Economic Development Revitalization Act of 2011

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Mr. CARPER. Mr. President, good to be with you again. I spent most of the morning with you and now part of the afternoon.

This is a difficult issue for a number of us in the Senate because we have friends on both sides of this issue. It is also a difficult issue for a lot of people because we do not want to be unmindful of the concerns raised legitimately by merchants for a number of years about debit charges they have had to pay, and we don't want to be unmindful of the concerns raised by banks, whether they be big or little, or by credit unions.

I was talking to one of my colleagues who said: I don't want to vote on this again. We had to vote on this once. I don't want to vote on this again. As one guy said: I certainly don't want to have to vote on it twice.

Another colleague said to me: I don't like the idea of just kicking the can down the road, having a 24-month pause and then maybe a new Congress and new administration and maybe it will all go away. That is not what I am interested in doing.

Another of my colleagues said to me: Why don't we fix this problem? Rather than kick the can down the road for 24 months, why don't we say: Let's fix this problem. As it turns out, four of our colleagues who voted with the Senator from Illinois, the author of the Durbin amendment, voted with Durbin originally when the amendment was first offered. They actually sat down, two Democrats and two Republicans, they and their staffs, hammered it out, worked with Senator Tester and they worked with Senator Corker as well and that is who wrote the bill. Did they get input from the merchants? I am sure they did. Did they get input from the banks? I am sure they did. I would hope so. That is the way this place ought to work, where Democrats and Republicans actually work together on legislation, and we seek input from not just banks, not just credit unions, not just merchants, but consumers as well.

I think back on the life I have been privileged to lead. I spent a lot of years in the Navy and had the privilege to serve my State as Governor and now in the Senate with my colleagues. I know any number of times in my life I have done things I was sure were the right thing to do but had an unintended consequence. I was sure I did the right thing, but as things turned out, there were consequences I didn't anticipate, and what I had to do was go back and help be part of the solution in addressing those unintended consequences.

Senator Durbin put his finger on a big problem, and the problem he put his finger on is--actually, more than 1 year ago but a number of years ago--we have a situation with the use of debit cards where merchants are disadvantaged. They don't have a lot of options, and they end up having to pay large fees to banks--sometimes big banks but sometimes small banks--and they don't have that much choice. They don't like that. They would like to see us do something about it. So what Senator Durbin proposed is a way to deal with that.

He intended in his legislation not only to try to help consumers and merchants, but he also tried to protect small banks, those with under $10 billion in assets, and to protect credit unions and their members.

I wish to see if we have a quote here. These banks have different regulators, credit unions have different regulators. I don't have quotes from all of them, but here is a quote Senator Tester shared with us. Ben Bernanke, Chairman of the Federal Reserve, when he was talking about the unintended consequences. Here is what Sheila Bair of the FDIC said. She is talking about institutions, community banks, smaller ones, under $10 billion of assets.

We are concerned that these institutions may not actually receive the benefit of the interchange fee limit exemption explicitly provided by Congress, resulting in a loss of income for community banks and ultimately higher banking costs for their consumers.

She said that in her testimony before the House.

John Walsh is the Comptroller of the Currency. He said:

We believe the proposal takes an unnecessarily narrow approach to recovery of costs that would be allowable under the law and that are recognized and indisputably part of conducting a debit card business. This has long-term safety and soundness consequences--for banks of all sizes.

That is what they said. They think we have a problem. Their job is not to be the lapdog for financial institutions. Their job is to regulate financial institutions.

I tried to think about some times where we have abuses to clean up and how we go about doing it. This sounds strange for a guy from Delaware to say this. We had big abuses in credit cards. It was pretty much impossible for most people to get a credit card application in their mailbox, look at that application--maybe they got six of them that same week--and decide which of those four, five or six were actually in their best interest to fill out and submit. We had credit card banks taking advantage of people in ways that were untoward, I think unethical. What we did in the Banking Committee, where I served, is we held not just a hearing, we held extensive hearings for months--for months. We did the same thing in the House, and we asked the Government Accountability Office to help us with an in-depth study of the credit card industry to try to decide what changes were needed. There are watchdog agencies. They came back and said these are our recommendations. Out of all those hearings came a lot of ideas too.

