Debit Card Fee Vote: Swipe Fee Showdown In Senate [UPDATED]
WASHINGTON -- The hardest fought, most expensive legislative battle of 2011 is coming to a head today in the U.S. Senate.
The question: How much should merchants have to pay to banks to swipe customers' debit cards? Although the media haven't zeroed in on the debate like a crotch close-up, the issue has dominated the calendars of members of Congress both when they're in Washington and back at home.
In May 2010, Senate Majority Whip Dick Durbin (D-Ill.) managed to secure 64 votes -- including 17 Republicans -- for an amendment that requires the Federal Reserve to cap the fees. The banks have been battling ever since to roll it back, first proposing a two year delay, then a 15 month pause and now a one year delay.
Bank and merchant lobbyists will be working furiously for the next few hours to lock down the last votes before a new amendment to delay the fee cap, carried by Montana Democrat Jon Tester, is voted on at 2:00 p.m.
(SCROLL DOWN FOR LIVE UPDATES)
Tester sat in the presiding officer's chair Tuesday as Durbin excoriated his amendment. "with some reservation, the senator from illinois," Tester quipped when giving the floor to Durbin, who responded that it was "cruel and unusual punishment" for Tester to have to to sit silently while he attacked the amendment. "But I'm going to inflict it anyway," Durbin added.
The issue is as hot as it is because it pits two powerful corporate interests against each other. "This is one of those where people have friends on both sides of it," Sen. Mark Pryor said yesterday. Pryor, a Democrat who represents Arkansas, the home base of Walmart, said he remained undecided.
At stake are roughly $16 billion a year in "swipe fees" that merchants pay to banks for the privilege of allowing their customers to shop with plastic. The new federal rules aiming to rein in those fees are slated to take effect on July 21.
The melee features a proxy leadership fight in the Democratic Party that depends heavily on Republican votes. It has major implications for the future of campaign financing for both parties.
On Tuesday, HuffPost asked Durbin about Tester's decision to attach his amendment to a legislative vehicle that is running on empty. Durbin responded with a wide, wry smile, relishing the timeworn congressional jiu-jitsu that pinned Tester without the Montana senator even realizing it. "Well," Durbin said, "we haven't had a lot of luck passing bills in both chambers."
K Street, which has lobbyists representing banks and merchants, wins either way and is grateful to Durbin for the payday, he says. "A friend of mine who is a lobbyist downtown in Washington said, 'Durbin, praise the Lord. Come up with some more ideas. This is a full employment amendment. Everybody who is a lobbyist in Washington is working on this amendment. We just love you to pieces,'" Durbin recounted on the Senate floor Tuesday afternoon. "Well, the sad reality is, it's coming maybe to a close with a vote on this amendment."
The Washington subway system, its airwaves, its trade newspapers and websites -- including this one -- have been blanketed by ads paid for by banks and merchants arguing both sides of the debate, likely costing more than $100 million this year alone.
As the vote nears, an accurate whip count is hard to come by. Lobbyists on both sides are uncertain. Senators whom The Huffington Post queried generally said they remained undecided -- often a sign that members of the herd were waiting to see which way the voting stampede might be headed. In Congress, the only thing worse than flip-flopping and angering a powerful industry is going to all that trouble for a losing cause.
Both sides publicly expressed confidence. "We aren't taking a single vote for granted, but we will have the votes we need with some room to spare," said Brian Dodge, a lobbyist for the retailers.
"Most people have told me how they're going to vote," Durbin said when HuffPost noted his colleagues hesitation. But then he hedged: "They may change their mind. It isn't over."
"If it's a 60-vote threshold, that's hard to get there," said Sen. Richard Shelby (Ala.), the top Republican on the banking panel and a strong Tester backer. The banks got a major boost this week when Americans for Tax Reform, Grover Norquist's group, designated the issue a "key" vote, meaning that breaking with the banks will count against senators tax-hawk bona fides.
Tester, with Corker's help, has been asking for months for a vote. Durbin said he could have pushed it back but decided not to. "He was going to get a vote and the question was when," said Durbin. "I could have delayed it. It reaches a point where I think the arguments have been made, so now let's have a vote."
If this debate is what Washington wants to focus on, then we're going to cover it minute to minute. Check below for live updates or take a moment to read our (very long) take on what this fight says about the current state of Washington politics.
Lobbyists, flacks and senators: email us at ryan@huffingtonpost.com or zach.carter@huffingtonpost.com with news, speculation, tidbits, whip counts or whatever else.
The six-month Senate fiasco over debit card swipe fees is finally over. Banks lost, and retailers won.
