Today is the first day that most large banks stop taking IOUs from individuals and small businesses. For those left holding them, the options are limited. Citibank agreed to a one-week extension, and Bank of the West will accept them - but only for existing customers. Other big banks may offer lines of credit or other short-term bridges for customers, but on a case-by-case basis. IOU holders needing cash might be able to try credit unions, or inevitably, check-cashing stores. And this all appears to suit Arnold Antionette just fine:
State Treasurer Bill Lockyer tried to persuade the big banks to change their minds about the IOUs. "We're just trying to convince them that it would be in the best interest of their customers and the best interest of taxpayers to give it more time," said his spokesman Tom Dresslar.
Gov. Arnold Schwarzenegger made no such attempt at persuasion. "His focus is to get a solution to our budget so we don't have to deal with IOUs," said his spokesman Aaron McLear. "I don't think it was anyone's expectation that they would honor them forever."
Emerging from a meeting with legislative leaders Friday, the governor would say only that "IOUs are one more reason to get the budget done as quickly as possible."
In 1992, the last time the state issued IOUs, the major banks accepted them for about a month. Their refusal to go any further was widely seen as a move to pressure officials to pass a budget.
Yes, of course, this is why he vetoed solutions that would have stopped the issuance of IOUs in the first place.
Meanwhile, John Chiang's latest release of the state economic picture shows a $10 billion dollar shortfall in Fiscal Year 2009, and a still-contracting revenue picture that has led to a $4 billion dollar delay in payments to local school districts. They has planned on sending out the money Friday; now they will hold off until July 30.
Bloomberg reports that people are lining up for those souvenir Arnoldbucks.
Controller Chiang said the warrants can be transferred between individuals, setting up the possibility that a secondary market for the IOUs may develop. Already ads are appearing on Web sites such as Craigslist offering cash for the IOUs at below face value.
In such a transaction, the person who gets the IOU would get most of the cash they were due the state, while the person buying the IOU might then hold onto it until maturity and earn the face value plus the 3.75 percent interest.
At least one person offered to buy an IOU at more than face value as a keepsake.
"I am interested in purchasing a 'State of California IOU' as a souvenir," the ad reads. "I figure it would be an interesting thing to have around when my grandchildren are fighting over my stuff after I'm dead and gone. I will pay two times face value (up to $100, or $50 face value) for a warrant/IOU."
Of course, after July 10, the deadline that banks like BofA and Wells have given for exchanging these IOUs for cash, souvenirs may be the only value for these IOUs for a few months. Maybe Arnold will go to a baseball card convention and sign them himself!
Here's another FAQ about who receives IOUs and who does not. The unemployed, SSI/SSP recipients, state employees and retirees, IHSS and Medi-Cal providers will NOT receive IOUs. Welfare recipients, contractors with the state, local governments, and income tax refund recipients WILL get them. Felix Salmon made a handy chart that suggest the haves will keep getting paid and the have-nots won't, and that's somewhat true, but some have-nots who have the benefit of their services being partially provided by the Feds will get paid as well. In general, where you stand does depend on where you sit, in this crisis. This again makes clear that the idea of California debtholders, who get priority of payment in the state constitution over everything but education, getting stiffed by the state is a ridiculous one that pretty much cannot happen, and lowering bond ratings should be rightly seen as Wall Street gouging.
Small businesses, students, seniors, and taxpayers will all start receiving IOUS. This shameful day didn't have to arrive. In fact, Governor Schwarzenegger had several opportunities to prevent it.
On June 12 Governor Schwarzenegger unilaterally blocked the Controller's authority to secure short-term loans to avoid the cash crisis. He said, "let them have a taste of what it is like when the state comes to a shutdown -- grinding halt."
On June 25 after the governor called Senate Republicans to his office for private meetings, $4 billion in immediate cash solutions that had been passed on an overwhelming bipartisan majority in the Assembly were killed in the Senate.
Most recently, the governor vetoed a comprehensive package of budget solutions supported by majorities in both houses of the legislature that would have resolved the $19.5 billion deficit, left a $4.0 billion reserve, avoided the cash crisis and prevented IOUs [...]
We did offer, as a sign of good faith, to begin work immediately on reforms regarding restructuring Medi-Cal and eliminating fraud in the IHSS program. We also committed to working with the governor on other reform legislation for him to sign. But the governor wouldn't take "yes" for an answer. So California businesses, taxpayers and students will be receiving IOUs simply because Governor Schwarzenegger thought it was more important to immediately force last minute changes such as reducing future employee pensions, fingerprinting elderly and disabled Californians who receive services, and denying kids food stamps if their families can't access a computer to sign them up for the program.