The Senate passed legislation. They passed legislation in the House. The banking industry didn't like it much. They complained about it. We went to conference with the House and the Senate and worked out a compromise. The banking industry didn't like it much. The regulators of the banks were required to help us implement the legislation and they had to write regulations. They had to write regulations that were true and consistent with the underlying law and they did and the banks didn't like it much. They were promulgated, some immediately, some over several months, and eventually they got the job done. I think consumers are better off. Did banks make as much as they did on credit cards? No. We know that personally in our State. But are consumers treated fairly? Yes; they are. Part of what happened was extensive hearings involving GAO, getting input from a lot of folks with different views on this, and then acting in light of the process.

I think what is different in this case, I don't believe the Banking Committee--I can't speak for other committees

in the last Congress, but I don't believe the Banking Committee or other committees in the House or Senate actually had the opportunity to hold hearings and bring people in, in the last Congress, and say this is what is good about the amendment proposed by our friend from Illinois and this is what is bad. I don't think we had GAO--GAO did not have the opportunity to come in and say we were never invited to come in. We never invited them to come in on the debit card side and, therefore, their voices were not available to us, and that is unfortunate.

Here is what happened. Legislation was passed. Senator Durbin offered it with the best of intentions. He said: We have a problem. We should fix it. Here is my suggestion. He essentially said we should regulate the marketplace. We should regulate the marketplace for debit cards. The free marketers said: No; we ought to let market solutions work, harness market forces--something I generally agree with--but in this case they were not working so he came up with an alternative and said let's see if there is another way to do this. Unfortunately, with the best of intentions, we have these unintended consequences. The question is, What do we do about it?

We have a situation where I am not sure consumers are going to be advantaged by the current law as it reads. Big banks, they will be OK. They can take care of themselves. But a lot of smaller banks, the people squawking the loudest, the folks from the community banks, they have been beating on my doors and other doors, and the folks from the credit unions, they are less able, frankly, to look out for themselves, and that is despite the intent, the explicit effort by the author of the amendment, to provide them exemption. The regulators say, frankly: Sorry. It does not work.

That suggests to me that we hit a pause button, we hit a pause button not for 2 years but at least for the next as much as 6 months and say to the regulators: OK. Do now what we should have done a year or two ago. Complete an in-depth study, look at the concerns of the merchants, look at the concerns of the consumers, look at the concerns of big banks, middle-size banks, small banks and credit unions, and come back to us with what you think to be a fair approach. You have 6 months to do it. If you can do it in less time, let's do that.

If they come back to us and say: Look, the legislation as written, current law, is fine for consumers, it is fine for institutions of all sizes and is fair to the merchants--if they come back and say this, basically, the Durbin language in the law prevails. If they say that is it, the regulators have spoken and we are done.

If they come back and say we have a problem here, these outfits, the regulators, have a period--I think it is up to 6 months--to figure out regulations that can then be implemented after the 6 months to fix the problem. Some will say how do we know they will do anything for consumers? They just did it for credit cards 2 years ago, and the bankers did not like it. They still do not like it. We have the pain in my State in the employment numbers to reflect that they didn't like it. We still live with that pain and discomfort, but who is better off? Consumers are better off. They are better off because Congress did its job. We were deliberate about it. We sought input from all sides. The regulators did their job, and it has been implemented in a prompt way.

I wish to close maybe with this thought.

There is an outfit called Michaels. We have a Michaels store not far, actually, from where my family and I live in Wilmington. They sell art supplies. It is a national chain and a pretty successful company. They were in the news big time recently--not because of a good story but because of a data breach story. A lot of folks who had accounts with them, their customer information was disclosed. There was great concern on the part of the consumers, the customers, that there had been this data breach and some of their sensitive information was going to be at risk. It involved hundreds of thousands, maybe millions of customers.

To whom did they turn to fix this problem? Did they turn to Michaels and say: You fix this problem. No, as it turns out, they didn't. Some probably did, but most probably didn't. Do you know to whom they turned? They turned to their banks. They turned to the issuers of the credit cards and said: You fix this problem. You issue a new credit card for us, and you cover this for us. And the banks did that. They were beholden to do that.

Finally, I am not here to carry the water for the banks. I think we are all here to do what we think is right. To my colleagues who are undecided on how to vote--I know some are. They don't want to choose between their two favorite children, whether it is the merchants on the one hand or the financial institutions, credit unions on the other hand. They don't have to choose between two children. They can ask themselves: What is the right thing to do? Try to understand what is in this amendment, a bipartisan amendment prepared by some of the people I most respect here in this body, and drill down on that. Listen to guys like Barney Frank who don't have a dog in this fight but have a lot of knowledge, and try to make the decision they think is the right decision.

Thank you very much.

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