VISA, Mastercard $7.25 billion settlement.

In one of the largest antitrust settlements ever, Visa, Mastercard and their associated banks have agreed to a massive $7.25 billion settlement with U.S. retailers. The latter had sued the former over fixing of credit and debit card fees in 2005 through several lawsuits. If the settlement is approved by a judge then it should put an end to a lengthy legal battle.

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The details of the settlement were submitted to Brooklyn federal court on Friday. According to the agreement, Visa, Mastercard and several banks that issue the company’s cards would make a payment to a ‘class of stores’ of $6 billion. Furthermore, the card companies will also reduce the swipe fees by 10 basis points for eight months with an estimated value of $1.2 billion.

Both Visa and Mastercard appear to be satisfied with the agreement. Noah Hanft from Mastercard  has favored the “amicable resolution”. Joseph Saunders, CEO of Visa has said believed that the settlement served the best interest of all the parties.

However, Tom Robinson from one class plaintiff, National Association of Convenience Stores has said that the “settlement fail(s) to introduce competition and transparency, it actually provides Visa and MasterCard with the tools to continue to shield swipe fees from market forces," as US retailers pay around $50 billion in swipe fees each year, several times more than the $7.25 billion settlement. Voicing further concerns, the American Bankers Association has also said that the settlement appears to favor retailers, not the consumers.  

 

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Relevant Links

Visa, MasterCard, banks in $7.25 billion retail settlement [Reuters]

Visa, MasterCard in $7.25B swipe-fee settlement [MarketWatch]

Visa, MasterCard, banks in $7.25 billion retail settlement [Chicago Tribune]

Visa, MasterCard settle swipe-fee antitrust suit [Washington Post]

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Disappointing US Jobs Report, June 2012

The US was able to add just 80,000 jobs in the month of June. This comes as a surprise as the market was expecting better results. Analysts had earlier predicted that the country should add at least 100,000 jobs in June. 

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The unemployment rate remained at 8.2%. The job figures for April and May were also revised. It is now revealed that 68,000 jobs were added in April and 77,000 in May, as opposed to 77,000 and 69,000 for the respective months announced earlier. Employment gains in the two months however, haven’t changed.

In other words, this is the third consecutive week of poor job report. On an average, just 75,000 jobs per month were added in April, May and June. To put things in perspective, US was able to create 226,000 jobs per month in the first three months of the current year, and even then the economy wasn’t booming.

On a slightly positive note, the average work week rose by 0.1 hours to 34.5 hours and earnings increased by 6 cents to $23.50 per hour.

                           

Not surprisingly, the markets were hit by the news as Dow Jones average dropped by 188 points, completely wiping out the entire week’s gains. Only AT&T was able to show some positive results out of the 30 stocks of Dow Jones average.

Matt Romney, in a press conference, has called the latest jobs report a “kick in the gut”. The Obama campaign spokesman Ben LaBolt has responded, “The President brought us back from the brink of another Depression but he doesn’t believe our work is done -- he’s got a plan to restore the middle class and create a million jobs now that Mitt Romney opposes and Republican leaders have blocked,"

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sarfaraz@when.com

Half Bridge Business News

Relevant Links

Romney: Jobs report a 'kick in the gut' [MSNBC]

Dollar Advances on Euro After Jobs Report [The Wall Street Journal]

Oil falls as U.S. jobs data disappoints [Reuters]

Disappointment as US economy added 80,000 jobs in June [The Guardian]

June Jobs Report: U.S. Adds 80,000 Jobs [The Huffington Post]

US: Congress Passes Students Loans, Transportation Jobs Bill

Yesterday, the Congress gave approval to a massive bill that would

a)    create millions of transportation jobs

b)    keep interest rates low for student loans

c)     maintain federal flood insurance

The bill passed 373 to 52 in Republican led House and 74 to 19 in Democratic led Senate. All the President Obama has to do now is to sign it into law.

Transportation

The bill aims to increase transportation spending by $105bn, which can potentially create, or at least save, up to 3 million jobs.

The politicians managed to pass the bill, just within the deadlines. The federal government spends nearly $50bn each year on transportation. The previous transportation bill expired almost three years ago, in 2009. Since then, the industry has been surviving on funding extensions, the last of which ends today, 30^th June.

