The New York Times reports that banks are lodging an “all-out assault” on Capitol Hill, seeking to lessen the impact of the Durbin Amendment.

The Durbin Amendment, which is part of the significant financial regulatory bill passed last summer, requires the Fed to ensure interchange rates for debit transactions are “reasonable and proportional.”  The Fed seemed to oblige, by proposing a rule to limit such charges to 7-12 cents per transaction.  But the rule-making process is subject to all kinds of lobbying, and the banks are pretty good lobbiers. Felix Salmon and Rortybomb posted good critiques of the bad arguments used by banks to lobby against the proposed rule.

As Stella explains, the rule could reduce the cost to merchants of processing debit cards.  If nothing else, it would reduce the advantage of big merchants, who have enough market power to negotiate their own interchange rates.  As a fan of small business, I for one hope that the rule is implemented as proposed.

Image thanks to http://www.flickr.com/photos/7578081@N07/3766750338/