How Wal-Mart Swiped JPMorgan

[mmr]

A long read, but certainly an enlightening perspective on how legislation and regulations are really shaped.

How Wal-Mart Swiped JPMorgan in $16 Billion Debit Card Lobbying Battle

The behind-the-scenes story of the swipe-fee war -- reconstructed from public and confidential documents and interviews with more than 30 people in Congress, regulatory agencies and industry -- shows how far the richest interest groups can go when a single decision puts billions of dollars up for grabs.

On one side were retailers large and small, including Wal- Mart Stores Inc., Target Corp. and Home Depot Inc., arguing that they were being gouged. On the other was a financial industry led by JPMorgan Chase & Co. and Bank of America Corp., weakened by public anger over bailouts and bonuses, resisting any government plan to set a price for their services.

Together, they deployed more than 500 lobbyists and spent some $30 million, according to people briefed on the expenditures. Their campaigns fanned dissension inside the Federal Reserve and created curious alliances as Tea Party freshmen, Indian tribes, tax activist Grover Norquist and the nation’s biggest teachers union entered the fray.

The retailers flew hundreds of merchants like Cavallaro to Washington; the financial lobby countered with squads from community banks and credit unions. The combatants called on all the tools of public relations: focus groups, TV ads, polls, conference calls with as many as 100 participants -- and at least one outright fabricated story planted in the press.

...

The outcome shows “banks still have a political cloud over them in Washington in a huge way,” said Stephen Myrow, a former Treasury Department official who worked on the 2008 financial industry bailout and is now with ACG Analytics Inc., a Washington investment research firm.

“When they flexed their muscle in Washington, large banks had been used to having an impact,” he said. “Now they act like, ‘We’ve taken our lumps, we’ve said our mea culpas, just let us get back to what we do best.’ But the reality is that’s not going to happen again.”

[brent217]

Re: How Wal-Mart Swiped JPMorgan

Wow, that is quite a read. I remember I used to believe that at some level laws were put in place to benefit society as a whole. I wonder who paid for the schooling system that teaches us such nonsense. Laws are put in place by those who expect to make money off the laws, and that is both the beginning and the end of it.

[mmr]

Re: How Wal-Mart Swiped JPMorgan

Coming soon... battle of the lobbyists, part 2. See if you can find the part where consumers might benefit. (I can't.)

Retail lobby amped up for battle with banking industry over credit card fees

Buoyed by their victory on debit cards, retailers are taking aim at another golden goose for the banking industry: interchange fees on credit cards.

The issue could turn out to be a replay of the fight over debit-card swipe fees, which dominated Capitol Hill this summer as the banks mounted an aggressive lobbying push to stop regulations capping them.

Retailers won that battle when the Federal Reserve stepped in with new rules that limit the fees that banks can charge for debit card transactions.

Katherine Lugar, executive vice president of public affairs for the Retail Industry Leaders Association, said her trade group plans to be just as active lobbying against the credit card interchange fees, which retail lobbyists say generate about $30 billion per year for banks and card providers.

“We plan to do the same, if not more, to see that credit is reformed,” Lugar told The Hill. “Debit is step one. Credit is next. We are heading there very aggressively.”

But representatives of the financial services industry say the lobbying on credit card fees will fall on deaf ears. They contend that lawmakers are drained from the summer’s debate on debit fees and don’t want to be caught again between such big-box retailers as Target and Wal-Mart and banking giants such as Bank of America and JPMorgan Chase.

"There is total fatigue on this issue," said Scott Talbott, senior vice president for government affairs at the Financial Services Roundtable. "They see both sides coming and they say, ‘Leave me alone. Get out of my office!’"

The debate over debit fees erupted again over the weekend, when Bank of America announced it would charge customers a $5 monthly fee for using their debit cards for purchases.

Retailers say they have always had credit card interchange fees in their sights.

Last month, the National Retail Federation announced a lobbying campaign, expected to cost at least $10 million, to help pass an ambitious legislative and regulatory agenda that includes reforming credit-card swipe fees.

Others are revving up for the debate.

"We have talked about credit and debit card fees for a long time," said Doug Kantor, counsel to the Merchant Payments Coalition. "We’re now in a sense refocusing on credit card fees and reminding lawmakers of the bad behavior by the banks and the credit card companies."

No legislation has been introduced this Congress yet to tamp down on credit card interchange fees. Furthermore, the partisan makeup of Capitol Hill has changed since Congress passed the Wall Street reform bill in 2010.

That bill included Sen. Dick Durbin’s (D-Ill.) amendment to tamp down on debit-card swipe fees. With the banks’ support, Sen. Jon Tester (D-Mont.) offered legislation to stall the debit card swipe fee regulations, but it died on the Senate floor this summer.

Lobbyists for retailers say they plan to educate lawmakers about the credit-card fees to help build a bipartisan consensus for action.

"Step one is to educate members on both sides of the aisle. Step two is to get strong bipartisan support," Lugar said. "It will be more fierce. If you thought that was intense, Katie, bar the door!"

