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Senate Proceeding 06-07-11 on Jun 7th, 2011 :: 0:34:55 to 0:45:50
Total video length: 3 hours 39 minutes Stream Tools: Stream Overview | Edit Time

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Jon Tester

0:34:53 to 0:35:13( Edit History Discussion )

Jon Tester: objection, so ordered. the presiding officer: the senator from montana. mr. tester: i -- over the last month, mr. president, senator corker and i have worked with several senators who are concerned about the unintended consequences of the debit interchange amendment that the senate adopted last year. we voted against that amendment. we were concerned about the

Jon Tester

0:34:55 to 0:45:50( Edit History Discussion )
Speech By: Jon Tester

Jon Tester

0:35:14 to 0:35:35( Edit History Discussion )

Jon Tester: impact of those consequences on folks, especially across rural america, who rely on their small banks and credit unions. the federal reserve's rules based on this amendment are about to go into effect, and the result is going to be bad for the small banks and credit unions and ultimately for the whole country, but especially rural america. even chairman bernanke admits

Jon Tester

0:35:36 to 0:35:56( Edit History Discussion )

Jon Tester: the rule could result in some smaller banks being less profitable or even failing. i am proud to be joined in this effort by senators crapo, senator bennett, senator hague and several -- snoring hagan and several others, all who share my concern about debit interchange fee on local banks. senator corker and i began with

Jon Tester

0:35:57 to 0:36:17( Edit History Discussion )

Jon Tester: the concern that local community banks and credit unions would end up being subject to the same one-size-fits-all regulation designed to address the excesses of some of the world's largest financial institutions. as i have said over and over and over again, those big wall street banks are going to be just fine. they have plenty of sources for their revenue. no one needs to shed a tear for

Jon Tester

0:36:18 to 0:36:38( Edit History Discussion )

Jon Tester: them. but the main street banks and the credit unions will not be okay if these rules are implemented. let me give you one example. community first credit union has two branches, one in mile city and one in ecalaka, montana. those two towns are about as far away from wall street as you can

Jon Tester

0:36:39 to 0:36:59( Edit History Discussion )

Jon Tester: get. ecalaka is pretty far away from just about everywhere. but last year, the senate approved an amendment that was aimed at holding the big banks accountable for the fees they charge when you swipe a debit card at wal-mart. folks were promised that we would have a split system where big banks like bank of america would get one interchange rate

Jon Tester

0:37:00 to 0:37:22( Edit History Discussion )

Jon Tester: and community first credit union would be able to get a higher rate. the reality is going to be quite different. without changes, the small guys like community first will not see this promised benefit. this so-called two-tiered system will not work under the current law, and that's not my opinion. it's the opinion of the folks who regulate these small banks.

Jon Tester

0:37:23 to 0:37:43( Edit History Discussion )

Jon Tester: what ben bernanke and sheila behr and others say is that market forces will inevitably push the rate down to the lowest level. that push has already started. retailers are seeking laws at the state level to give them freedom to deny purchases with debit cards that have a higher interchange fee. given the amount of money the big box retailers are putting in their lobbying campaigns, it is

Jon Tester

0:37:44 to 0:38:05( Edit History Discussion )

Jon Tester: only a matter of time before they're successful. so what happens to the consumer who does their banking at a small community bank or credit union? these are the folks i am concerned with because they are the majority of montanans. unfortunately, they are going to get stuck with higher fees with no access to capital or even worse no banks at all. and let's be clear.

Jon Tester

0:38:06 to 0:38:26( Edit History Discussion )

Jon Tester: if any single one of the regulators, whether it be the chairman of the federal reserve or the chair of the fdic or the comptroller of currency, had told me that the interchange system proposed last year would actually protect small banks and credit unions, we would not be here, but that is not what happened. the chairman of the federal

Jon Tester

0:38:27 to 0:38:47( Edit History Discussion )

Jon Tester: reserve said that without changes, the system that will be implemented on july 21 will cause small institutions, the kind of banks that serve most montanans, to suffer and some could even fail. the chair of the fdic said that unquestionably, these banks would be hurt, the credit union

Jon Tester

0:38:48 to 0:39:09( Edit History Discussion )

Jon Tester: administrator agrees. perhaps they will make up for those losses by raising rates on checking accounts. maybe it will be higher fees when a small business comes in looking for a loan to expand or that will surely help the biggest banks to capture more of the market share at the expense of the smaller banks like community first. this week, we have a chance to stop and rewrite these rules

Jon Tester

0:39:10 to 0:39:31( Edit History Discussion )

Jon Tester: before they hurt those small banks, before they hurt those small credit unions, before the new rules hurt the consumers and the small businesses in rural america that prefer to do their banking business with the folks who know them and who are part of their communities. rural america is what i know. it is where i am from. and as i have watched consolidation in the

Jon Tester

0:39:32 to 0:39:53( Edit History Discussion )

Jon Tester: agricultural industry and have watched rural america get smaller and smaller, i'm not about to let this happen in the financial services industry. fewer banking options in rural america is a death knell for rural america, and that is where we are headed today. one way to stop this from happening is for us to slow down and fix the debit interchange

Jon Tester

0:39:54 to 0:40:14( Edit History Discussion )

Jon Tester: regulation so that the small banks that serve rural america don't get hit. we also know how dangerous it is to set a price for a product without understanding all of the costs that go into that product. small business owners certainly couldn't stay in business if they didn't understand their own costs. likewise, if we're going to be regulating debit interchange fees, we need to understand all

