Another outcome from the global banking crisis, including today’s news that Citigroup will acquire the banking operations of Wachovia, raises added concerns. While the banking industry’s two giant credit card associations want consumers to think that Visa and MasterCard play fairly, do not violate the law and offer boundless competition within the credit card market, the reality is that the banking industry consolidation is yielding an even more unstable and a more tilted playing area.
Banks are defaulting and being nationalized. How will this impact their credit card operations and will they attempt to further raise merchant interchange fees in an attempt to strengthen their balance sheets on the backs of businesses and consumers?
After Visa and MasterCard went public in an attempt to shift ownership from the banks, now many of the leading banks are consolidating and their percentage of control is creeping back. JP Morgan Chase, Bank of America and Citigroup, all named defendants in the Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, are amassing assets and extending their cartel-like market power over the electronic payment system.
Consumers and businesses have lost confidence in the banking industry. Its corporate leaders are under fired, or have been fired. Government intervention at this late hour is doomed and the question remains: why didn’t the government clamp down on the trillions in unstable and ruinous mortgages years ago. A similar question is why did the government permit banks to reap hundreds of billions in anticompetitive and unfair fees at the expense of merchants and consumers?
While the banking crisis is taking all the attention, merchant interchange fees continue to slice away at our nation’s economy. These fees generate nearly $50 billion each year at the expense of Americans; it removes much needed capital from our economy and is aggressively plundered by the banks as we are learning on the failed housing market and other disastrous schemes.
According to The Wall Street Journal (Sept 29), “Citigroup has put up for sale a Japanese call center valued at about $2 billion, the latest push by the financial conglomerate to drum up fresh capital.” If the banks are desperately seeking cash, as a merchant, I am extra worried that they will again hit up their interchange pricing fiefdom to get fast cash at the expense of retailers and consumers.