Greater Interchange Fee Wrath from D.C. (MA, V)

Credit card clearing and processing giants Mastercard Incorporated (NYSE: MA) and Visa, Inc. (NYSE: V) are getting hammered on strong volume today.  The culprit is probably easy to guess… interchange fees.

Today’s opinion from the Fed staff memo is proposing new tighter fees that cap at $0.12 per transaction.  While this is not yet set in stone, this is setting the tone for a rough year-end for 2011 and a rough start to 2011 for banks and the credit card card precessing fees.

The expectations were roughly a 50% to 60% cut, but this is apparently much worse than what was expected.  If the hit to banks is too hard, then fewer new cards issued are likely to be issued and that hurts the processing giants.

At 2:43 PM EST we have Visa shares down 5.4% at $72.80 on 14.6 million shares versus almost 5.2 million on average.  Mastercard is down 5.6% at $235.26 on 2.8 million shares versus an average of about 1.15 million shares.

Be advised, this is not going to occur overnight even if a vote to adopt these measures take place.  There is a public comment period, and a period that the lobbyists will get to work their magic.

JON C. OGG