After an incredible lobbying scramble that boggled the minds of even seasoned lawmakers and political fundraisers, the final vote was 54 yeas and 45 nays, well shy of the 60 needed to clear a filibuster. But in the year since the Senate last voted, the banks managed to shave 19 votes off the merchants' total.
Read the rest here.
It turns out that Wall Street power does know some limits in the Capitol. That limit is Walmart.
The banks wound up with a slim majority of 54 votes in favor of delaying swipe fee reform, with 45 voting against the measure. But they fell short of the 60 needed to end debate and move to a final vote on delaying swipe fee reform.
The banks didn't have every weapon firing. Sen. Chuck Schumer (D-N.Y.), dubbed by friends and enemies "Wall Street Chuck," arrived early for the vote, cast his ballot on behalf of Tester's amendment but made no effort to persuade his colleagues to do the same and left within two minutes of arriving, leaving the floor to Durbin and Tester.
Forty-one Senators have voted against Sen. Jon Tester's bill to delay swipe fee reform. While the vote is still being counted, the rest will be academic and technical maneuvering. Banks lost, retailers won.
-- Zach Carter
As Lindsey Graham put it, "everyone and their grandmother is lobbying on this." With minutes to go before the vote, Tester announced the backing of the Non-Commissioned Officers Association, the Marine Corps Association and the Naval Enlisted Reserve Association (probably influenced by the large federal credit unions that serve them).
But the military is split. The Armed Forces Marketing Council just came out against Tester.
“Currently, the three military exchange systems -– Army-Air Force Exchange System, Navy Exchange Command and the Marine Corps Exchange -– are having to pay well over $100 million per year combined in interchange fees and interchange fees are the fastest growing uncontrollable expense to the military exchange systems," the council said.
-- Ryan Grim
Sen. Bob Corker (R-Tenn.), one of the sponsors of Tester's amendment, appealed to his colleagues to vote for the bill instead of making an "emotional" vote against banks -- and alluded to the extensive lobbying that has been done on the issue.
"This has been a contentious issue, a vote that, candidly, a lot of people would just as soon go away," he said. "People have friends who are retailers, people have friends who are bankers, and they hate to, quote, 'choose between their friends.' "
He said the bill is not another bank bailout, but rather a way to remain on the "balance of appropriateness" by removing some regulations from the Durbin bill.
"If this amendment is defeated it's just one more blow against our economy as we constrict lending and our financial institutions to communities and our citizens across the country," he said.
-- Elise Foley
The Nation's George Zornick notes that Durbin's lobbyist friend's joke about a "full employment" bill has a perverse irony to it:
On the Senate floor late yesterday, Durbin joked that his amendment is actually a “full employment” bill for Washington. “A friend of mine who is a lobbyist downtown in Washington said, ‘Durbin, praise the Lord. Come up with some more ideas. This is a full employment amendment. Everybody who is a lobbyist in Washington is working on this amendment. We just love you to pieces,’ ” he said.Sen. Lindsey Graham told [4] the Huffington Post that “Everybody and their grandmother’s lobbying on this” and added it was in the “top ten” of brutal and well-funded lobbying battles that he’s seen.
There’s a lot of perverse humor in Durbin’s “full employment” joke that he may not have intended, however. Unemployment nationally is over 9 percent, and 3.5 million homes have been foreclosed [5] on since the start of the housing crisis. Full emplyment is a distant fantasy for most parts of the country.
Even rosy estimates by retailers say swipe fee reductions will only save [6] households about $427 annually—hardly a life-saving amount, but yet this is the lobbying battle consuming Washington.
-- Ryan Grim
Add one more weird lobbying group to the seemingly endless list of corporate coalitions weighing in on swipe fees. In a letter circulated among Senators Wednesday, the American Beverage Licensees urged lawmakers to oppose the Tester amendment.
It's a bit of an about-face for the ABL. According to a HuffPost analysis of Federal Election Commission filings, the organization and and its members have contributed $14,161.56 to Tester's 2012 campaign to date -- minor money when compared with Wall Street donations, but significant for a coalition of local liquor stores.
From the ABL's letter:
ABL represents some of the last local businesses left on Main Street: taverns, independent restaurants and local package liquor stores. ABL members are not "big box" retailers. They don’t have huge corporate budgets. And their headquarters are not overseas or even out-of-state. They’re community businesses, some of which are probably in your neighborhood. They contribute to their local economies and provide services and products to your friends and neighbors.For years, the taverns and liquor stores ABL represents have been subjected to the explosive rise of interchange swipe fees. These businesses have no options for negotiating these swipe fees, which routinely are the second or third highest expense behind labor costs for many ABL members.
Despite claiming that an amendment to delay the implementation of the Durbin Amendment is a "compromise," it is anything but. It is not a serious attempt to find a policy solution. It is nothing more than an attempt to kill swipe fee reform.
