WEBVTT - Durbin on Credit Cards, Airline Programs 0:00:13.119 --> 0:00:15.680 Hello, and welcome to the Votes and Verdicts podcast, hosted 0:00:15.680 --> 0:00:18.240 by the litigation and policy team at Bloomberg Intelligence. We 0:00:18.280 --> 0:00:21.920 are the investment research platform at Bloomberg LP. This podcast 0:00:21.920 --> 0:00:25.000 series examines the intersection of business policy and law. I'm 0:00:25.079 --> 0:00:28.640 Nathan Dean, an analysts with Bloomberg Intelligence covering financials policy. 0:00:28.800 --> 0:00:31.080 And my name is Elliot Stein, and I'm an analyst 0:00:31.120 --> 0:00:33.760 with Bloomberg Intelligence covering financials litigation. 0:00:34.159 --> 0:00:36.880 So today's episode of Votes and Verdicts will focus on 0:00:36.880 --> 0:00:39.360 one issue that may have heard of if you've flown 0:00:39.360 --> 0:00:42.200 through the airport lately, or you had your favorite YouTube 0:00:42.280 --> 0:00:45.400 v Locker or Instagram influencer opine on it. We're talking 0:00:45.440 --> 0:00:48.680 about the Credit Card Competition Act, co sponsored by Senator 0:00:48.720 --> 0:00:51.400 Dick Durbin of Illinois. Elliott Stein and I had a 0:00:51.479 --> 0:00:53.360 chance to speak with the Senator about the bill, why 0:00:53.400 --> 0:00:56.040 it was needed, and his response to the criticism that 0:00:56.080 --> 0:00:58.320 the credit card reward programs would disappear if the bill 0:00:58.320 --> 0:01:01.000 were to become law. Before we do that, Elliot and 0:01:01.000 --> 0:01:02.480 I would like to just take a few minutes to 0:01:02.520 --> 0:01:04.679 talk about the bill and where the history of it is. 0:01:05.480 --> 0:01:07.840 Yeah, So, Nathan, why don't you know before we get 0:01:07.880 --> 0:01:11.479 into Senator Durbin's Q and a portion of this, why 0:01:11.480 --> 0:01:13.920 don't you tell us you know where we are with 0:01:14.000 --> 0:01:17.759 the bill, what the history is, and what the current 0:01:17.760 --> 0:01:18.360 status is. 0:01:19.000 --> 0:01:19.240 Yeah. 0:01:19.319 --> 0:01:21.920 So this is called the Credit Card Competition Act and 0:01:22.080 --> 0:01:26.480 was sponsored, are introduced by Senator Durbin on June seventh, 0:01:26.600 --> 0:01:29.800 twenty twenty three, and is co sponsored by Republican Senator 0:01:29.880 --> 0:01:32.440 Roger Marshall of Kansas. So this is a bipartisan bill 0:01:33.319 --> 0:01:37.520 and it has four co sponsors, two Democrats and two Republicans. Now, 0:01:37.560 --> 0:01:41.080 this bill would require the largest credit card issuing financial institutions, 0:01:41.080 --> 0:01:44.120 So essentially, those banks that have one hundred billion in 0:01:44.160 --> 0:01:47.600 asset up to or we require them to enable at 0:01:47.640 --> 0:01:49.800 least two credit card networks to be used on their 0:01:49.840 --> 0:01:52.960 credit cards instead of just one. So, for example, right now, 0:01:53.120 --> 0:01:56.880 eighty percent or eighty percent plus of the market is 0:01:56.920 --> 0:02:00.480 dominated by Visa and MasterCards. This bill would require a 0:02:00.560 --> 0:02:03.919 bank to offer their merchant a network of Visa plus 0:02:03.920 --> 0:02:07.240 something else or MasterCard plus something else. That something else 0:02:07.280 --> 0:02:10.400 could be discover it could be American Express, but under 0:02:10.440 --> 0:02:14.720 the bill language, it cannot be just both Visa and MasterCard. 