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Student Loans

The issue of student loans was also nearing its own deadline. The bill prevents the federal student loan interest rates from increasing to 6.8% from the current 3.4% from 1^st July, representing a 100% increase. Accordingly, the interest rates would remain at 3.4% for another year, as the government injects $6bn into the program, most likely, by increasing premiums for federal pension insurance.

Both Democrats and Republicans were unanimous in keeping the interest rates for federal student loans to their current levels; the debate was, instead, focused on how the target is to be achieved.

Commenting on the bill, the White House spokesman Jay Carney said, “"Thanks to Congress heeding that call today, millions of American students will avoid a $1,000 debt hike while millions of construction workers will be able to stay on the job,"

Flood Insurance

The bill has also extended the National Flood Insurance program to 30^th September, 2017, as the government braces itself for a new hurricane season expected to begin from late July. Interestingly, the previous program was supposed to expire in July 2012, right in the middle of the hurricane season. 

your comments and feedback are always appreciated

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Half Bridge Business News

Relevant Links:

• USCongress passes bill for transport jobs, student loans [Reuters]
• USlawmakers reach student loans deal [The Australian]
• Studentloans rate rise halted by Congress bill [BBC]

US Job Report May 2012

• The most recent jobs report gives a disappointing view of the US economy. The American employers were able to add just 69,000 jobs in the previous month, much lower than what the economists had predicted.

• According to the household employment survey, 422,000 jobs were added in May but the labor force increased by 642,000 thereby raising the unemployment rate for the current month from 8.1% to 8.2%.

• The personal income and nominal consumer spending have also increased by 0.2% and 0.3% respectively.

The recent job figures is a big blow for the President Obama administration, which now has three continuous months of disappointing job figures to its credit. Standard and Poor’s 500 and Dow Jones are going through the worst period of the current year. With about five months remaining in the election, the current economic indicators could turn out to be a game changer.

"It is now clear to everyone that President Obama's policies have failed to achieve their goals and that the Obama economy is crushing America's middle class," said Romney while commenting on the report. On the other hand, the President believes that the economy “will come back stronger,".

It is not just US, the entire global economic system is suffering, UK has slipped into another recession while the rest of Europe copes with the debt crisis, the Indian rupee is weakening and China’s growth is slowing down. "The U.S. is not an island, and what happens abroad matters here," said an economist from Mesirow Financial.

According to the recent polls conducted by Associated Press and GfK, 52% of Americans have disapproved of the White House’s economic strategy while 46% have approved.

Some circles are looking towards the Feds to intervene, but there is very little the central bank can do as it has already maintained the interest rates at record lows. However, under the current circumstances, the Federal Reserve is likely to announce some new monetary policy actions in the Federal Open Market Committee meeting in 20^th June.

Your comments and feedback are always appreciated

Sarfaraz Khan

sarfaraz@when.com

Half Bridge Business News

US Economy growing slower than predicted

The US Economy has grown at the rate of 1.9% in the first quarter of the current year, as opposed to 2.2% announced earlier. The downward revision has been made due to:

a.      a downward revision in consumer spending estimates,

b.      an increase in imports,

c.      an decrease in corporate after-tax-profits,

d.      decrease in government spending

The after tax profits have fallen significantly by 4.1%, showing the biggest decline in three years. Consumer spending has actually increased by 2.7%, as opposed to 2.9% announced earlier. The government has also reduced its spending from 3.9% to 3%.

Future Growth

Analysts are expecting the growth rate for the second quarter of 2012 to increase to an annual rate 2.5%, a reduction from the 3% growth rate achieved in the last quarter of 2011. The US economy is expected to improve the growth rate in the coming months, which might take the annual growth rate for 2012 to 2.5%, an improvement from the 1.7% growth rate of 2011.

Better Performing Sectors

There is some good news from some sectors that are performing better than others and even beating the analysts’ forecasts. Clothing firms such as Limited Brands (Victoria’s Secret), Target, Gap and TJX Cos (TJX and TJMaxx) are reporting increase in sales. 

Your comments and feedback are always appreciated

Sarfaraz Khan

sarfaraz@when.com

Half Bridge Business News