Europe Can Rein in Visa and MasterCard... Why Can't We?

MasterCard's profits surged 70% last quarter, AP is reporting just this afternoon. The profit alone was $214 million, and it's a company record.

Here's what I want to know: We get upset when oil companies reap outsized windfalls on the backs of everyday consumers. Why don't we get similarly outraged when the credit card companies do the same?

I attempt to answer that below the fold...

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Bush, Banks & Preemption

By Paul Bland, Trial Lawyers for Public Justice


It's no secret that many of the most generous contributors to the President are energetically calling for major "tort reforms" - measures to eliminate or reduce the liabilities corporations face for various harm that they cause to others.


It's also a matter of public record that these corporations have not as of yet been able to get Congress to pass the vast majority of the items on their wish list.  While corporations have received some Christmas gifts from the Congress (most importantly, the euphemistically named Class Action Fairness Act and the Bankruptcy Reform Act), most corporations do not yet enjoy the kind of sweeping immunity from any liability for which they've been hoping.

While the White House cannot quite dictate its will unfettered to the legislative branch, it does have complete control over the administrative agencies of the executive branch.

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Another loan shark bill makes progress

Only the most naive could have believed that, when the bankruptcy bill S 256 (Queen Mary and Calais...) was passed that the loan sharks (Patron Saint: St Joseph of Wilmington) would be satisfied.

One of several bills on the stocks is HR 3997, the Financial Data Protection Act, which, Kevin Drum alerts me, has just been reported out by the House Financial Services Committee. (Kind of Loan Shark Central on the House side.)

It is designed to override state laws on, and provide a Federal code for, data protection.

Of a sort.

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Helping Iceland

Iceland is a small country in big trouble.

During the heady times of economic growth, its banks expanded operations far beyond what the country could possibly support. When the global financial crisis came, all three collapsed. Millions of depositors in Britain and the Netherlands would have lost their savings.

When banks collapse nowadays, fortunately, governments intervene. The governments of both Britain and the Netherlands guaranteed the accounts of their citizens. In total, this cost said countries approximately 3.9 euros (or 5.3 billion dollars).

Understandably, said countries were also angered at picking up the tab of Iceland’s failed banks. The root of Iceland’s current troubles lies in their demands that Iceland repay the €3.9 billion. To force Iceland’s hand, Britain – in a rather mean gesture – used anti-terrorism laws to freeze Iceland’s financial assets. This helped crush the country’s economy.

Now, there are two problems with the demands of Britain and the Netherlands. Firstly, Icelanders really do not want to repay the money. To the average citizen, suffering for the mistakes of a few bankers smacks of unfairness. Giving money to what many view as a big bullying country is also unpopular. In a recent referendum on the question, 93% of voters rejected a deal to repay Britain and the Netherlands.

Secondly, it’s practically impossible for Iceland to repay the money. The country’s population, after all, numbers only around 300,000. The €3.9 billion in debt amounts to almost half of its GDP. Imagine if the United States owed $6.5 trillion to another country because of Goldman Sachs.

The best step for Britain and the Netherlands would just be to forgive Iceland’s debt – or, if that fails, to negotiate a very generous deal. Third World countries have their debt relieved all the time; there’s no good reason for Iceland to be an exception.

Perhaps United States can lend a hand. €3.9 billion is a lot for Iceland, but practically nothing for a country of America’s size. It may not even need to actually spend money to help Iceland; Britain, after all, still owes the United States £40 billion pounds (inflation-adjusted) that it borrowed from it to fight WWI.

More fundamentally, this situation may end very badly for the West. Iceland’s predicament brings to mind the massive reparations Germany faced after WWI – something which ended disastrously for all countries involved. Already hostility to Britain and the Netherlands is quite high in Iceland; it will probably rise further. Last November the president of Iceland accused its neighbors of betraying Iceland during its time of need.

There may come a time when the West is likewise in a dire strait – whether it be war, economic peril, or something else. It may need all the help it can get. Then Britain and the Netherlands may rue taking a country like Iceland for granted. In the best case scenario, Britain and the Netherlands get their €3.9 billion, and Iceland forgives and forgets. In the worst case – one of those “unknown unknowns” – their bullying may end up costing the West far more than €3.9 billion.

--Inoljt, http://mypolitikal.com/

 

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