0:02:14.480 --> 0:02:18.640 And I know there's a lot of incentives associated with 0:02:18.720 --> 0:02:20.560 this bill, how exactly would those work? 0:02:21.280 --> 0:02:23.520 So, according to the bill summary and the bill text, 0:02:24.360 --> 0:02:27.600 bank networks would have to have the incentive, or would 0:02:27.760 --> 0:02:30.519 bank networks would have the incentive to hold down merchant 0:02:30.560 --> 0:02:34.799 fees in order to incentivive merchants to choose routing transactions 0:02:34.840 --> 0:02:37.360 over network instead of other ones. The idea here is 0:02:37.440 --> 0:02:42.160 more competition equals lower fees, equals lower fees than for 0:02:42.240 --> 0:02:45.120 the consumer. This is very similar to what Senator Durbin 0:02:45.200 --> 0:02:48.120 did back in twenty ten and twenty eleven with the 0:02:48.200 --> 0:02:51.680 Durban Amendment on the Debit card interchange fee Proposal and 0:02:51.720 --> 0:02:53.760 provision and regulation that he sponsored them. 0:02:53.960 --> 0:02:56.680 And what about rewards programs? I know there's been concern 0:02:57.240 --> 0:03:00.640 about those. Do you think there's any risk to them? 0:03:00.800 --> 0:03:03.000 Yeah, So this is where you know, this issue has 0:03:03.040 --> 0:03:05.400 become more topical. So what I just said before that 0:03:05.520 --> 0:03:08.080 is from the bill summary in the bill text that 0:03:08.160 --> 0:03:10.760 the idea here is that more competition equals lower fees 0:03:10.760 --> 0:03:13.079 for the merchant and then lower fees for the consumer. 0:03:13.480 --> 0:03:16.160 And the banks and the airline industries have countered back 0:03:16.200 --> 0:03:17.840 and said that's just not going to be the case. 0:03:18.280 --> 0:03:20.160 You know, as you will hear from Senator Durbin a 0:03:20.200 --> 0:03:22.839 little bit later in terms of his response. But these 0:03:22.880 --> 0:03:27.400 credit card programs, airlines, YouTube blockers, bloggers, even the points 0:03:27.440 --> 0:03:30.880 guy have countered that if this bill were to become law, 0:03:31.160 --> 0:03:34.280 reward programs with credit cards could be at risk. And 0:03:34.360 --> 0:03:36.880 you'll see again, you'll hear Senator Durbin's response to that 0:03:36.920 --> 0:03:39.800 point shortly. But we're talking about a bill that has 0:03:39.880 --> 0:03:45.960 pitted the retailers and the consumer advocates versus banks and airlines, 0:03:46.480 --> 0:03:49.040 and that it's just something you've rarely ever see in Washington. 0:03:49.720 --> 0:03:52.280 Yeah, that's quite the battle royale. All right, So this 0:03:52.400 --> 0:03:54.280 bill becomes law, what happens next? 0:03:55.080 --> 0:03:56.960 So if this bill were to come law, the next 0:03:56.960 --> 0:03:58.960 step would be for the Federal Reserve to issue a 0:03:59.000 --> 0:04:02.200 proposal implement the regulation. This is how it works in Washington. 0:04:02.600 --> 0:04:04.960 So Congress passes the law, they say, here's what the 0:04:05.040 --> 0:04:07.680 law is at the one hundred thousand foot level. Then 0:04:07.720 --> 0:04:10.480 the Federal Reserve has to go forward and figure out, okay, 0:04:10.640 --> 0:04:13.000 how does the law work at the five foot level. 0:04:13.480 --> 0:04:16.320 So the legislation will say the Federal Reserve must issue 0:04:16.320 --> 0:04:18.840 a rule within a certain amount of time. But from 0:04:18.880 --> 0:04:21.800 the fedce perspective, it could take a year, if not longer. 0:04:22.080 --> 0:04:24.799 For example, when the Dot Frank Act passed the provision 0:04:24.839 --> 0:04:26.840 known as the Durban Amendment, they did this on July 0:04:26.920 --> 0:04:30.520 twenty first, twenty ten, which required the Fed to limit 0:04:30.560 --> 0:04:33.680 fees for charge to retailers for debit card processing. The 0:04:33.720 --> 0:04:37.200 Federal Reserve didn't issue its final regulation until June twenty ninth, 0:04:37.279 --> 0:04:40.719 twenty eleven, and that was extremely fast. In fact, the 0:04:40.760 --> 0:04:43.880 Federal Reserve is currently going through a proposal to change 0:04:43.920 --> 0:04:47.440 that Urban Amendment provision from twenty eleven, and they're probably 0:04:47.440 --> 0:04:49.159 going to take it just about a year or under 