MADISON, Wis. (5/23/13)--A group of 19 retailers, including Wal-Mart Stores, Starbuck Corp. and Costco Wholesale Corp., are opting out of a $7.25 billion antitrust settlement with credit card titans Visa Inc. and MasterCard Inc. over fees that merchants are charged to process credit card transactions.
 
The merchants say the reason for not accepting the proposed settlement reached last summer is that it would not stop swipe fees from rising. Also, it maintains and bolsters an anticompetitive system that permits Visa and MasterCard to fix fees, they said (The Wall Street Journal and Bloomberg.com May 21).
 
Furthermore, the group said the deal would prevent them from taking legal action in the future against credit card networks for any alleged anticompetitive behavior, acording to the Journal.    
 
If the proposed settlement were approved, large banks and credit card companies would be given license "to perpetuate an unfair and broken system that costs all consumers," Mike Cook, senior vice president of finance and an assistant treasurer for Wal-Mart said Tuesday. Those costs would also impact consumers who don't own a credit or debit card, he added. 
 
Other companies in the retail group that are opting out include: Alon Brands Inc., Gap Inc., Lowes Cos., Nike Inc. and 7-Eleven Inc., the Journal said.  
 
The National Retail Federation, a trade group based in Washington, D.C., separately said Tuesday it intends to object and opt out of the proposed settlement. The deadline to object and opt out is next week, the Journal said. 
 
Although credit unions are not involved in the proposed antitrust settlement, they--along with other financial institutions--would be impacted by terms of the $7.5 billion settlement, which would necessitate a reduced interchange rate fee (IRF) of 10 basis points for an eight-month period (News Now Nov. 1).
 
Credit unions with credit card programs would lose roughly $50 million in total revenues--or about 0.5 basis points on their total assets--if the total IRF reduction is $1.2 billion, the Credit Union National Association said. That loss would mostly be absorbed by a relatively small number of credit unions with very active credit card programs, CUNA added.

WASHINGTON (5/23/13)--The Federal Reserve is assessing whether the labor market has made real and sustainable progress. If improvement continues, its policymakers could in the next few meetings step down its pace of asset purchases, said Ben Bernanke, testifying before the Joint Economic Committee Meeting in Washington Wednesday.
 
However, members of the Fed's key policymaking body, the Federal Open Market Committee (FOMC), remain split about when to introduce such measures, according to minutes released Wednesday of its April 30-May 1 meeting.
 
The FOMC had started a third round of bond buying in what is known as quantitative easing in September and increased it in December to $85 billion a month in securities--$45 billion in Treasury securities and $40 billion in mortgage-backed securities.  At its last meeting, the committee's post-meeting statement had said the FOMC was "prepared to increase or reduce the pace of its purchases to maintain appropriate policy accommodation as the outlook for the labor market or inflations changes."
 
Most participants at the meeting "observed that the outlook for the labor market had shown progress since the program was started in September, but many of these participants indicated that continued progress, more confidence in the outlook, or diminished downside risks would be required before slowing the pace of purchases would become appropriate," the FOMC's meeting minutes indicated.
 
"A number of participants expressed willingness to adjust the flow of purchases downward as early as the June meeting if the economic information received by that time showed evidence of sufficiently strong and sustained growth; however, views differed about what evidence was necessary and the likelihood of that outcome," the minutes said.
 
"One participant preferred to begin decreasing the rate of purchases immediately, while another participant preferred to add more monetary accommodation at the current meeting and mentioned that the committee had several other tools it could potentially use to do so," the minutes continued.
 
"Most participants emphasized that it was important for the committee to be prepared to adjust the pace of its purchases up or down as needed to align the degree of policy accommodation with the changes in the outlook for the labor market and inflation as well as the extent of progress toward the committee's economic objectives," the minutes said.
 
In his testimony Wednesday, Bernanke noted that credit conditions in the U.S. have eased for some types of loans, as bank capital and asset quality have strengthened.  Congress and the administration could consider replacing some of the near-term fiscal restraint now in law with policies that reduce the federal deficit more gradually in the near term but more substantially in the longer run, Bernanke said.
 
"With unemployment well above normal levels and inflation subdued, fostering our congressionally mandated objectives of maximum employment and price stability requires a highly accommodative monetary policy," he said.
 
"Because only a healthy economy can deliver sustainably high real rates of return to savers and investors, the best way to achieve higher returns in the medium term and beyond is for the Federal Reserve--consistent with its congressional mandate--to provide policy accommodation as needed to foster maximum employment and price stability," he said. The Fed "will do so with the due regard for the efficacy and costs of our policy actions and in a way that is responsive to the evolution of the economic outlook."
 
The FOMC's next meeting will be June 18-19.  For the full minutes, use the link.

MOUNTAIN VIEW, Calif. and SAN FRANCISCO (5/22/13)--Google and mobile payment company Square have launched separate initiatives that allow consumers to send payments via e-mail.
 
