published Monday, July 25th, 2011

Cause and effect on 'price controls'

Now that federal regulators have stepped in to dictate the fee that banks may charge to merchants for transactions using the banks' debit cards, some unintended financial consequences have started surfacing.

Visa Inc. says its earnings and revenue will be several percentage points lower in the next fiscal year because of Washington's price controls on debit card fees. You may not care much about a big corporation like Visa, but lost revenue and earnings can mean lower dividends for investors, including many workers who have 401(k) plans. Plus, many banks are expected to make up the lost fees by ending free checking or imposing fees in other areas.

Do these negative effects give you any confidence that the federal government's judgment is superior to that of the free market?

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