Congress' misdirected 'probe' of debit card fees

Congress' misdirected 'probe' of debit card fees

October 21st, 2011 in Opinion Free Press

It is appalling that some of the same members of Congress who passed a law that set the stage for higher bank fees are now demanding a Justice Department "probe" of those very fees.

How did this absurd situation come about?

It started when Congress imposed caps on fees that banks may charge to retailers each time a customer uses a bank's debit card. Those are called "swipe fees."

Of course, Congress has no business telling private companies how much they may charge for providing a service to a retailer. And not surprisingly, once banks were forced by lawmakers to reduce the swipe fees, the banks faced billions of dollars in losses.

So what did they do? In order to make up for those losses, they implemented monthly fees for customers to use their debit cards in the first place.

Now, some Democrats in Congress are trying to investigate the banks for instituting the debit card fees -- even though it was congressional action that pushed banks toward instituting those fees to begin with!

What is apparent is that some in Congress have not learned the principle of cause and effect. They thought they would "help" consumers by imposing price controls. But price controls in one area only led, predictably, to price increases in another area.

Rather than accept responsibility and reverse the original bad legislative policy, however, Congress is digging in its heels and blaming the banks just for trying to recoup their losses.

Once again, sadly, government intervention in the free market has caused harmful effects on the American people, but the government doesn't want to be held accountable.