Bernanke on Dodd-Frank Fallout: Debit Card Fee Caps Threaten Small Banks

Diane Katz / May 17, 2011

Federal Reserve chairman Ben Bernanke has delivered yet another ominous prediction about Dodd–Frank fallout, telling the Senate Banking Committee last week that government dictates on debit card fees “could result in some smaller banks being less profitable or even failing.”

Although not the first to recognize the problem, the Fed chairman’s remarks certainly strengthen the case for eliminating the ill-conceived “swipe fee” regulations.

The fees (a.k.a. “interchange fees”) refer to bank charges paid by retailers to process debit card transactions. At the urging of some of the nation’s biggest retailers, lawmakers fashioned a provision within the vast new regulatory regime known as Dodd–Frank that requires the central bank to impose new limits on the fees that have averaged about 44 cents per transaction (or 1.14 percent of total purchases). (more…)