The budget gap grows by $25 million a day and we have wasted billions of taxpayer dollars because the Governor wants to teach everyone a lesson. I hope that IOU secondary market is bigger than eBay, because those suffering with the consequences of dysfunction are going to need the help.
The IOUs are on the verge of being distributed. The Pooled Money Investment Board met today to hash out the terms for the IOUs, and surprise, there were some differences. The Governor wants a paltry 1.5% interest rate for the IOUs, and flexibility on repayment until as late as June 2010. That would be worse than a 1-year CD. Controller Chiang supports the staff recommendation of 3.75% interest rates and repayment in October. Chiang won. The board approved his terms.
The reason to offer a more attractive interest rate is to ensure that banks will actually cash them. Wells Fargo and Bank of America announced they will accept them, but only until July 10; after that, it's anybody's guess. Golden 1 Credit Union and Tri Counties bank of Chico also agreed to accept the warrants. This article gives a good rundown of how the IOUs will work. If your bank won't cash them, you're basically stuck with a piece of paper until October.
The most important question, of course, is why we're going down this costly route at all, when the Assembly and Senate Democrats fashioned a solution to avoid this. The answer is that the Governor wanted some leverage, the people be damned.
If the stigma of issuing IOUs triggers a budget deal in the coming days, Gov. Arnold Schwarzenegger might find redemption in his strategy of quashing a stopgap solution that would have avoided those non-cash payments.
But if no budget deal emerges soon, Schwarzenegger will have helped saddle the state with a lower credit rating and have nothing to show for it.
As a negotiating strategy, Schwarzenegger is counting on public pressure to mount against the Legislature as California issues IOUs today for only the second time since the Great Depression. The Republican governor could have backed legislation to avert IOUs this week, but he demanded that lawmakers solve the entire budget problem, which grew Wednesday to $26.3 billion [...]
Schwarzenegger wanted a full budget deal, and part of his calculation was likely that IOUs ramp up the stakes and force lawmakers to reach that goal sooner. Without IOUs, he figured lawmakers might have delayed compromise on the rest of the package, costing the state in a different way.
"If he had signed the stopgap measures, the Legislature would have gone home for Fourth of July weekend and come back when the threat of IOUs came up again," said Tim Hodson, executive director of the Center for California Studies at California State University, Sacramento. "I'm sure the governor went over this and thought: Are the consequences of the delay worse, and would he have lost the leverage that he has now?"
Well, this is a game played with people's lives. If banks won't cash IOUs, you can be sure Rite-Aid won't accept them. Or landlords. Or health care providers. In addition, this little power play cost taxpayers between $2 and $7 billion dollars, which I don't see Schwarzenegger going into his wallet to cover.
Rather than shock doctrine the legislature into making major policy changes as a condition of passing a budget, a more likely scenario is that this train wreck will spark reform efforts to finally get off this perpetual track of hijacking and stubbornness.
If California has become ungovernable, and teeters now on the brink of bankruptcy, it is due less to excessive spending than a deficit in democracy - the very essence of which is majority rule. A simply worded, one-paragraph initiative to restore majority rule in the Legislature might well prove resoundingly successful with a crisis-weary electorate. And while it may not be sufficient in itself to repair the state's balance sheet and fix its broken governance, restoring majority rule is the necessary first step toward ending gridlock, renewing public confidence, and preventing extremists of whatever stripe from holding future legislatures hostage to their own narrow agendas.
If no deal is reached between the Governor and the Legislature in the next 14 hours, California will start to issue IOUs to companies that do business with the state (mostly small businesses), taxpayers expecting refunds, and agencies delivering assistance to the most vulnerable members of society - welfare recipients, the elderly, disabled and blind, and college students expecting aid grants.
The biggest variable with these IOUs is whether or not banks will honor them, a decision that they have yet to reach.
The deciding factor could be California's banks. If they're willing to honor the registered warrants, or IOUs, then the problem becomes manageable for the scores of small businesses and local governments that rely on dollars flowing from Sacramento. They'll be able to cash the IOUs.
But if the banks resist, billions in state payments will be effectively delayed - putting renewed stress on a state and region already suffering from a deep recession. One Rocklin company, a temp firm that relies heavily on state business, has already laid off five workers in anticipation of a cash squeeze.
