One example of an under-the-radar side issue with big consequences is this swipe fee issue. I got intrigued by this issue a few weeks ago when my friends at AFR alerted me to it, I started writing about it, and have now managed to talk a bunch of retail business folks into paying me to work on it (is this a great country or what?) Here's the deal: every time a restaurant owner or taxicab driver, a small business person or, for that matter, a blogger, swipes a credit or debit card, the credit card company can charge a fee. Any fee they want. The bigger the business, the lower the fee that can be negotiated, so the folks this really screws over are the smallest businesses who use credit card machines. My cabbie the other day told me he gets charged 10 cents on the dollar, and I know a bunch of other small business people in the same boat. You know who else gets screwed by this? Charities. The swipe fee costs charities around $250 million a year, according to an analysis by the Huffington Post.
So 10 cents here, 10 cents there - not such a big issue, you say? Well, you know what, there are a lot of credit and debit card transactions in this country every day. The definitive estimate on the amount of money being taken out of the pockets of retail businesses and put into the pocket of the banks stands at $48 billion per year. And here's a shocker: 80% of all this money is received by the top 10 banks (actually, I'm a little surprised it is not even more concentrated).
In the world of trillion dollar Federal Reserve bailouts for the banking industry, $48 billion may not seem like much, which is why people call it a side issue in financial reform. But a $48 billion dollar infusion of cash into the real economy as opposed to the profits of the biggest banks would have a lot of benefit right now. And left unregulated, that number will inevitably get bigger, because the big banks' profits will likely be curbed 15-20% by the financial reform bill, and they will be looking for new ways to boost their profits. Any part of the financial industry left unregulated will be in for new rounds of price gouging and market manipulation. The amount Americans pay in swipe fees, who are already paying the highest fees in the world, has already gone up 3 times the amount it was in 2001. Left unregulated, it will go up a lot more.
So if we win this fight, and the banks don't get the $48 billion, what happens to it? Retailers say they will be able to lower prices as a result, so consumers will benefit, but it's hard to know whether or not that will be true. I suspect that some of the $48 billion will benefit consumers with lower prices; some will benefit business owners directly. Hopefully some of those businesses will use the money to hire more workers or even given the workers they have a much needed raise. The extra dollars gained by small businesses might be enough to keep some struggling restaurants and local businesses alive in these tough times.
Regardless of how that $48 billion pie gets sliced, though, getting that money pumping through the rest of the economy and out of the hands of the very biggest banks is a big plus. The big banks have too much power and too much concentrated wealth: anything that takes money out of their hands and puts it into the Main Street economy is a very good thing. This "side" issue matters a lot.
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