Financial services lobbyists believe they have a better argument this time. Credit card interchange fees pay for a service banks provide — essentially a loan to the retailer when a customer uses a credit card at their place of business.

"Credit interchange has been historically untouchable because the value proposition is more obvious. When a retailer accepts a credit card, the bank provides them the loan and forwards on the funds so the retailers benefit," said Trish Wexler, a spokeswoman for the Electronic Payments Coalition. "People spend more on credit, so that’s good for the retailer."

In 2008, Reps. John Conyers Jr. (D-Mich.) and Peter Welch (D-Vt.) both introduced separate legislation that included action against credit-card interchange fees. Welch’s bill went no further, while Conyers’s was passed out of the House Judiciary Committee but never received a floor vote.

Conyers and Welch both introduced their bills again in 2009, and hearings were held on them.

Durbin introduced legislation the last two Congresses to rein in both debit- and credit-card interchange fees. A spokesman for the Illinois senator said the lawmaker will take "a very close look" at reforming interchange fees again.

"Credit-card interchange fees remain as unregulated, anti-competitive and unfair to consumers today as they did in 2008 and 2009. As big banks try to drive customers from debit cards to credit cards, credit card swipe fee reform is something we’ll be taking a very close look at," said Max Gleischman, Durbin’s communications director.

Wexler with the Electronic Payments Coalition says that with banks now charging their customers more fees to make up for lost revenue from lowered debit-card swipe fees, lawmakers will be too scared to tackle the issue.

"I think it would be politically untenable for a member of Congress to take on credit interchange because all of their constituents are already suffering as a result of the Durbin amendment," Wexler said. "I can’t see anyone touching this with a 10-foot pole."

Nevertheless, financial services companies will not back down if credit-card interchange fees are threatened.

"This is never going to die. It’s too important for the credit unions and the banks who rely on this revenue. And quite frankly, when two elephants fight, the grass underfoot gets crushed," Wexler said.

[flintlock]

Re: How Wal-Mart Swiped JPMorgan

Wow, that is quite a read. I remember I used to believe that at some level laws were put in place to benefit society as a whole. I wonder who paid for the schooling system that teaches us such nonsense. Laws are put in place by those who expect to make money off the laws, and that is both the beginning and the end of it.

I've come to the conclusion that really is our system in a nutshell. Issues dont even get addresses in congress unless someone can find a way to make money off it. Its one reason you wont find anyone put in jail for the financial shenanagans of the last decade. They just cant find a way to turn a buck doing that. Better to push solar energy, or health care "reform". Something congress can sink its teeth into.

[lektrode]

Re: How Wal-Mart Swiped JPMorgan

Coming soon... battle of the lobbyists, part 2. See if you can find the part where consumers might benefit. (I can't.)

where consumers might benefit?
huh?
like how we supposedly 'benefited' with home depots new terms? - you remember the good ole days, right?
when one could charge on their HD card, and have 6-12mos to pay, WITH NO INTEREST OR PAYMENTS FOR upto 1 YEAR?
with the 'reform', now ya gotta make a min pmt - that doesnt even come close to repaying the bal due within the allotted 'free' period and if ya dont make the stinkin $10 min pmt, with the 'reforms', now WE GET 35dollar LATE FEE?

and this was supposed to be a 'reform' ????

even _they_ couldnt possibly believe anybody _but_ the interchange mob will 'benefit'

adding: and just where would THIS PART: http://www.constitution.org/cs_money.htm of 'the rules' begin to have standing in all this, anyway?

Art. I Sec. 8 Cl. 5

[Congress shall have Power ... ] To coin Money, regulate the Value thereof, and of foreign Coin, ...;

Art. I Sec. 10 Cl. 1

[No State shall ...] make any Thing but gold and silver Coin a Tender in Payment of Debts; ...

Note that there is no such prohibition against Congress, or any delegated power to make anything legal tender. Congress was originally understood to have no power to make anything legal tender outside of federal territories, under Art. I Sec. 8 Cl. 17 and Art. IV Sec. 3 Cl. 2, but in 1868 a Supreme Court packed by Pres. Ulysses S. Grant, in the Legal Tender Cases, allowed Congress to make paper currency issued by the U.S. Treasury, backed by gold, legal tender on state territory, a precedent that remains controversial to this day, when courts allow paper currency not backed by anything to be considered "legal tender".


as usual, when they cant get their way at THE BALLOT BOX, they go to the courts?

wonder where the next OCCUPY group is scheduled to appear?

[bpr]

Re: How Wal-Mart Swiped JPMorgan

Coming soon... battle of the lobbyists, part 2. See if you can find the part where consumers might benefit. (I can't.)

Pretty interesting, but I'm beginning to think that we need to stop looking for "consumer benefits," since there are never any, regardless of our defunct society's insistence on the consumer as the locus of economic wealth, and the persistent MSM message that the consumer is king.

I'm not sure how to do this without turning whole socialist (a lack of consumer benefits means an excess of producer benefits, and, frankly, I'm not sure what's holding me back from wholesale re-distribution of wealth).

[shiny!]