So far, no banks have committed to honoring the IOUs, said Hallye Jordan, spokeswoman for state Controller John Chiang.
She said banks are probably waiting to see how much interest the state will pay on the IOUs - a figure that won't be decided until Thursday, the same day Chiang is scheduled to issue IOUs. The notes will total $3.36 billion, with about $500 million targeted for the private sector.
In 1992, banks generally honored the IOUs by cashing them on demand. If you haven't heard, banks are in a slightly worse financial picture now than then, and might not be willing to float bridge loans for the state, even with generous interest, this time. And of course, if the banks agree to honor the IOUs, the state will be paying out hundreds of millions of dollars to them in short-term interest.
If the banks fail to honor the IOUs, you can just add that to the severe pain being felt by California residents at this time. The personal bankruptcy filings which soared in Southern California in the first quarter will only increase. The foreclosures, which have not only continued for residences but commercial property like hotels, will expand. With small businesses forced to cut back due to cash flow cutoffs from the state, expect more unemployment and a continued erosion of the tax base, leading to even larger budget shortfalls. This is a death spiral from which we will find it hard to extricate ourselves. California's role as the biggest of the "50 Herbert Hoovers" truly can threaten national economic recovery.
The banksters still have a powerful sway over members of Congress. Yesterday, they stopped cramdown in the Senate, which would have allowed bankruptcy judges to treat primary residences the same way as yachts and vacation homes in a bankruptcy. And there was much rejoicing.
On the same day, the House bucked the trend, passing the Credit Cardholder's Bill of Rights by a wide, bipartisan margin.
In 2008, credit card issuers imposed $19 billion in penalty fees on families with credit cards and this year, card companies will break all records for late fees, over-limit charges, and other penalties, pulling in more than $20.5 billion. Credit-card debt in the U.S. has reached a record high of nearly $1 trillion - and almost half of American families currently carry a balance, and for those families the average balance was $7,300. One-fifth of those carrying credit-card debt pay an interest rate above 20 percent [...]
The Credit Cardholders' Bill of Rights Act passed today levels the playing field between card issuers and cardholders by applying common-sense regulations that would ban retroactive interest rate hikes on existing balances, double-cycle billing, and due-date gimmicks. It would also increase the advance notice of impending rate hikes, giving cardholders the information they need and rights to make decisions about their financial lives. Our economic recovery depends on a shared prosperity - and we must put an end to these abusive practices that continue to drive so many Americans deeper and deeper into debt.
I'm glad this ends double-cycle billing, where cardholders pay interest on debt that they've already paid off, and forces credit card companies to allocate payment to the debt with the highest interest rate. But overall, these are very modest protections that simply prohibit the credit card companies from ripping off the American people. And 105 Republicans agreed yesterday. But among those who didn't we're the usual suspects of arch-conservative Yacht Party wingers like Tom McClintock, joined by supposed "moderate" David Dreier.
Of course, as Dick Durbin noted yesterday, the bankers who own the Senate will return to try and ditch this bill. They've killed the same legislation before, and Harry Reid didn't exactly sound confident this time around. But I want to focus on Dreier and McClintock, both of whom and their pals in the GOP caucus have been well and truly bought by banking interests in exchange for votes like this.
Ed Royce (CA-40- $2,506,414)
David Dreier (CA-26- $2,118,538)
Gary Miller (CA-42- $765,988)
Devin Nunes (CA-21- $499,235)
Kevin McCarthy (CA-22- $461,138)
Tom McClintock (CA-04- $353,294)
Here's what newly-announced candidate Russ Warner had to say about this yesterday:
Dreier will once again be forced to face a top rate challenge in 2010, Russ Warner, who has every intention of making sure voters from Rancho Cucamonga, Upland, and Claremont to San Dimas, Monrovia, Sierra Madre, San Marino and La Crescenta know that Dreier is strictly a representative of the special interests that have done such grievous damage to the state's economy and to the financial well-being to his own constituents. "Time and time again," Russ told us this morning after going over the vote yesterday, "David Dreier proves the interests of his corporate donors take precedent over the people he was elected to serve. Dreier's never felt the pressure of supporting a family and has lived off the taxpayer dime for nearly three decades, so its not surprising he has no idea how harmful these predatory credit card companies are."
