amendment to stop and study the impact of this proposed rule has such broad, bipartisan support… from organizations like the National Education Association on the left… to “Americans for Tax Reform” on the right.

And then there are non-profit organizations like Rural Dynamics in Montana.

Rural Dynamics serves the entire state of Montana – thousands of people every year.
Their mission?  To help individual people and families achieve economic independence… To make sure that folks can earn, keep and grow their assets to reach economic independence.

Rural Dynamics is a well-respected organization.

Many of their strategies involve helping Montanans manage their assets and save for their future enabling them to access banking services.  And anything that would result in undue, higher fees would take that mission… backwards.

Rural Dynamics says simply: We want to understand the long-term risk associated with limiting debit card swipe fees.  How will it impact rural America?  How will it affect economic independence?

Just as convincing as the small businesses in my state are the Administration experts who have been tasked with trying to make these debit interchange rules work. 

Chairman Bernanke just last week said  he’s still not sure whether the small issuer exemption would work, saying – quote: “There are market forces that would work against the exemption.”

Chairwoman Bair of the FDIC has raised similar concerns about the workability of the small issuer exemption.

So has Chairwoman Debbie Matz of the National Credit Union Administration.

So has the Conference of State Banking Supervisors.

So has the National Association of State Credit Union Supervisors. 

This represents ALL of the regulators of small financial institutions at the state and national level.  Every one of them.

These are the folks tasked with keeping our community banks and credit unions vibrant and strong, ensuring that these institutions are well capitalized and making sound loans.

And ALL of them – let me say that again – ALL of them have raised serious concerns about the impact of this rule on the small financial institutions that they supervise. 

These regulators are not convinced that these rules are going to be able to work in the way that they were intended.

My friends on the other side of this debate continue to attack these folks.

They’ve said that they are shills for the big banks…that they don’t understand market forces….they they don’t understand small institutions.  This couldn’t be further from the truth. 

And no one – no one – has been able to explain to me why studying this issue to make sure that these rules do what they are intended to is a bad idea.

Let’s stop.  Let’s study.  That’s what my bipartisan bill does, Madame President.  Stop.  And study the unintended consequences for rural America and this country as a whole.

If this rule goes into effect, the consumers and businesses who rely on community banks and credit unions will pay the price.

And we can bet that many retailers won’t be eager to pass the few pennies they save… down to you.

Yet Doris Rocheleau’s monthly banking fees will go up.

Mark Voyles will have to pay more to keep his money in his bank.

The folks at Cabela’s will be asking, what’s next?  And will it hurt their loyal customers?

And thousands of Montanans who rely on Rural Dynamics will have more hurdles to jump over as they reach for economic independence.

Madame President, these stories hit home. 

They’re the stories I tell when someone asks: “Why would a populist farmer be against the government telling the small banks that drive our economy – how to do business?

I’m not asking to repeal this provision, Madame President.  I’m simply asking us to do our homework in this body, to make sure we understand exactly what it will mean for Montana – and all of America.

I yield the floor.