Coming to the Correct Conclusion

March 9, 2011

Group thinking is a little-studied phenomenon. Having participated in thousands of committee meetings, board meetings, planning meetings, ad hoc meetings and more throughout my career, I have some thoughts on the subject and an example to support those thoughts.

No group decision is any better than the data it is based on. What occurs in a group setting is that a single person can put forth an idea, and the other group members readily agree. In fact it takes courage to express a differing opinion. And, if the idea is based on little thought or shoddy research, the wrong conclusion can be reached. By contrast, a group with carefully collected data, examined thoughtfully over a period of time, is more likely to come to the correct conclusion.

Last year, during the heat of floor debate in the U.S. Senate, Sen. Dick Durbin put forth an amendment to the Dodd-Frank Act. The amendment required the Federal Reserve Bank to determine the appropriate interchange or swipe fee, based solely on the cost of the transaction. Without further discussion, the Senate approved this wrong conclusion in the form of an amendment to the Dodd-Frank Act. The act went on to pass the Senate and House and later was signed into law by President Obama, over protests from the banking community.

To their credit, bankers continued to provide research and data to the banking agencies—including the Federal Reserve Bank—and to Congress. Now, with proper data and research in hand, there is a movement to extend the timeframe and to modify the scope of what the Federal Reserve Bank must consider in setting this business-to-business rate.

Consequently the chairman of the Federal Deposit Insurance Corp., the acting Comptroller of the Currency and many in Congress are calling for the time extension and a broadening of the scope of expenses that should be factored into the rate. This result would be the correct conclusion.

– S. Joe DeHaven

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