For the past year, a wide and expensive lobbying fight in Washington has pitted Wall Street banks against big retailers, and fattened the wallets of lobbyists up and down K Street. The final battle (for now, anyhow) will take place on the Senate floor this afternoon when an amendment by Senator Jon Tester of Montana comes up for a vote.

This fierce debate is over the “swipe fees” that banks charge retailers when a customer uses a debit or credit card at their store. During the Dodd-Frank financial reform debate last year, Senator Dick Durbin successfully passed a bill requiring the Federal Reserve to limit these fees, and the Fed’s rules go into effect on July 21. Tester’s amendment would delay that implementation by twelve months.

There’s a lot at stake for Wall Street banks in this fight—they rake in $1.35 billion in swipe fees every month, according to the Nilson Report. More than half goes to ten large megabanks that include Chase, Wells Fargo and Bank of America.

America has the highest average swipe fees in the world, at 44 cents per transaction. Durbin’s bill required the Federal Reserve to come up with a swipe-fee cap based on what it actually costs banks to perform those transactions. The Fed studied that question and came back with a pretty amazing finding in December: fair “swipe fees” should average about 12 cents, not 44. It will enforce that cap next month if Tester’s amendment fails.

With $16 billion per year in swipe fees about to be reduced by nearly three-quarters, big banks have gone all-out to stop the changes. In just the first quarter of this year, the bank-funded Electronic Payments Coalition has given $2 million to members of Congress in an attempt to derail the bill. Then there’s the money they’ve spent hiring lobbyists—118 ex–government officials and staffers alone—along with flashy media campaigns.

Naturally, however, retailers are just as determined to stop Tester’s amendment, so the billions they pay each year in swipe fees can be dramatically reduced. Major retailers like Walmart, Home Depot, Target and others have spent millions of their own in contributions, and hired 124 former government officials and staffers to fight their battle.

On the Senate floor late yesterday, Durbin joked that his amendment is actually a “full employment” bill for Washington. “A friend of mine who is a lobbyist downtown in Washington said, ‘Durbin, praise the Lord. Come up with some more ideas. This is a full employment amendment. Everybody who is a lobbyist in Washington is working on this amendment. We just love you to pieces,’ ” he said.

Sen. Lindsey Graham told the Huffington Post that “Everybody and their grandmother’s lobbying on this” and added it was in the “top ten” of brutal and well-funded lobbying battles that he’s seen.

There’s a lot of perverse humor in Durbin’s “full employment” joke that he may not have intended, however. Unemployment nationally is over 9 percent, and 3.5 million homes have been foreclosed on since the start of the housing crisis. Full employment is a distant fantasy for most parts of the country.

Even rosy estimates by retailers say swipe fee reductions will only save households about $427 annually—hardly a life-saving amount, but yet this is the lobbying battle consuming Washington.

It appears the banks will lose this fight. Tester needs sixty votes to pass his bill delaying the swipe fees, and various news reports indicate he probably doesn’t have it. Moreover, the larger bill that his amendment is attached to, expanding funding for the Public Works and Economic Development Administration, will almost certainly die in the House anyhow. So Wall Street banks can actually lose Washington battles—but apparently only when their adversary is other big businesses.


UPDATE – 2:40 p.m.: Tester’s amendment has failed, 54-45. A majority of Senators voted for it, but it obviously fell shy of the necessary 60-vote threshold. The Federal Reserve is now free to impose a cap on swipe fees, will happen no later than July 21. 


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