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Just What Exactly Does the Federal Reserve Have Against Banks?
TLDR:
– The Federal Reserve has a history of implementing price controls that are detrimental to banks and their ability to offer services.
– In 2011, the Fed limited the amount that debit-card issuers could charge retailers per swipe, shrinking the profitability of offering such a service.
– The imposition of price controls on debit-card transactions resulted in the disappearance of perks and benefits associated with debit cards.
– The Fed is now seeking to revisit price caps on debit transactions, potentially hampering the ability of banks to offer services and further restricting profitability.
– The article argues that without naturally arrived at prices, markets cannot function and that banks need the freedom to offer services without regulatory interference.
The Federal Reserve has a contentious relationship with banks, often implementing policies that are detrimental to their ability to offer services. In 2011, the Fed placed a price cap on debit-card transactions, limiting the revenue that banks could generate from this service. The imposition of this price control resulted in the disappearance of perks and benefits associated with debit cards, as banks were unable to maintain profitability.
Now, the Federal Reserve is seeking to revisit price caps on debit transactions, proposing a .14 cents per debit transaction cap. However, the article argues that price controls are illogical and only lead to scarcity in the market. Banks need the freedom to offer services without regulatory interference in order to thrive and provide customers with the best possible experience.
Without naturally arrived at prices, markets cannot function, and banks are no exception to this rule. If regulators continue to hamper the profitability of debit-card transactions through price controls, banks will be forced to offer fewer services or none at all. The article concludes by stating that a choice must be made between real prices and scarcity, and that regulatory interference will only lead to the latter.