We're going to have to fight in the Senate to make sure this passes. But this vote should not be forgotten next year. Everyone has felt the pinch from credit card usurers, and so votes like this are signatures, marks of where you stand. Hopefully Warner and whoever challenges these other Republicans will use it.
When the Obama Administration's plan to mitigate foreclosures came out, it was clear that it would be insufficient to deal with the particular challenges faced in California. Initially, the plan would only modify loans where the amount owed was 105% of the home's true value. Given that home prices have collapsed here, this would have helped almost nobody in California. State lawmakers, in particular the Democratic point person on mortgages and foreclosures Asm. Ted Lieu, went to Washington to lobby for changes. And today, faced with a sluggish mortgage rescue program attracting few lenders or homeowners, the Administration expanded the plan.
The Obama administration said Tuesday it is expanding its foreclosure prevention program to cover second mortgages and to direct more troubled borrowers to the Hope for Homeowners program.
Under the administration's new program, the interest rate on second mortgages will be reduced to 1% on loans where payments cover interest and principal and to 2% for interest-only loans. The government will subsidize the rate reduction, with the money going to the mortgage investor [...]
Also Tuesday, the administration said it is now requiring servicers to offer troubled borrowers access to Hope for Homeowners as a modification option if they qualify.
Expanding Hope for Homeowners would address one of the major holes in the original Obama foreclosure prevention plan. It helps homeowners whose homes are now worth far less than their mortgages.
Servicers had balked at participating in the Hope program because it required they reduce the mortgage principal balance to 90% of a home's current value.
Hope for Homeowners, which began in October, is being revamped in Congress. Servicers would have to reduce the principal to 93% of the home's value. The change would also reduce the program's high fees, which turned off many troubled borrowers.
Loan servicers get a fair bit of cash incentives for participating in the program, which I don't totally support, but if we have to bribe lenders in order to keep people in their homes, that makes more sense than spending the same amount of money on the fallout from a foreclosure. And lenders do take a haircut in the Hope for Homeowners program, the first loss to my knowledge that lenders have been forced to take.
The CA-32 race to replace Labor Secretary has less than six weeks to go until the primary. We know about the two major candidates; Board of Equalization member Judy Chu (not to be confused with Betty Chu, who will appear directly above her on the ballot and surely cause some errors among voters) and State Senator Gil Cedillo, whose extreme spending of campaign contributions on shopping, meals and lavish hotels made the LA Times this weekend and caused a stir.
Somewhat less remarked-upon has been the candidacy of Emanuel Pleitez, a product of East Los Angeles and Woodrow Wilson High School, who matriculated at Stanford, joined the advisory board of Voto Latino (a group that encourages voter registration and engagement for the Latino community), worked for Democratic lawmakers like Antonio Villaraigosa, Tom Daschle and Hillary Clinton, and worked on the Obama transition team at the Treasury Department. On Friday I had the opportunity to chat with Pleitez about his life experiences, the financial crisis, housing policy and a host of other issues. A paraphrase of that conversation follows.
(As a side note, this story about one of the volunteers on the campaign, who traveled all the way from Santiago, Chile to work on it, is pretty amazing.)
Late last week, Democrats temporarily shelved a bill that would allow bankruptcy judges to modify the terms of mortgages on primary residences (also known as "cram-down"). Moderates who put the hold on this legislation, particularly former Wall Street investor Ellen Tauscher, crowed about it to the media.
This hardly amounts to a breakthrough win for party moderates - or a major concession by the speaker. But it was a consequential moment in the minds of moderate leaders who often find themselves marginalized in a caucus dominated by liberals.
"It shows we have bench strength, and it shows we can flex," said California Rep. Ellen O. Tauscher, who chairs the New Democrat Coalition and played a central role in negotiations over the bankruptcy bill [...]
Moderates worry Pelosi is routinely staking very liberal positions to push House versions of big bills as far to the left as possible to enhance their standing in negotiations with the historically centrist Senate. This might be a smart tactic, but it often hurts Democrats who rely on Republican votes to win reelection. Put bluntly, it makes them look too liberal [...]
That prompted lawmakers, like Tauscher, to limit the scope of the bankruptcy bill as much as possible, even though this measure is only loosely related to the president's broader proposal.
Tauscher's New Democrat Coalition teamed with their natural allies in the Blue Dog Coalition to impose 10 significant changes, including requirements that bankruptcy judges use federal guidelines to determine the fair market value of a home and that modified loans must be "unaffordable and not just underwater" to prevent wealthy homeowners from taking advantage of the process, according to a widely distributed e-mail from Adam Pase, executive director of the New Democrat Coalition.
