[Cross-posted from the AEI  Enterprise Blog]

The conclusion, one way or the other, of the storm called the Durbin Amendment, which would enable price controls on some of the fees involved in processing debit card transactions, will come next Tuesday during the House-Senate Conference on financial reform.

Fifteen market-oriented groups have joined the opposition with a joint letter to the congressional leadership. Its tenor is summed up in the headline on the accompanying press release from one  signatory: “Center-Right Groups Protest Durbin ‘Interchange Fee’ Amendment Pushing Through Price Controls and Benefiting Big Retailers: No Place for Corporate Welfare in Financial Regulation.”

As substantive policy, the Durbin Amendment is a silly idea. At a deeper level, as a commentary on the current functioning of Congress, it is troublesome that such a proposal could arise like a twister, get stuffed into important legislation, and either become law or, at best, be killed only after sucking up undue amounts of money and energy that should be devoted to other causes.

And to take it one step further, it is a signal of the increasing dysfunction of the public policy activities of corporate America. As the letter notes: “Although supporters of this measure cast it as benefiting small businesses and consumers, some of the biggest support from this bill comes from Fortune 500 retailers.”

Leaving aside the naked rapacity of the effort—”The Time to Worry about Big Business Is When It Gets in Cahoots with Big Government“—think of the stupidity. The big retailers are “platform companies” in the sense that each is at the center of a huge network of other companies that are dependent on the platform for their very existence. Telecom companies are also platforms, as is Microsoft, and as are the great electronic payment networks.

The interrelationships between platforms, suppliers, and consumers are opaque to economics, poorly understood, and exceedingly vulnerable to political hysteria (viz., the Microsoft case). At a conference on interchange fees last week, Professor Joshua Wright of George Mason University made this point with an analogy to the slotting allowances controversy of the early part of the decade and a reference to the Federal Trade Commission report on the issue (well worth a look).

So why the devil do the proponents of the Durbin Amendment think that an arbitrary intervention into a complex system will work out to their advantage? And why do they not realize that fostering such activities simply encourages the proliferation of arbitrary interventions into platform systems, including their own? If Congress wants to regulate interchange fees, well, hey, I think Walgreens should give better payment terms to its suppliers—let’s have a law.

So the final level of concern here is that corporate America has gotten dumbed down. It has become an exceedingly unsophisticated consumer of the services offered by D.C. lawyers and fixers, whose time horizons rival those of goldfish (every trip around the bowl is a new experience) and whose ability to think strategically and long term has become totally vestigial.

Tea, anyone?