0:04:49.200 --> 0:04:51.160 a year to do that. So if this bill were 0:04:51.200 --> 0:04:53.120 to come into law, and let's say if it happens 0:04:53.120 --> 0:04:55.840 either this year or next year, you're probably looking twelve 0:04:55.880 --> 0:04:59.120 to eighteen months for the regulation to come out and 0:04:59.120 --> 0:05:03.080 then subsequently compliance period after that. So this was a 0:05:03.120 --> 0:05:05.320 little bit about the bill and a little bit more 0:05:05.360 --> 0:05:08.040 about the understanding. So without any further delay, let's get 0:05:08.040 --> 0:05:10.719 into the discussion that Ellie and I had with Senator derban. 0:05:15.120 --> 0:05:15.200 So. 0:05:15.279 --> 0:05:17.800 Our guest today is Senator Dick Durban of Illinois, who 0:05:17.960 --> 0:05:20.120 I as a native of Chicago and have followed ever 0:05:20.160 --> 0:05:22.719 since he took his seat in the Senate over the 0:05:22.800 --> 0:05:26.760 victory over Al Salve in nineteen ninety six. You know, 0:05:26.800 --> 0:05:29.479 Senator durban is also chairman of the Senate Judiciary Committee 0:05:29.520 --> 0:05:32.440 and also serves as the Democratic Whip. Senator Durbin, thank 0:05:32.480 --> 0:05:34.080 you very much for agreeing to talk to us today 0:05:34.080 --> 0:05:35.039 and welcome to the votes. 0:05:34.839 --> 0:05:37.680 In Verdiccks podcast with you great. Thank you. 0:05:38.240 --> 0:05:40.280 So, while we would love to talk about a number 0:05:40.279 --> 0:05:42.440 of issues with you, there's one that is near and 0:05:42.480 --> 0:05:44.280 dear to our hearts, and that is the Credit Card 0:05:44.279 --> 0:05:47.480 Competition Act, which you've worked on with Senator Roger Marshall 0:05:47.480 --> 0:05:49.800 and a number of other co sponsors in the Senate. 0:05:51.440 --> 0:05:53.720 To listeners that are not aware of, the short summary 0:05:53.800 --> 0:05:56.960 states is that the Credit Card Competition Act would enhance 0:05:57.000 --> 0:05:59.960 credit card competition and choice in order to reduce successive 0:06:00.040 --> 0:06:02.680 credit card fees. It would require the largest credit card 0:06:02.720 --> 0:06:05.480 issuing financial institutions in the country, those with assets over 0:06:05.480 --> 0:06:07.920 one hundred billion, to enable at least two to credit 0:06:08.000 --> 0:06:10.400 card networks to be used on their credit cards instead 0:06:10.400 --> 0:06:12.600 of just one, and at least one of those networks 0:06:12.680 --> 0:06:15.320 must be network other than Visa or the MasterCard. 0:06:15.360 --> 0:06:16.080 Do all believe. 0:06:16.400 --> 0:06:18.719 So to start off with Senator Derbin, why does America 0:06:18.800 --> 0:06:19.360 need this bill? 0:06:19.640 --> 0:06:23.039 Competition? We believe in the free market system, and we 0:06:23.120 --> 0:06:27.359 believe competition is a key element. Unfortunately, you'll find retailers 0:06:27.400 --> 0:06:30.279 all across the United States who are stuck with a 0:06:30.320 --> 0:06:32.920 swipe fee or interchange fee. They give nothing to say 0:06:32.960 --> 0:06:35.120 about take it or leave it. If you want to 0:06:35.200 --> 0:06:37.760 use Visa and MasterCard, you have to pay the fee. 0:06:38.120 --> 0:06:40.480 So we want to have some competition for that business. 0:06:40.800 --> 0:06:43.520 Let's have at least one other network for retailers to 0:06:43.600 --> 0:06:44.360 choose from. 0:06:44.680 --> 0:06:46.960 So, Senator, you know, one of the ideas, of course, 0:06:47.040 --> 0:06:51.040 is that more competition will bring about lower fees and 0:06:51.080 --> 0:06:53.279 that those savings will then be passed on to the 0:06:53.320 --> 0:06:54.839 consumer from the retailers. 