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I have been watching the talking heads crucifying Bank of America (BAC) for a $5 per month fee on debit cards. Bank of America and other large banks have been hit by a new law that puts a limit on the amount they can charge a merchant to swipe their card. Congress has told the free enterprise system how much they can charge for their services. Why, is this matter of national security? Not likely. But it is a “sound bite” for illinois senator, dick durbin and his colleagues to show they are behind the consumer and against big business making money.

But in the end the consumer suffers. The banks have a shortfall of billions of dollars and like any company, need to make up the difference somehow. Thus the consumer is hit with this $5 extra fee. I have heard no one ask how this swipe fee limit has helped the consumer at stores like Wal-mart and Walgreens. Have prices come down to reflect the windfall profits that were given to these large companies by limiting the bank swipe fees?

Again we see unintended consequences from decisions made by politicos in Washington.

Another political decision made in Washington to “protect the consumer” has had and will continue to have detrimental unintended consequences. A few years ago the powers  to be in Washington  decided that by changing the pricing structure of our stock exchanges from 1/16th’s & 1/8th’s to pennies, the consumer would get better pricing and the evil wall street would not be able to make money on the spreads. Again the politicos trumpeted their fighting for the consumer (great sound bite), the small investor.

But, again, in the end the small investor has and will suffer. What has emerged with this change in pricing structure? The takeover of our equity markets by HFT's (high frequency trading). This type of trading by computers now accounts for an estimated 60% of the volume on our exchanges. It could not be done without penny pricing. We now have 60% of our trades being done by computers that do not care about long term investing. Computers couldn’t care less about a company’s balance sheet. The only things that matter are the algorithms they are programmed with.

What we now have is a market with extreme volitility that has scared the small investor out of the markets. This is a disaster waiting to happen. Computers trade at lightning speed and just like what happened on May 6th, we are headed for another major “flash crash” because these computers cannot be stopped once they hit their sell points.

The small investor is looking to participate in our economy, to save for retirement and put their kids through college. In this market, they are stymied by the unintended consequences of increased volitility and potential danger of an hft trading disaster.

The answers are simple. Stop making decisions in Washington based on how they will sound to voters. It almost feels like the politicos are trying for a 360 degree slam dunk so they can be on espn highlights. They are not interested in winning the game by making decisions that are well thought out and have no unintended consequences. It is unthinkable that Congress would tell American businesses how much they can charge for a product or a service. If they are actually interested in creating jobs, put back the old pricing structures in our equity exchanges and bring back the 5000 or more folks who worked at our exchanges. We might have slower trading, but we will have trading based on what our systems were set up for, not algorithms.

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