Shares of MasterCard and Visa plunged last week after the Federal Reserve decreed plans to limit the cards' debit fees to 12 cents per transaction. Presently, the debit fees are $1.20 when a customer signs for a purchase and 60 cents when he or she enters a PIN number.

Why should we care if low debit-card fees are bad for bank stocks? They're good for consumers, no?

No, say Thomas McCrohan, Janney Capital Markets financial tech analyst, and his sidekick, Len DeProspo, who was in Washington to watch the Fed's decree. "We think the unintended consequences of this legislation will be an environment that is actually bad for consumers, not good for them," McCrohan and DeProspo told clients in a report.

The Fed and the Democratic-controlled Senate, the drivers behind this move, are "assuming that merchants will take any savings and just pass it along to consumers," the analysts say. But, they add, Australia and other countries that tried to force low fees saw merchants "pocket a lot of the savings."

I thought that was the idea. Struggling merchants (even including giant chains like Wal-Mart) have more clout than unpopular banks in Washington these days.

But Janney says the banks have come to depend on high debit-card fees and would respond to cuts by imposing "much higher banking fees," the Janney duo says.

They conclude: "Goodbye free checking, hello increased minimum deposits."

Where dollars die

Billionaire investor Warren Buffett has famously pointed out that the airline industry made "next to zero" for investors in the last 100 years, when you consider its total costs, profits, and losses.

Analyst Craig Moffett of Sanford C. Bernstein makes a similar argument about today's telecommunications networks: It might be a "Golden Age" for makers and users of cable and satellite TV and mobile phone and Internet - but for people who bought phone and cable stocks, "The returns on investment capital during the decade have been, at best, anemic."

Yet Moffett still hopes for a payoff: "Cable returns have improved dramatically" as Comcast and its cable peers have become dominant Internet providers. "They should remain so," Moffett argues, to discourage much stricter government regulation, or a return of the outrageously high-priced mergers of the 1990s and early 2000s.

Bakers and bankers

When I write about the Federal Reserve, I get posts and calls from solemn people who repeat what they read in an angry paperback or heard on cable TV: The Fed is an evil, antidemocratic private conspiracy controlled by old European banking families. It creates phony dollars out of nothing - to the ruin of free markets and true prosperity.

Back on Earth, the real Fed is run by a chairman and six henchmen appointed by the president and approved by the Senate, just like judges or ambassadors.

Each month, when they weigh whether to flatten prices or boost jobs by nudging interest rates, they form the Fed's Open Markets Committee and are joined by five representatives of the 12 Federal Reserve districts.

And who runs these regional Feds? In Philadelphia, it's a board headed by Charles Pizzi, boss of the firm that makes Tastykakes. It includes R. Scott Smith Jr., boss at Fulton Bank of Lancaster; Jeremy Nowak, who heads the Reinvestment Fund, a nonprofit lender to charter schools and supermarkets; Keith S. Campbell, chairman of Mannington Mills of Salem County, plus five more.

Who picks the nine? Six are elected by local banks, including three, like Smith, who are bankers, and three, like Campbell, who are typically businessmen. The remaining three are appointed by the Fed board in Washington. They include Pizzi and Nowak, whose reappointments were announced Monday.

Among the local board's responsibilities is to name and watchdog the Philly Fed's day-to-day president, currently the conservative economist Charles Plosser.

Plosser is a critic of Fed chairman Ben Bernanke's potentially inflationary attempts to get people back to work.

Plosser is about to go back to Washington as a rotating member of the Open Markets Committee, where he can resist Bernanke face to face.