Re: How Wal-Mart Swiped JPMorgan

"They see both sides coming and they say, ‘Leave me alone. Get out of my office!’"

If only they would say that more often!

[gwynedd1]

Re: How Wal-Mart Swiped JPMorgan

A long read, but certainly an enlightening perspective on how legislation and regulations are really shaped.

Do what I do and read things written in the 19th century or before with some habit.

[Jam]

Re: How Wal-Mart Swiped JPMorgan

"[...] it would be politically untenable for a member of Congress to take on credit interchange because all of their constituents are already suffering as a result of the Durbin amendment," Wexler said.

So, Wexler has left no doubt as to who he considers a congressman's constituents: It is not 'we, the people,' who elected given congressman--it is the banks and credit card companies who bought him/her.

[mmr]

Re: How Wal-Mart Swiped JPMorgan

Yet another glimpse into how a law becomes a regulation in the modern era.

Bank Lobby’s Onslaught Shifts Debate on Volcker Rule

After a four-month lobbying blitz led by firms including Goldman Sachs Group Inc., JPMorgan Chase & Co. and Credit Suisse Group AG, U.S. regulators and lawmakers are signaling they’re receptive to delaying and revising their plan to stop banks from making speculative trades on their own accounts.

Representative Barney Frank, a Massachusetts Democrat and co-author of the 2010 law mandating the ban, urged regulators last week to simplify their first draft, while a bipartisan group of senators proposed pushing back its effective date.

Banking executives have long seen the rule as one of the most threatening parts of the Dodd-Frank regulatory overhaul, an assault on a lucrative line of business that comes branded with a name, that of ex-Federal Reserve Chairman Paul Volcker, garnering worldwide respect. Compliance and capital costs alone could reach $1 billion annually, the U.S. Office of the Comptroller of the Currency has said.

To make their case in Washington, banks and trade associations have been pressing a coordinated campaign to get regulators from five federal agencies to scale back the draft of the proprietary-trading rule issued in October, according to public and internal documents and interviews. They recruited money managers, industrial companies, municipal officials and foreign governments to their side.

Stanley, a former congressional aide, said that his side has at most a couple of dozen people working the agencies and Congress. Meantime, he said, hundreds of banking representatives are enlisting their customers by warning that the rule’s fallout will be higher costs and less-liquid markets.

In one typical encounter at a public event late last year, JPMorgan Chief Executive Officer Jamie Dimon encouraged BlackRock Inc. CEO Laurence D. Fink to weigh in, said two people familiar with the conversation who like others interviewed for this story spoke on condition of anonymity because the meetings were private. They didn’t give further details on the event.

Some banks recommended consultants and law firms, including Davis Polk & Wardwell LLP and Sullivan & Cromwell LLP, to help clients write letters arguing that the proposed language defines proprietary trading too broadly. Partnering with trade associations, the banks also commissioned studies, tested messages with focus groups, distributed talking points and set up a phone hotline for Capitol Hill staffers....

Knowing that they were tainted by bailouts and vulnerable to charges they were trying to preserve excessive profits, the banks looked for other firms to help press the argument.

That’s what made Robert Auwaerter such a valuable ally.

Auwaerter, who manages $650 billion as head of the fixed income group at mutual fund company Vanguard Group Inc., was in attendance on a day in early February, shortly after the Super Bowl, when Credit Suisse invited Democratic congressmen to its New York office for a presentation on the Volcker rule.

Almost all Republican lawmakers already opposed Dodd-Frank. Banks would have more sway with regulators if they could show bipartisanship. They turned to a group of House members known as the New Democrats for their centrist and pro-business leanings.

Credit Suisse hosted three members from the caucus -- Representatives Joe Crowley of New York, Jim Himes of Connecticut and John Carney of Delaware -- along with Auwaerter and officials from firms including Prudential Financial Inc., MetLife Inc. and Western Asset Management Co.
‘Great Dialog’

The session lasted about 90 minutes and “was a great dialogue,” Auwaerter, who led the discussion, said in an interview. “They were really receptive to our comments.”

Crowley pushed back at one point, telling the group that he’d recently marched in a Lunar New Year parade in Queens with Thomas DiNapoli, the New York State Comptroller who oversees a state retirement fund of about $140 billion. Why wasn’t DiNapoli complaining about Volcker?

The asset managers told Crowley they have a closer view of how the markets work than the pension funds that hire them. The proposed rule, they said, would slow bond trading, making it harder for them to execute their strategies. They predicted that would mean lower returns for funds like DiNapoli’s, as well as for 401(k) plans and individual investors.

Less than two weeks after the Credit Suisse visit, 26 New Democrats signed a letter to regulators noting that “millions of public school teachers, police officers and private employees depend on liquid markets and low transaction costs” to retire with “dignity and ease.”

Asked about the connection between the letter and the meeting, Crowley said in a statement that the lawmakers also heard from “many of those on the front lines” including teachers, firefighters, state governments and businesses who said they could be hurt by the rule. It was clear, he said, that “more conversations need to be had to ensure any final regulation is done right.”....