Jul 15, 2012

Visa, MasterCard Settle with Retailers

Visa (V) and MasterCard (MA) settled a long running lawsuit brought by retailers against the card giants which permits merchants to charge more to customers who pay with credit cards.  The net effect of the deal should allow retailers to charge more for products when consumers use credit cards for payment, raising prices and helping margins.  The prior agreement maintained a preferred pricing, whereby retailers were prohibited from raising prices on credit users, although they could discount for those paying with cash.  The deal requires up to $1.2 billion in fee relief plus an additional $6 billion in cash to settle the price-fixing charges.   Bank card issuers such as JP Morgan (JPM), Wells Fargo (WFC) and Bank of America (BAC) will contribute to the settlement.  The suit has been ongoing for almost eight years.
The head of Perigrine Financial, Russell Wasendorf Sr., admitted to embezzling more than $100 million from clients over a 20 year period.  Wasendorf had attempted suicide last week, but survived.  In his suicide note he outlined his deception, which included doctoring statements and fooling regulators for two decades. 
Vallejo.  Stockton. Mammoth Lakes.  San Bernardino.  Stanton?  It appears that the tiny Orange County city of Stanton might be the next in an ever growing list of municipalities to file bankruptcy.  “It’s easy math.  We have a deficit of $2 million a year and there’s only $8 million left” said Terri Marsh, a city official.  The list of California cities with looming financial problems is growing, and with the assumption of Redevelopment Agency liabilities, more cities are beginning to teeter.  

One year later the market is in roughly the same spot as it was before beginning a 16% correction.  Economically the world is marginally different today than it was twelve months ago, with the biggest changes being Europe is now at the doorstep of a recession, China and the other BRIC countries are rapidly slowing, and another round of central bank easing has begun.  The US still faces monstrous fiscal problems with little chance officials will address them.  

Speaking of Central Banks, Helicopter Ben will be testifying to the Senate on Tuesday.  With the economy slowing, an election looming, and hawkish statements dominating the most recent Fed minutes, expect a ton of grandstanding from the committee members.  Typically the members will bombastically make statements, which they then try to contort into a question for the Chairman.  He has been adept at not falling into the elected officials’ feeble traps, but don’t expect that to keep them from spewing their typical vitriol. 

Five weeks to college football season.  Are you ready?

Have a great day


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