19 Oct 2023

Joel Griffith: Big box retailers pocketed free checking account perks — now they want your credit card rewards

by | posted in: Society | 0

Most of us don’t give much thought to the process of using a credit card. We just know it’s convenient, and we enjoy the rewards many card-issuers offer. But if Big Box retailers get their way through the Orwellian-named Credit Card Competition Act, that will change. We’ll be paying more in fees and higher interest rates while earning fewer rewards as merchants try to shift their costs onto you.

To see why, consider what happens when you use a credit card.

Quite a bit happens before and after a transaction that takes mere seconds. A network — called an interchange platform — quickly determines whether your credit card is valid and if you have sufficient credit available. And within hours of the purchase, credit supplied on your behalf by your card issuer flows through the interchange platform and is deposited as funds in the merchant’s checking account.

Hundreds of banks worldwide issue credit cards with unique interest rates, repayment terms, and rewards programs — but the number of interchange platforms are far fewer. The most common ones, of course, are Visa and MasterCard. When you apply for a “Visa” or “MasterCard” credit card from your bank, you’ve selected one of those entities as the network that will process the purchases on credit from that bank. Importantly, your bank — not the platform itself — issues the credit.

The merchant pays an “interchange fee” on every credit transaction — typically under 2%, a fee that rose only 0.1% from 2014-2020. Your bank and the merchant’s bank negotiate exactly how to split this fee. This fee enables the card-issuing bank to provide credit card rewards, protection against fraudulent purchases, and responsive customer service.

Of course, this arrangement also enables merchants to sell goods and services on credit to customers despite no pre-established relationship, no credit check, and with no risk to them should you fail to repay the loan. Importantly, your bank, rather than merchant, provides the capital — eliminating this cost to the retailer as well.

Just a generation ago, a merchant desiring to sell on credit found it necessary to conduct their own time-intensive due diligence, along with securing additional funds to finance credit issuance. Merchants also found themselves at risk of loans going unpaid – especially during economic downturns. It’s no surprise that most merchants abandoned their own credit extension programs as credit-card issuers gave them this alternative — and many other merchants who didn’t extend credit previously chose to utilize this service.

Now some in Congress want to take away this choice from you as the consumer. The Credit Card Competition Act would arbitrarily force dozens of the leading credit-card issuing banks to add at least one alternative interchange platform to process the credit transactions. In many instances, the retailer will choose the barebones, low-cost alternative. Perhaps the existing networks will choose to scale back their fees and frills as well.

In both scenarios, this congressional interference in the credit card results in diminished proceeds distributed to your bank for credit card rewards programs, fraud prevention, and customer support.

Some business groups argue that more competition is needed in the credit-card processing market. Certainly, competition helps hold down costs and improve service. However, wide competition DOES exist. Visa, MasterCard, Discover, and American Express (in addition to other payment methods) strive to be the preferred choice of the consumer and the business.

A business decides which of these platforms meets his needs. He may choose to accept credit cards regardless of the network utilized. Or a merchant may refuse to accept credit cards utilizing a network the merchant deems too expensive. For instance, it’s quite common for retailers to only accept Visa and Mastercard, rejecting American Express because the processing fees sometimes are significantly higher. Some merchants choose to reject credit-card purchases altogether, relying on cash, check, or self-financed credit purchases.

Don’t think for a second that the big box retailers will at least lower their prices in response to any reduction in processing costs. A similar situation occurred more than a decade ago when the Durbin Amendment regulation under Dodd-Frank limited debit card transaction fees. Most big retailers pocketed the savings — with only 22% lowering prices. Meanwhile, the price cap forced banks to recoup their revenue losses by adding fees and eliminating free checking for some lower-net-worth clients.

This is crony capitalism at its worst. This meddling at the behest of big box retailers amounts to more than just cost shifting — it results in higher total costs and diminished service. This is one so-called reform that should come back “declined.”

Joel Griffith is a Research Fellow in the Thomas A. Roe Institute for economic policy studies at The Heritage Foundation.

 

19 Oct 2023

Erwin Chemerinsky: A federal judge’s gag order against Trump may be satisfying. But it isn’t constitutional

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Although I often wish that Donald Trump would shut up, he has a constitutional right not to. A federal judge went too far in restricting his free expression Monday when she imposed a gag order on the former president.

U.S. District Judge Tanya Chutkan, who is presiding over the Washington prosecution of Trump for his role in the Jan. 6, 2021, insurrection, ordered him to refrain from rhetoric targeting prosecutors and court personnel as well as inflammatory statements about likely witnesses.

Chutkan issued the order in response to a motion from special counsel Jack Smith. Trump has said on social media that Smith is “deranged,” that the judge is “a radical Obama hack” and that the court system is “rigged.” He has also attacked potential witnesses such as former Vice President Mike Pence.

“This is not about whether I like the language Mr. Trump uses,” Chutkan said in announcing her decision from the bench. “This is about language that presents a danger to the administration of justice.” She added that Trump’s presidential candidacy “does not give him carte blanche” to threaten public servants. The judge said that “1st Amendment protections yield to the administration of justice and to the protection of witnesses.”