-- Zach Carter and Paul Blumenthal
Sen. Rand Paul (R-Ky.) will vote to support Tester's amendment, though he'd prefer to repeal it entirely, his spokeswoman, Moira Bagley, tells HuffPost.
"He favors repeal and doesn't think this amendment fixes the problem, but he is voting for delay to keep working on repeal," she said.
Paul replaces Jim Bunning, who voted against the original amendment, so his vote keeps the whip count the same.
-- Ryan Grim
Two major consumer advocates and a network of small businesses weighed in today in opposition to the Tester amendment.
With the key Senate vote just hours away, the U.S. Public Interest Research Group and Public Citizen sent a letter to lawmakers urging them to vote against Tester:
"All consumers, whether they pay with cash or plastic, pay more at the store and more at the pump due to the current non-transparent interchange fee system, which is tantamount to a wealth transfer from the poor to the rich. Recent Federal Reserve research has shown that lower-income cash consumers subsidize the rewards cards of more affluent customers. Yet, retail is a highly-competitive industry where cost savings are routinely passed along to consumers. There is no reason to expect that retailers, in a marketplace where numerous sellers routinely compare and change their prices on a daily basis, would fail to pass along the savings from the unfair anti-competitive interchange system."
Another major consumer group, the Consumer Federation of America, is essentially neutral on the swipe fee issue.
Main Street Alliance, an advocacy group for small businesses that frequently supports progressive causes, also opposes Tester, saying in an email to HuffPost:
"Obviously today there is a lot at stake for small businesses with the anticipated vote on the Tester Amendment. These debit card fees are constantly increasing, and have become a major drag on the sails of small business job creation. Efforts to delay these much needed reforms are nothing more than a thinly veiled attempt to continue the domination of our economy by the banks. The exemption for small banks should allow for a two tiered system, VISA and MasterCard both said they'll implement different fee structures, and merchants are prohibited (logistically and legally) from discriminating against small card issuers. It's becoming plainly clear, delaying these reforms is nothing more than another bailout to the big banks while providing little to no relief for small banks and small business."
-- Zach Carter
Sen. Jon Tester (R-Mont.) is facing criticism from voters back home. As HuffPost's Elise Foley and Ryan Grim report, "Three-quarters of Montana voters support the swipe fee reform that Tester is trying to delay."
Read the full story here.
An interesting exchange occurred on the Senate floor yesterday when Sen. Dick Durbin (D-Ill.) stood to speak out on swipe fees. Durbin, the chief backer of swipe fee reform, was speaking as Sen. Jon Tester (D-Mont.), the chief opponent of swipe fee reform, presided over the chamber. Tester had to grant Durbin permission to speak, and then endure Durbin's characteristically aggressive attack on Tester's amendment. Check out the video below.
"With some reservation, the Senator from Illinois," Tester said, turning over the floor to Durbin.
"Mister President, there's a prohibition in the U.S. constitution from cruel and unusual punishment, and the fact that you would be presiding in the chair when I am going to be speaking on an amendment which you are offering is truly cruel and unusual, and I'm going to inflict it anyway," Durbin said. "I will try to be as gentle as I can."
Durbin was not gentle. He ripped Tester's call for a study of swipe fees, arguing the methodology would require those studying the economic effects of reform to consider lower bank executive compensation as part of the overall impact.
"They want to include in the reasonable cost for the debit card, executive compensation, compensation of bank officials," Durbin said. "How much compensation do we give those who work at the Wall Street banks? It turns out that last year it was $20.8 billion in executive compensation. They want to add that in, part of the operational cost of using the debit card. The bonuses? We're going to pay for the bonuses? That's a reasonable debit card cost?"
Durbin misspoke slightly -- the $20.8 billion figure references total Wall Street compensation, not just that of executives -- but it is nevertheless the case that "rank-and-file" financial professionals at big banks routinely make hundreds of thousands of dollars a year more than bank regulators or similarly educated professionals in other industries.
Tester's office declined to comment on both the exchange and the study. Watch the video below, courtesy of C-SPAN:
-- Zach Carter
Fresh from a Tuesday Wall Street fundraiser, Rep. Barney Frank (D-Mass.), issued a statement Wednesday in support of the Tester amendment to preserve bank profits on swipe fees.
"I think it’s a good, balanced, compromise approach," Frank said. "I support it and I hope it will pass."
Frank, the top Democrat on the House Financial Services Committee, has supported Tester's plan for some time, indicating that if the legislation can make it through the Senate, the bill will easily pass the House.
The Tuesday fundraiser was hosted by the Securities Industry and Financial Markets Association, a top lobbying group for the banking industry.