Google will integrate its digital Google Wallet with Gmail so users can send money to friends and family even if they don't have a Gmail address, Google announced last week (CNet May 15).
 
To send money in Gmail, users must hover over an attachment paperclip, click the "$" icon to attach money to the message, enter the amount, and press send.
 
Sending money via Gmail is currently available only on desktop computers. The service will be free.
 
Square also added a cash-by-e-mail feature, called Square Cash. The service is "invite only" (Cnet May 20)
 
To use Square Cash, users draft an e-mail to the recipient, CC: it to pay@square.com, enter a dollar amount in the subject line, and send the e-mail.
 
The recipient will be asked to associate a debit card with the transfer, after which the money will be sent directly to the banking account linked to it.
 
The sender will be charged a 50-cent fee for Square Cash.

WASHINGTON (5/20/13)--U.S. consumers gained significant optimism in May, according to the Thomson-Reuters/University of Michigan Consumer Sentiment Index.
 
The early-May index jumped to 83.7 from 76.4 at the end of April. The April reading was revised from 72.3, an economist told The Wall Street Journal (May 17).
 
In early May, the current conditions index surged to 97.5 from 89.9 at the end of April, and the expectations index rose to 74.8 from 67.8.
 
The early May index gains suggest consumers are shrugging off the drag caused by cuts to federal spending, the Journal said. Declining gasoline prices, stronger housing markets and a rise in stock prices have mitigated the cuts, the Journal added. 
 
Also, consumers do not anticipate much of a change in future inflation, with one-year inflation expectations remaining at 3.1%, and inflation expectations for the next five to 10 years dipping to 2.8% from 2.9% at the end of April, the report indicated.

WASHINGTON (5/17/13)--Federal regulators have decided to relax a rule aimed at curbing large banks' domination of the derivatives market, which was a prime cause of the financial crisis.
 
The rule changes announced Thursday could allow a few big banks to continue controlling derivatives--a $700 trillion market involving contracts that derive their value from an underlying asset such as an interest rate or bond. The market allows firms to either protect against risk or speculate in the markets (The New York Times May 15).
 
Five banks hold more than 90% of all derivatives contracts, the Times said.
 
In 2008, that dominance of such a huge and critical market by just a few players was criticized because derivatives contracts caused insurance behemoth American International Group to nearly implode before the government bailed it out, the Times said.  
 
After the 2008 crisis, regulators initially intended to make asset managers contact a minimum of five banks when looking for a derivative contract price--a move geared toward engendering competition among banks, the Times said. Now, the Commodity Futures Trading  Commission has agreed to lower the standard to two banks, according to officials briefed on the matter.
 
Within 15 months from today, the standard will automatically increase to three banks, the officials added. The new rule, created by the trading commission, also specifies that large volumes of derivatives trading must shift to regulated trading platforms that resemble exchanges, from the current privately negotiated deals, the Times said.
 
In a related matter, it was announced Thursday that well-run federal credit unions would be permitted to use simple derivatives to hedge against interest rate risks under a just-proposed National Credit Union Administration program (News Now May 16).
 
Only credit unions that have assets of more than $250 million, are well-managed, and have the appropriate expertise will be eligible to apply for an agency derivatives investment program, under the terms of the NCUA proposal. The agency will seek comments for 60 days on the proposal. (See related News Now story, NCUA Releases CU Derivatives Program Proposal.)

WASHINGTON (5/17/13)--Jobless claims spiked by 32,000--more than economists had predicted--during the week ended May 11, said the Labor Department Thursday.
 
Claims for the week totaled 360,000, which is 30,000 more than the median forecast by economists surveyed by Bloomberg.  Estimates had ranged from 315,000 to 355,000 (Bloomberg.com and Moody's Economy.com May 16). The previous week's claims were revised to 328,000 from the 323,000 originally reported.
 
The claims are the highest since November, after Superstorm  Sandy had hit the North East, said Bloomberg.
 
The claims' four-week moving average rose by 1,250, which Moody's termed as a "moderate" increase, to 339,250. That means the average is close to its multiyear low of the previous week.
 
Continuing claims dropped 4,000 in the week ended May 4 to reach 3.01 million, near a multiyear low. The four-week moving average for these claims fell 21,000 to 3.02 million, a recovery low, said Moody's.

WASHINGTON (5/16/13)--The Federal Deposit Insurance Corp. announced Tuesday that one bank was shuttered and its assets assumed by another bank.
 
Central Arizona Bank, Scottsdale, Ariz., was assumed by Western State Bank, Devils Lake, N.D. Central Arizona Bank had about $31.6 million in total assets and roughly $30.8 million in total Deposits.
 
The failure brings the number of total bank failures this year to 13. The cost of the failure will be $8.6 million, FDIC estimated.