This, of course, angered some liberals. "The New Dems' position is the banks' position," a senior Democratic aide involved in the bankruptcy negotiations complained on Friday. "New Democrats are shills for the banks."
It's confounding that any New Democrat thinks their constituents give a ring-a-ding about banking industry concerns, and are not in fact the very people struggling to keep their homes that this legislation would help.
More, including Tauscher staffers lying to bloggers, on the flip...
I just heard Will.I.Am on NPR talking about education cuts in California. The budget crisis has gone mainstream. And once everyone gets the news that tax refunds, welfare checks and student grants will be suspended because the state is out of cash, a whole lot of other people might get some awareness as well. The dirty little secret about "liberal bastion" California is that we are not a civically engaged people, generally speaking. The budget has been in "crisis" for decades but not enough Californians have mustered up the interest in it. We have right-wing astroturf movements that play to base emotion, but not really citizen's movements that ask for basic fairness. Californians are 45th in the country in volunteering, 44th in attending community meetings and 45th in working on community problems. Chalk it up to traffic or self-absorption or what have you, but the general take is that Californians don't see much beyond what is in front of them. IOUs would change that. Well, maybe. It depends on if the banks will accept them, which is still being negotiated.
The payments to be frozen include nearly $2 billion in tax refunds; $300 million in cash grants for needy families and the elderly, blind and disabled; and $13 million in grants for college students.
Even if a budget agreement is reached by the end of this month, tax refunds and other payments could remain temporarily frozen. Chiang said a budget deal may not generate cash quickly enough to resume them immediately [...]
State officials have already designed an IOU template, Chiang said, and have been negotiating with banks over whether taxpayers could cash or deposit them if they are issued. The state could be forced to pay as much as 5% interest on delayed tax refunds if they are not paid by the end of May, Chiang said.
The last time the state issued such IOUs -- the only time since the Great Depression -- was in 1992.
In other words, the only way this delayed tax refund is going to work is if it causes MORE debt for the state. But let's go back to 1992. This was the last big recession in the country, and California again found itself unable to pay its bills. Tell me again how the budget problems aren't structural. Anyway, the state issued about $350 million in IOUs that year, about 15% of what is being prepared today. The process was not smooth:
IOUs have caused headaches for the state in the past. California issued $350 million worth of IOUs to 100,000 recipients in 1992 during a budget impasse between then Gov. Pete Wilson and the Legislature.
A four-year legal battle ensued after some workers had trouble cashing them. The dispute was settled in 1996 with some state workers getting paid time off for the inconvenience they experienced.
Beth Mills, a spokeswoman for the California Bankers Association, said individual banks statewide haven't decided yet whether they will accept the state IOUs this time.
Banks are barely willing to lend money, I just don't think they're going to be interested in accepting $2.3 billion in IOUs when the process was so difficult last time, and there is more uncertainty in the financial markets now. And even if they do, it will not be uniform across all banks, and customers are going to have varying experiences.
The State of the State speech that nobody watched proved the need for fundamental reform, but it generated barely a blip among non-elites. Having trouble cashing your disabled mom's assistance payment, that's a whole different story. Not to mention the fact that the continued erosion of jobs and the 5,300 public works projects that have been delayed by the state will create a lot of angry and idle minds. Of course, the cautionary part of this is that the 1992 IOUs did not lead to structural reform. However, we all can agree that this is a much bigger problem.
Pitchforks and torches may be at a premium. And while it's hard to write a new Constitution in a riot, something needs to shake up this decayed and dysfunctional system.
• It's two days until the kickoff of Netroots Nation, and among the many luminaries attending will be Gavin Newsom, who is introducing green jobs expert Van Jones at the Sunday morning keynote. The fact that he's running for Governor has nothing to do with this, I'm sure... UPDATE: LA City Attorney Rocky Delgadillo will also be on a panel on health care, talking about his many investigations into insurance industry pratices. That should be an interesting panel for health care activists, as it features nyceve and Ezra Klein, as well as the mother of Nataline Sarkysian, who died while waiting for her insurer to approve an operation.
• The final numbers on the June election were miserable, with a record low (for a regular election) 28.2% turnout. A ridiculous amount of voters cast ballots by mail - 58.7%, also a record. VBM is far stronger in Northern California than in the Los Angeles area, and not surprisingly turnout is higher up there as well. This is really changing how elections ought to be conducted, as we move to a VBM state. Campaign operatives need to understand this quickly.