-- Zach Carter
Dick Durbin and Chuck Schumer (D-N.Y.), longtime rivals for Democratic leadership and housemates, are on opposite sides of this fight -- although Durbin has taken a much more active and public role than Schumer, who has merely said publicly that he'll be voting with Tester. (He voted with Durbin last year, which takes the merchant side down to 44 by our provisional count, still enough to hold on.)
When HuffPost asked Durbin about his housemate's position, he didn't hold back. “Listen, I know the zip code for Wall Street and I know what state it’s in," Durbin said.
-- Ryan Grim
In May of last year, Durbin beat the banks 64-33 in the Senate. This time around, it's the banks who need 60 votes, meaning that Durbin need only hold on to 41 of his allies. But that also means he can only lose 13 votes if he wants to hold on. His victory then cut across party lines: 17 Republicans voted yes. Fifteen of those Republicans are still in the Senate. Over the past few months and days, HuffPost has been quizzing senators as to how they'll vote.
North Dakota progressive Byron Dorgan retired in 2010 to head to K Street. He backed Durbin; his replacement, Republican John Hoeven, tells HuffPost he’s with Tester (Durbin down to 63). Russ Feingold’s yes vote is gone, swapped for the Wall Street-friendly Ron Johnson, who says he's undecided (62, probably). Democrat Kay Hagan, from Bank of America’s North Carolina, voted with Durbin but is now cosponsoring Tester, even while the state's Republican Sen. Richard Burr tells HuffPost he's still with Durbin (61). Florida Sen. George LeMieux is now Sen. Marco Rubio; it’s doubtful the Tea Party darling will follow LeMieux in backing Durbin (60). Idaho’s Mike Crapo supported Durbin but is flipping to Tester (59). Democrat Michael Bennet, no longer facing a progressive primary challenge in Colorado, flipped from Durbin to become a Tester cosponsor (58). Richard Lugar, a Durbin vote, is facing heavy pressure from the right (57?). Republicans Mike Enzi, John Barrasso and and Olympia Snowe say they're solid Durbin votes, but there are a number of undecideds who could get Durbins number far lower: Roger Wicker, David Vitter, Mark Pryor, Mary Landrieu, Susan Collins, Mark Pryor, John Boozman, Lindsey Graham, Mark Udall, Joe Manchin, Pat Roberts and Scott Brown.
If they all flipped, that'd take Durbin's total down to 45, still enough to fend off the banks. Who are we missing?
-- Ryan Grim
Rep. Peter Welch (D-Vt.) challenged Tester on the interests of "Rural America" in a Wednesday op-ed in Roll Call.
Welch, one of the leading voices calling to reduce swipe fees, emphasized the interests of small merchants in rural communities, an indirect swipe at Tester's repeated claim that blocking swipe fee reform will benefit rural economies. Here's Welch:
I represent a rural state and live in a small town. Small merchants make up the majority of Vermont’s small businesses and thread our state together. It is the mom-and-pop grocers, farm-supply stores, coffee shops, bookstores and barber shops where Vermonters connect, conduct business and check in on one another. They employ local people and help our economy and our communities thrive.It was these folks who first alerted me to the skyrocketing fees levied against them by Visa and MasterCard every time a debit or credit card is swiped. The data supports their stories.
The rest of the piece argues the a standard pro-retailer swipe fee case: Merchants are getting squeezed, fees just keep rising, and consumers are footing the bill.
-- Zach Carter
HuffPost's Ryan Grim and Zach Carter on what's a stake in today's vote:
The debit card battle that has engulfed lobbyists and lawmakers in the nation's capital all year will come to a head on Wednesday, with a vote set for 2 p.m.At stake are roughly $16 billion a year in "swipe fees" that merchants pay to banks for the privilege of allowing their customers to shop with plastic. New federal rules aiming to rein in those fees are slated to take effect on July 21, and as the clock ticks down to a final vote, an already bizarre Washington lobbying scramble is getting weirder and wilder.
Sen. Jon Tester (D-Mont.) has been maneuvering all year to woo the 60 votes he needs for a bill that would delay the new rules. And as of Tuesday, he may finally have done so. But he might still lose -- and not because he doesn't have the votes in the GOP-run House. It's because Tester's amendment is tethered to a bill that is itself unlikely to become law. Congress, in other words, is so broken it can't even pass bank-friendly legislation.
Thus far, it's been an epic lobbying battle pitting Wall Street against Walmart, one so heated that Washington insiders jokingly refer to it as "The K Street Full Employment Act."
Read the whole thing here.
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First Posted: 06/08/11 09:59 AM ET Updated: 08/08/11 06:12 AM ET