I certainly understand Chutkan’s desire to limit such speech, and this is obviously a unique case with no similar precedents. But basic 1st Amendment principles cast serious doubt on the judge’s order.

The Supreme Court has long held that court orders prohibiting speech constitute “prior restraint” and are allowed only in extraordinary and compelling circumstances. In New York Times Co. v. United States (1971), for example, the justices held that the courts could not constitutionally enjoin newspapers from publishing the Pentagon Papers, a history of America’s involvement in the Vietnam War. The Supreme Court held that there is a strong presumption against orders preventing speech.

Even more to the point, in Nebraska Press Assn. v. Stuart (1976), the justices held that the courts can almost never keep the press from reporting on criminal cases, even when the goal is to protect a defendant’s right to a fair trial.

Although the Supreme Court hasn’t considered gag orders on parties to a case and their lawyers, the same strong presumption should apply against such prior restraints. What is particularly troubling about Chutkan’s order is that it seems primarily concerned with protecting prosecutors and court personnel from Trump’s vitriol. The law is clear that speech can’t be restricted to prevent government officials from being criticized or even vilified.

The Supreme Court has repeatedly held that the 1st Amendment protects a right to criticize government officials, even harshly. In New York Times Co. v. Sullivan (1964), the court unanimously declared that the amendment reflects a “profound national commitment to the principle that debate on public issues should be uninhibited, robust, and wide-open, and that it may well include vehement, caustic, and sometimes unpleasantly sharp attacks on government and public officials.”

There is no reason to believe, moreover, that Trump’s criticism of Smith, his staff or court personnel will prevent a fair trial. It is impossible to imagine that Trump’s attacks will change how the prosecutors behave. And given all that Trump has said and all that has been said about the events of Jan. 6, it is inconceivable that more speech will do much more to prejudice prospective jurors.

Whether Chutkan’s order is constitutional insofar as it keeps Trump from speaking about witnesses is a harder question. Trump has already appeared to threaten potential witnesses. The day after his August arraignment, for example, Trump posted on social media: “If you go after me, I’m coming after you.”

But it is important to note that the witnesses Trump has attacked are former high-level officials such as Pence and Attorney General William Barr. (Chutkan ruled that Trump can talk about Pence as a rival for the Republican presidential nomination but not as a potential witness in the case.) There is little reason to believe that Pence or Barr would be intimidated by Trump and strong grounds for protecting criticism of what they did as public officials, even by Trump. Also, Chutkan could have issued a narrower order limited to speech about witnesses but didn’t.

Ultimately, the judge imposed a gag order on Trump because his speech is often unpleasant and offensive. But that is simply not a basis for restricting speech under the 1st Amendment. We may loathe what Trump says, but we must defend his right to say it.

Erwin Chemerinsky is a contributing writer to the Los Angeles Times Opinion section and the dean of the UC Berkeley School of Law. His latest book is “Worse Than Nothing: The Dangerous Fallacy of Originalism.”

19 Oct 2023

Victor, Ramanathan: Climate change isn’t just about emissions. We’re ignoring a huge part of the fight

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Last month, we heard yet again about the need to stop global warming at about 1.5 degrees centigrade above preindustrial levels. The International Energy Agency outlined a plan to meet that goal, and the United Nations secretary-general implored nations to get serious about cutting emissions to make it a reality.

That goal is a fantasy. This summer, global warming already yielded monthly average temperatures that exceeded preindustrial averages by 1.5 degrees. It took more than a century for global annual average temperatures to reach the first degree, which happened around 2015. Climate data suggest that the next half-degree is likely to happen by the early 2030s, if not sooner, and that 2023 will be the warmest year on record.

The reality of rapid warming requires that every country create an adaptation strategy to become more resilient to the effects of climate change.

Adaptation means lessening the harm caused by storm surges, floods, heat waves, fires and other weather-related perils. It requires new infrastructure, early warning systems and better awareness of how changes in the climate will harm things we value.

The best adaptation strategies go further to pursue resilience — the ability to bounce back from destructive changes.

Adaptation to the consequences of global warming doesn’t come just from singular activities, like flipping a switch; it’s processes that will affect all of society and can easily go awry.

Similarly, a serious resilience strategy can’t be piecemeal: It involves power grids and other infrastructure that must be managed at a large scale, and every locality needs to learn from ideas that get tested around the country and world. That’s why we need a national approach that assesses how local efforts fit together, how much money to spend on each component and which policies actually work.

The U.S. currently invests far too little in adaptation projects and has no comprehensive national adaptation strategy.

The unprecedented climate spending in two recent laws — the Bipartisan Infrastructure Law and the Inflation Reduction Act — is long overdue. But they primarily focus on reducing emissions, devoting a small fraction of total spending to resilience and adaptation.

Even California, a national leader on climate issues, last year allocated only about one-fifth of its multiyear climate budget to resilience efforts such as shoring up the water system against drought. This year, with a tighter budget overall, that proportion is declining. A national adaptation and resilience strategy would help states, in addition to the federal government, set goals for the right spending to ensure effective adaptation while also aggressively cutting emissions.

