David Brooks says correctly that not enough Washington reporters break away from the pack and report on how the government really works. Let’s just say this is an understatement.
Huffington Post fills a breach in more ways than one with a fascinating piece on the epic battle now underway in Washington between banks and retailers over the $48 billion the banks now charge in interchange fees, the percentage of each transaction they charge when customers swipe debit and credit cards.
Once you overcome your resistance to reading 8,000 words (and it’s too long) on interchange fees and turn on readability, you’ll be rewarded with a balanced, sober, but, no less for that, absorbing account of what Washington really does all day, which is mediate between corporate interests. The public interest may or may not get a word in edgewise. (Ryan see the public interest as aligned with retailers, and he’s right.) But even if it does, it’s more or less by accident. The HuffPo piece is a window onto a kind of post-partisanship, but not the good kind.
The swipe fee debate, as mundane as it may appear, is emblematic of how Washington works today — and helps explain why Congress hasn’t passed an appropriations bill in years, can’t write an annual budget, is flirting with defaulting on the country’s debt and effectively gave up on job-creation efforts in the midst of a brutal economic downturn. There are, to be sure, a variety of reasons that Congress is zombified, but one of the least understood explanations is also one of the simplest: The city is too busy refereeing disputes between major corporate interest groups.
As swipe fees dominate the Congressional agenda, a handful of other intra-corporate contests consume most of what remains on the Congressional calendar: a squabble over a jet engine, industry tussling over health-care spoils and the never-ending fight over the corporate tax code.
The endless meetings and evenings devoted to arbitrating duels between big businesses destroy time and energy that could otherwise be spent on higher priorities.
Empowered by an amendment sponsored by Dick Durbin to the Dodd-Frank reform law, the Fed has proposed but not finalized rules capping the fees at 12 cents a transaction, replacing a formula that averages about 44 cents, with the rules set to go into effect in July. The financial lobby has been pushing a bill to delay the new rules. (A debit swipe to HuffPo, and for that matter, this Hill story, for not explaining the basics clearly; a credit swipe to the WSJ‘s blog for doing so.)
Because the dispute is almost entirely between corporate interests, and with money from undisclosed sources flowing through front groups thanks to the Citizens United decision, the politics have become particularly convoluted and about as clear as mud. HuffPo unwinds the strange tale of a natural pro-bank, anti-Fed congresswoman, Tea Party freshman Renee Ellmers of North Carolina, who first backs the anti-Fed bill, then withdraws her support. Turns out, she had received campaign help from “Americans for Job Security,” linked to Karl Rove. As HuffPo says, no one knows much about AJS, just that a lawsuit filed by Democrats names it as a major recipient of undisclosed corporate cash. The quote from AJS head Stephen DeMaura is not reassuring: “We don’t have clients. We have members.”
Is Rove on the anti-bank side? Seems so. Who knows?
Even the savvy insider Durbin is flabbergasted:
“I didn’t know Rove was involved in this,” says Durbin. “I’m surprised and confused. I have no idea where these guys are. When we turn the lights out you never know who’s going to be sitting in the chairs when the lights come back on.”
A century ago ago, Cosmopolitan magazine, then owned by William Randolph Hearst, published the wildly popular “The Treason of the Senate” series by David Graham Phillips, who, in Taibbi-esque language, exposed and railed against the degree to which “interests” had come to control individual U.S. senators.
Here, HuffPo’s brings the same issue into sharp relief through sober fact-gathering. Senators are heard speak frankly about representing one interest or the other. It’s a given.
“I’ve got friends on both sides of it and, you know, it is what it is,” says a visibly anguished Sen. Saxby Chambliss (R-Ga.) when asked about the bill to delay swipe fee reform. Home Depot, headquartered in Atlanta, is a leading player on the merchant side, and both the company and its co-founder, Bernard Marcus, have invested heavily in Chambliss’ Senate career. “I voted to support it and I’m gonna continue to support it.”
HuffPost asks what he says to the bankers. “I’ve voted. And I’m sticking with it,” he says. “Oooh, the bankers aren’t happy.”
Chambliss’ fellow Georgia Republican Sen. Johnny Isakson is also staying with Home Depot. “It’s part of the job,” Isakson says of resisting the bank pressure. “That’s why they pay us the big bucks.”
Surprisingly, Arkansas’s senators are similarly torn.
“Walmart’s a huge employer in our state. It’s a consideration, but it’s one of many considerations,” says [Democrat Mark] Pryor, who is known on the Hill as one of two “senators from Walmart.”
What kind of consideration could be a bigger concern for an Arkansas senator than Walmart? “We have a lot of banks and credit unions in our state as well,” he explains.
One quibble: this piece could be cut, mostly via tightening from the bottom starting at “The swipe fee faceoff is a major test…” You could probably get 2,000 words out of it.
Just saying. This isn’t like the emperor complaining to Mozart that there are too many notes.
That aside, kudos to HuffPo for going deep in Washington.
Further reading:
–Ryan breaks down the Journal‘s great job on interchange fees in 2009.
–The Times‘s stellar “Card Game” series with Frontline included a piece that laid out the issue of Visa’s dominance back in January 2010.
–Felix expounds on Dick Durbin’s body slam of Jamie Dimon on the topic.
Dean Starkman Dean Starkman runs The Audit, CJR’s business section, and is the author of The Watchdog That Didn’t Bark: The Financial Crisis and the Disappearance of Investigative Journalism (Columbia University Press, January 2014). Follow Dean on Twitter: @deanstarkman.