• Hey, we had a bank run at IndyMac yesterday. Fun! The FDIC insures up to $100,000, so consumers should be fine for the most part, but what you're going to see is eroding confidence in regional banks as the financial crisis widens.
• Another leader at the LA Times is out, this time publisher David Hiller. I'm sure Sam Zell and his team can make loads of money on the paper if they just fire everybody and go to robot reporters.
• AB 97 cleared the legislature yesterday, which would ban trans fats at California restaurants and bakeries. It now goes to the governor. He did sign a ban on trans fats in school cafeterias last year.
I don't think we have a full appreciation of what's really happening in these exurbs. This is a crime.
By the way, the most lucid explanation I've seen about how this housing crisis happened is in this Web comic, of all places. Basically the investment banks tried to put together a pyramid scheme, knowing that it was fated to fail but hoping that they were more clever than everyone and nobody would find out, and the housing market would hold out at the historically anomalous levels it was headed in 2004-2005. I remember being told in 2005 when I was looking for a house that "nobody gets a fixed mortgage anymore." That was the mentality from the banks, the lenders, the investors. The goal was to shovel more and more people into mortgages, no matter their credit history. Everybody benefited; government, industry, financial institutions. There was no check on this forward motion, the regulation that was needed. Unregulated capitalism will always step in the "Shitpile" this way. And the banks and the lawmakers will all get bailed out, at the expense of these people in the Hoovervilles Bushvilles.
Expanding the field of progressive ideas is never easy. We are a mixed bunch with many causes and sometimes it can be tough to figure out which ones are worth going for. Here is one suggestion.
I am working with a group called the Merchants Payments Coalition, a collection of retailers from restaurants, convenience stores, grocery stores. They don't have a lot in common -- their markets are diverse and sometimes competitive, but one thing they agree on happens to be something U.S. PIRG and other progressive groups have been talking about.
The issue is Interchange Fees, a very complex (this is on purpose) fee imposed by the banks that issue credit cards for MasterCard and Visa. The fee is charged directly to merchants -- so their interest should come as no surprise -- but it is important to remember that ultimately this fee gets passed along to consumers in the form of higher prices on all products.
So what's the big deal about that? Fees are a part of life, just part of doing business, right? Not in a market that is essentially a duopoly. Visa and MasterCard together control 80% of the U.S. credit card market, and the banks that issue their cards are usually the same banks (JP Morgan Chase) so they wield monopolistic control of the market.
There is also no way to avoid this fee. You can pretty much avoid any credit card fee if you don't use credit cards -- but not this one. One of their tricks is that any merchant who accepts credit cards cannot offer consumers a cash discount. Studies show that only 14% of the money collected from interchange fees is needed to cover the cost of processing credit card transactions. This means that a whopping 86% of the fee is extra profit for the card companies, or even worse, helps fund reward programs for high-income credit card owners.
Every time a low-income consumer purchases something with cash at a store that accepts credit cards, they are subsidizing plush reward programs for wealthy credit card users. It is essentially a reverse Robin Hood wealth transfer, from the poorest members of society to the wealthiest, and it is being encouraged by the card companies, who continue to offer even greater reward programs. A low-income consumer with a poor credit history is not allowed to enjoy the benefits of these reward programs, yet their hard-earned money helps fund them.
Now that we have a Democratic Congress, the use of committees is very important, and one we should put our stamp on is the Banking Committee. Chris Dodd has already started hearings on hidden credit card fees and predatory lending. Warren Reports at TPM Café followed that on the week it happened, and there is another diary on this subject at My Left Nutmeg.
What we need are more hearings to put further pressure on the credit card industry. Dodd is off to a good start, but we need more action. A major problem is that the interchange fee schedules and agreements are kept secret by Visa and MasterCard. First and foremost this is a matter of transparency -- and the lack of it is hurting people's pocketbooks. It doesn't cost you much with each purchase you make, but it adds up fast. In fact, it's the single biggest fee the card issuing banks collect, costing consumers $30 Billion dollars last year alone.
I encourage members of Calitics to help us put pressure on the credit card companies in order to convince them to provide more transparency and lower these inflationary fees.
Note of disclosure: I am writing this with input from others who are working with me to help raise awareness of this issue, so you may find a similar version of this diary on other progressive blogs. This is an important issue, so we will be around to follow up.
