In this very nice op-ed, Todd Zywicki – my GMU colleague over in the law school – recently explained how Sen. Richard Durbin’s efforts to have government set debit-card interchange fees will harm consumers.
I sent this letter to the Washington Times in response to Sen. Durbin’s Orwellian nonsense:
All tyrants, from the monstrous to the petty, abuse language in their attempts to beautify their bullying. Sen. Richard Durbin is no exception.
Durbin proposes legislation that, in his words, “ensures” that the interchange fees charged by banks whose customers use debit cards “are reasonable and linked to processing costs” (Letters, June 13). In a recent op-ed, my colleague Todd Zywicki accurately described Durbin’s legislation as imposing “price controls” on this segment of the payment-card industry (“Durbin regulations are aimed at your wallet,” June 2).
Durbin denies the charge: “Contrary to the [Zywicki] commentary’s assertion, my amendment doesn’t create price-fixing; it corrects it.”
Overlook the fact that Zywicki accused Durbin, not of creating price-fixing, but of imposing price controls. (These two things are very different, but I reckon that a busy senator hasn’t the time to avoid conflating them.) By Durbin’s own admission, his legislation prevents these private companies from charging whatever prices the market will bear. That is a price control, period. And this fact isn’t changed in the least by even the most heartfelt belief that the prices set by government will be more ‘correct’ than those determined by the voluntary contractual arrangements of the parties to the transactions.
Donald J. Boudreaux