Here's some more public choice economics to follow the post below about Google's Chairman - this public choice analysis comes from Washington Examiner's Tim Carney about the recent announcement that Bank of America will begin charging a $5 monthly fee to debit card customers:
"The real culprit is Walmart and the retail lobby, which used government to squeeze banks and fatten their own bottom line. Walmart won, banks lost, and now customers are stuck with a new monthly fee.
Here's the background: Whenever you use a credit card or debit card to buy something at a store, the credit card processor (like Visa or Mastercard) and the issuing bank (like Bank of America or Chevy Chase Bank) both take a cut. The store may only get $9.70 on a $10 purchase.
How is that rate -- the "interchange fee" -- set? Until this year, it was set by market forces. Visa and Mastercard offer stores a service that facilitates sales and brings in more business. In return, they demand a cut of the sale. Walmart and Joe's Corner Store aren't required to accept debit cards or credit cards, but they do, which means that they decided the price was worth it.
Retailers, of course, wish the card issuers and processors would provide this service for free. Businessmen are always looking for a better deal. The businessmen in this case decided to employ regulatory robbery to get their way. Led by Walmart and the Retail Industry Leaders Association, retailers pushed for a federal cap on interchange fees.
Debit-card users don't have the lobbying clout of Walmart and the retail industry. It's the standard tale of government intervention in the economy: The guy with the best lobbyists wins, and the little guy -- this time, the consumer -- loses."
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