Financial regulation hits your wallet

Moreover the “incremental cost” language creates the precedent that price controls for network transactions should be set at or near the marginal cost of running the transaction, which ignores the enormous investment required to build, maintain, and support the underlying network. That is a very frightening precedent for every network industry from railroads to the Internet, which could have capital investment destroyed by applying the same regulatory model of pushing transactional charges toward marginal cost.

The new rules are in section 1075 of the massive Dodd-Frank Wall Street Reform and Consumer Protection Act, and were added on an unusual amendment vote on May 13.  The amendment, sponsored by Sen. Dick Durbin of Illinois, got 64 votes (60 were needed) including 17 Republicans.  The Republicans who supported the amendment put the interests of politically connected merchants ahead of their professed free-market principles, and the interests of consumers.

In effect, the federal government is, at the behest of merchants, overturning a market arrangement that has served consumers well.  And they are doing it inside a bill that is supposed to be a response to the financial crisis.  The Senate still has an opportunity to reject these provisions by voting no on the deeply flawed Dodd-Frank bill.  If the bill is enacted, repealing the debit card price controls should be included in any “fix bill” worthy of the name.

Mr. Kerpen is vice president for policy at Americans for Prosperity.