The Fed should refrain from putting its thumb on
the scales to determine which businesses boom
and fail.
Americans on both ends of the political spectrum
frequently voice frustration over the growing
power of corporate interests. Understandably
so. These conglomerates exploit their market
power with government officials to secure
subsidies, tax benefits, and favorable deals
that limit competition. A recent proposal from the Federal Reserve, Regulation II -
which provides an unfair landscape to
retailers like Amazon and Walmart, increasing
profits to an even greater degree off the
backs of Main Street and our most vulnerable
communities - is a particularly egregious
example.
In 2011, as part of the Dodd-Frank Wall Street
Reform and Consumer Protection Act, Congress
issued a rule limiting the interchange “swipe”
fees that banks and credit unions could charge
corporate America for processing stores’ debit
card transactions. Congress said this price
cap would help Main Street and underserved
communities because the corporations in
question would pass the cost-savings they
secured onto their customers in the form of
lower prices and fees. At the time, the
Federal Reserve was skeptical, but it still followed the legislative branch’s
lead and finalized the proposed rule.
Time proved the Federal Reserve’s fears
well-founded: these projected Main Street
savings never materialized. Instead, the big
box stores pocketed millions, while minority
communities’ local community banks and credit
unions were forced
to cut back on their services to
low-income customers, usually in the form of increased monthly fees
for checking accounts and elimination of most
promotional offers such as points and airline
miles.
Many
civil rights advocates have pointed out that
the African American community felt the brunt
of this wealth transfer. Taikein
M. Cooper,
for example, outlined how
“these regulations increased our nation’s
unbanked population by 1 million people,
disproportionately so in minority and
low-income areas.”
While minority communities were left hanging,
Federal Reserve research shows that large retail
merchants have reaped nearly $8 billion per year
since this rule went into effect. In other
words, the big retailers used their influence to
push a regulation that has made them nearly $100
billion at working families’ expense over the
last dozen years. What could these communities
have done with these dollars? Improving
education, health care, and food access would
all have been possibilities. The dollars could
have been invested in much-needed economic
development, or just to put a few extra dollars
in someone’s pocket.
Now, the big box stores and their allies are at
it again. Circumventing Congress, they are
using their influence inside the Beltway to
convince the Federal Reserve’s new leadership
to forget the central bank’s previous concerns
and restrict these swipe fees by more
than 30% further so that they can fatten their bottom lines
even more.
We all know the story of these big box store
chains. They come into our communities with
much fanfare, promising lower prices, better
service, and more comprehensive selections.
However, their biggest success is their
ability to
strangle local businesses, which they frequently do without remorse and
without compensation, leaving previously
prosperous small businessmen and women without
jobs, livelihoods, and, many times, options.
These industry giants are no friends to the
working man or woman. They hire people at
poverty-level wages with few benefits and
little job security, frequently the same
people that they put out of business in the
first place. They aggressively restrict their
employees who try to unionize (Massachusetts
Walmart workers just had
this happened weeks ago). Their business model is based
on outsourcing supply, eliminating
competition, and preventing unionization. It
is predatory capitalism at most odious.
Let me be clear: Washington must ensure that corporations
do not place profits over people. The Fed
should refrain from putting its thumb on the
scales to determine which businesses boom and
fail. This new proposal that decreases the big
box stores’ swipe fees greatly degree. It’s
biased and it’s wrong.
Former NAACP Executive Director Dr. Ben Chavis,
civil rights activist Rep. Nikema Williams
(D-GA), and over 30 other of her congressional
colleagues were correct to tell the Fed, as the congressional
members did in a recent letter, that this
proposed rule is a wrong-headed example of
business as usual in Washington. The Fed must
slow their roll on this one and convene
discussions with Rep. Williams and her
congressional colleagues to ensure that this
policy does not have unintended consequences.
They should also hear from the businesses and
customers affected by the rules change.
