Idiots in Congress haven’t heard of ‘law of unintended consequences’

I have to admit that I don’t like banks. Their persnickety rules and condescending attitudes have irritated me over the years in more ways than I can list here. So this might be the first time that I’ve ever been forced to defend a bank. Well, sort of, anyway.

You might have heard the news that Bank of America is instituting a $5-per-month charge for customers using its debit card. When I first heard this, I was outraged, because I knew that the banks were compensated by getting a small slice of each transaction the card is used for. What I didn’t realize at first, though, is that Congress just intervened in the market to cut that fee almost in half, taking away a big chunk of revenue for the banks.

Previously, every time you used your debit card, the bank received a fee from the merchant of 44 cents for handling the transaction. But in an amendment to the Dodd-Frank financial law, Sen. Dick Durbin (D-Ill.) got that fee cut to 24 cents per swipe. In one giant bite, banks had their income from their debit card operations slashed by roughly 45 percent.

If you run a business, you understand what happens when income is cut in one area. If you want to remain profitable, you increase your income elsewhere. With Durbin and the rest of Congress telling banks they aren’t allowed to get the money from merchants, Bank of America (and possibly other banks) are turning to their only other source of income — their own customers.

Predictably, Durbin is angry about this, but I can’t figure out why he didn’t see it coming. If you slash the income of a business by 45 percent, the money has to be made up. Has Durban never heard of the law of unintended consequences? Apparently not, because here’s what Durban had to say about it this week on the Senate floor:

“Bank of America customers, vote with your feet, get the heck out of that bank,” Durbin said on the Senate floor. “Find yourself a bank or credit union that won’t gouge you for $5 a month and still will give you a debit card that you can use every single day. What Bank of America has done is an outrage.”

He didn’t mention, of course, that he’s the one responsible for the charge. He would rather demand a run on a bank than to explain that it was his amendment that caused the change.

The truth is that consumers were already paying this fee, because merchants were paying it with each transaction. It’s just that consumers can now see the fee they’ve been paying all along. It turns out that they prefer fees that they don’t even know they’re paying.