Build on existing adaptation projects

Any national approach will, of course, build on adaptation projects that localities are pursuing.

California and its electric utilities have learned how to reduce the risk of wildfires by cutting power to fire-prone areas, clearing brush, hardening power lines and experimenting with new control systems.

The Southwest is, belatedly, planning for a more parched future by seeking new sources of water, investing in ways to purify wastewater and seawater, requiring more frugal water use, managing snowpack runoff more efficiently and reallocating water from the region’s crucial river, the Colorado.

Miami is building artificial reefs that can help blunt waves and wind during storms.

New York, battered by Superstorm Sandy in 2012 and hit recently by floods, has strengthened its defenses such as seawalls and subway floodgates.

Houston and New Orleans are bracing for more frequent and severe flooding by improving seawalls and stormwater systems.

The federal government must knit these scattered efforts into a coherent national approach.

It is starting to shift its behavior — slightly. The Federal Emergency Management Agency is putting more resources toward disaster resilience and has raised federal insurance premiums, including an increase in rates for flood insurance, to better reflect real risks. The Pentagon is, among other efforts, working to protect military bases from rising seas and stronger storms and building microgrids to insulate bases’ electric supply against climate-related interruptions.

These actions are important. But they remain isolated around the country and limited to government, still failing to consider the system as a whole. For example, because the climate can change in unexpected and dangerous ways, it’s important to run stress tests — such as assessing how stronger storms could affect supply chains that in turn affect the economy — much as central bankers periodically look at extreme economic events.

Strategy for rapid warming

Five years ago we predicted, with a colleague, what’s confirmed in today’s news: that warming rates would accelerate. That prediction was not taken seriously at the time because the scientific consensus was that warming would happen more slowly. If the country had a national adaptation strategy that included stress tests, we could have assessed how outlier predictions such as ours — which often come to pass in climate science, since the consensus leans conservative — would affect the country.

A strategic view would also make it easier to identify and fix maladaptive policies that put us at greater risk.

Many states, for example, cap premiums charged to homeowners and others who insure against wildfires, hurricanes and other perils. Rather than letting the market reflect the true risks of living in certain areas, this approach can mask the real dangers faced by some properties.

The result: Major insurance companies are paring back coverage, which means that governments are more likely to get stuck covering big losses from climate-related destruction. Already AIG, Allstate, Farmer’s and State Farm are exiting parts of the California market. That market response has spread to Florida and other states on the front lines of harsh climate impacts.

Investing in more adaptation projects makes good economic sense too. In 2019, a commission co-chaired by Bill Gates, former U.N. Secretary-General Ban Ki-moon and International Monetary Fund Managing Director Kristalina Georgieva reported that a $1.8-trillion investment in adaptation worldwide could generate $7.1 trillion in benefits by 2030, including by creating more jobs in vulnerable communities.

At the global level, the populations most vulnerable to rapid warming include about 3 billion people who are contending with poverty, fragile housing, scarce affordable clean energy and other challenges. Although these communities contribute just a tiny fraction of the carbon emissions that cause global warming, the world is spending billions more on getting them to reduce those emissions than on the more urgent goal of helping them adapt to the impacts. On the national level, we don’t even have estimates on how much money the federal government could save by investing more in adaptation than in rebuilding communities after they’ve been demolished by extreme weather events.

Even with a global crash program to cut emissions — which is essential — climate change will worsen for at least the next two decades. We need national strategies that can help us bounce back from increasingly devastating hits.

David G. Victor is a nonresident senior fellow at the Brookings Institution, professor of innovation and public policy at UC San Diego’s School of Global Policy and Strategy and professor of climate and atmospheric science at Scripps Institution of Oceanography. Veerabhadran Ramanathan is a distinguished professor emeritus of climate sustainability at Scripps Institution of Oceanography and climate solutions scholar at Cornell University. They wrote this column for the Los Angeles Times.

19 Oct 2023

Patriots release 2023 NFL Draft pick, freeing up roster spot

by | posted in: News | 0

FOXBORO — The Patriots waived cornerback Ameer Speed on Thursday, opening up a spot on their 53-man roster.

Speed, a 2023 sixth-round pick out of Michigan State, has played in five of six games so far this season. He’s registered three tackles in 10 defensive snaps and 73 special-teams plays.

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The Patriots have multiple options to fill Speed’s spot on the roster. They can activate cornerback Jack Jones from injured reserve. They can also activate safety Cody Davis or defensive end Trey Flowers from the PUP list.

Davis could help fill Speed’s special-teams role with more veteran experience. Jones would likely fill a starting spot at cornerback if he’s ready to return from an early-season hamstring injury. Flowers would also help the team with injuries to Matthew Judon (injured reserve), Keion White (concussion) and Josh Uche (knee/foot) at edge defender.

The Patriots also could sign or claim an outside addition or promote a player from their practice squad.

The Patriots could wait until Saturday at 4 p.m. to make their next move to fill the 53-man roster spot.

If Speed clears waivers he could return to the Patriots’ practice squad. The 6-foot-3, 210-pound defensive back began his college career at Georgia before transferring. He’s one of the team’s backup gunners behind Matthew Slater and Brenden Schooler.