Jon Tester

0:40:15 to 0:40:37( Edit History Discussion )

Jon Tester: of the costs associated with the debit transaction and debit programs. when we voted on this amendment last year, we thought we were voting to allow the federal reserve to consider all costs. however, the reality is that last year's interchange amendment limited the costs that could be included. some fraud costs were allowed to be included but others were not. some technology costs were

Jon Tester

0:40:38 to 0:40:58( Edit History Discussion )

Jon Tester: included but others not. the result is a proposed fed rule that sets the debit interchange rate at seven or 12 cents for all transactions, a level that most folks agree is too low. i'm sure that the big box retailers think that 7 cents or 12 cents is too high. in fact, they have argued for

Jon Tester

0:40:59 to 0:41:21( Edit History Discussion )

Jon Tester: rates closer to four cents. i have heard from many of my retailers in my home state. some have said that 12 cents is probably too low. they understand you absolutely can't set the price of doing business below the business that it costs. if we're going to be regulating this market, we must do it in a way that's fair, in a way that still directs the fed to determine what is reasonable and proportional, but to give them

Jon Tester

0:41:22 to 0:41:43( Edit History Discussion )

Jon Tester: the discretion to look at all of the costs associated with debit transactions. that does not mean executive pay. that does not mean the cost of a corporate jet or a special rewards program. all the costs will still need to be justified, but the fed will not be limited arbitrarily in what they can look at. that is why my friend senator corker and i are offering this amendment today.

Jon Tester

0:41:44 to 0:42:04( Edit History Discussion )

Jon Tester: this amendment is a compromise, and that's how we do business in montana. we find the common ground and we work together to do what's best. senator corker and i first proposed a two-year delay of the fed rules to allow adequate time to study the impact on small banks and rewrite the rules based on what we learned in that study. the fed tells us now that it may

Jon Tester

0:42:05 to 0:42:25( Edit History Discussion )

Jon Tester: be able to do this joint study in six months. so that is what our amendment proposes, just six months to study whether the rules that will govern debit interchange marketplace can protect small banks. in this amendment, we outline the topics that the study should address, including taking a closer look at all of the actual costs associated with debit card transactions, the impact on

Jon Tester

0:42:26 to 0:42:47( Edit History Discussion )

Jon Tester: consumers and whether an exemption for small banks as proposed in the interchange amendment last year will actually work. if after the study at least two of the agencies involved determine that the current rules don't take into account all costs, that the rules may harm customers or that the exemption meant to protect small banks and credit unions won't work, then

Jon Tester

0:42:48 to 0:43:10( Edit History Discussion )

Jon Tester: the fed has six more months to rewrite the rules considering all costs. that's one year, mr. president, to address our concerns and to make sure rural banks don't get wiped out by this rule. if the agency finds that the rules consider all costs, consumers would not be harmed and that the smallisher exemption will work, then the

Jon Tester

0:43:11 to 0:43:31( Edit History Discussion )

Jon Tester: current rules pending would move forward. and what about the little guys? well, we put into place a process that will address any potential impact on smallishers. my contention has long been that market forces would drive fees for smallishers to the lowest rate. since we cannot fully understand how the market will operate until interchange regulation is

Jon Tester

0:43:32 to 0:43:53( Edit History Discussion )

Jon Tester: enacted, we direct the fed to report the actual impact of the market on smallishers a year after the rules are implemented. and the fed has to present a report to congress in every other year thereafter on the impact of a regulated market on smallishers. most importantly, the report will include recommendations for how to resolve any potential

Jon Tester

0:43:54 to 0:44:14( Edit History Discussion )

Jon Tester: harm to smallishers and to enforce the exemption.this will help make sure that when congress acts, we will have the facts about how it would impact small banks. that means the regulatory process is over in 12 months and congress does not have to revisit this issue. let me say this again. congress does not have to

Jon Tester

0:44:15 to 0:44:37( Edit History Discussion )

Jon Tester: revisit this issue. and at the end of the entire process, there is still a regulated market for debit interchange fees. that's what the senate voted for last year loudly and clearly. and we preserve the marketplace. we will have a regulated marketplace once we fully

Jon Tester

0:44:38 to 0:44:59( Edit History Discussion )

Jon Tester: understand all the costs. and the impact of these rules an consumers and small issuers. that's what the majority of the senate voted for last year and that is what we will get, that it will be a regulatory framework that does not penalize small banks and credit unions and is fair by not setting prices below costs. when every banking regulator who

Jon Tester

0:45:00 to 0:45:21( Edit History Discussion )

Jon Tester: has a role in underseeing the debit interchange market, then we ought to listen. today's liberty interchange market is not fair for some retailers so i understand their desire to see a fix. but the answer is not to create a new system that is unfair to the small banks in montana and

Jon Tester

0:45:22 to 0:45:43( Edit History Discussion )

Jon Tester: other parts of rural america. the amendment that the senate approved last year was designed to punish wall street but the result may be the banks who will lose customers and potentially even fail. let's measure twice and cut once. let's do it quickly. but let's make sure we get this right and that if we're going to

Jon Tester

0:45:44 to 0:45:50( Edit History Discussion )

Jon Tester: create regulations, we're doing it in a way that is fair and consistent with the intent. i urge my colleagues to support

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