0:06:55.400 --> 0:06:55.560 You know. 0:06:55.600 --> 0:06:58.360 I guess one question is, how do you ensure that 0:06:58.440 --> 0:07:03.720 retailers do indeed as those savings on to consumers, you know? 0:07:03.960 --> 0:07:06.240 And I asked that because the banking industry, of course, 0:07:06.279 --> 0:07:10.800 has contested and said that retailers would likely you know, 0:07:11.160 --> 0:07:14.920 pocket most of those savings for themselves to their own benefit, 0:07:15.680 --> 0:07:18.440 you know, So why is the banking industry wrong about that? 0:07:19.240 --> 0:07:21.960 And then along similar lines, I guess the banking industry 0:07:21.960 --> 0:07:26.960 has also argued that the law would essentially weaken cybersecurity 0:07:27.040 --> 0:07:31.040 protections and potentially reduce access to credit as well. What 0:07:31.280 --> 0:07:33.120 do you say about those criticisms as well. 0:07:33.640 --> 0:07:36.760 I've been through this before with debit cards more than 0:07:36.800 --> 0:07:40.240 ten years ago. There's a long litany of horror stories 0:07:40.680 --> 0:07:44.480 that the banks and credit card companies want us tell us, 0:07:44.880 --> 0:07:47.280 and frankly, they aren't backed up. In fact, here's the 0:07:47.320 --> 0:07:53.040 bottom line. Most retailers are in a low percentage recovery situation. 0:07:53.440 --> 0:07:56.920 They're in competition. They've got to be able to compete 0:07:57.000 --> 0:08:00.280 in the market. If they have a benefit to one 0:08:00.280 --> 0:08:03.920 of the biggest charges that they face as retailers, I 0:08:04.000 --> 0:08:06.600 believe the consumers are going to benefit from it. There 0:08:06.600 --> 0:08:08.880 have been some analyses of what happened in the debit 0:08:08.920 --> 0:08:11.680 card market as a result of the first round of 0:08:11.680 --> 0:08:15.080 the Turbine Amendment, and there's been clear evidence that the 0:08:15.120 --> 0:08:16.200 consumer was a winner. 0:08:18.320 --> 0:08:18.520 You know. 0:08:18.600 --> 0:08:21.880 So we've seen criticism not only from the banks, but 0:08:21.920 --> 0:08:25.040 also from the airlines. You know, if anybody's flown through 0:08:25.080 --> 0:08:28.360 LaGuardia or Reagan or O'Hare, you know they've probably seen 0:08:28.360 --> 0:08:31.040 the advertisements that we should be in opposition to this bill. 0:08:31.040 --> 0:08:34.080 In fact, I've seen YouTube travel bloggers tell me that 0:08:34.360 --> 0:08:37.679 on the Instagram circuit that I should be in opposition 0:08:37.760 --> 0:08:40.760 to this bill, all under the idea that if this 0:08:40.840 --> 0:08:44.040 bill goes forward, reward programs with credit cards or the 0:08:44.040 --> 0:08:46.880 credit card programs are going to disappear. Is that a 0:08:46.960 --> 0:08:48.640 valid concern? Do you think that would happen? 0:08:48.880 --> 0:08:52.959 No, it absolutely is not. Let's consider two interesting things. 0:08:53.320 --> 0:08:56.440 The first is that most people would be surprised to 0:08:56.520 --> 0:09:00.120 know that at least two of the major airlines have 0:09:00.160 --> 0:09:03.360 more profit coming off of their branded credit cards, and 0:09:03.400 --> 0:09:06.839 they do off of aviation operations. It turns out their 0:09:07.040 --> 0:09:13.240 banks primarily with airplanes. And if you're a passenger, I 0:09:13.360 --> 0:09:16.640 just went through this earlier this week, you sit down, 0:09:16.840 --> 0:09:20.240 you buckle up, they give you the key safety instructions, 0:09:20.240 --> 0:09:23.160 and then they start peddling their credit cards on the airplanes. 0:09:23.520 --> 0:09:25.720 The poor flight attendants who had better things to do. 0:09:25.800 --> 0:09:28.840 We're working up and down the aisle with brochures trying 0:09:28.840 --> 0:09:30.640 to get people to sign up for their credit cards. 0:09:30.720 --> 0:09:34.280 Why because for United and American, for example, they make 0:09:34.320 --> 0:09:36.520 more money off their credit cards than they do off 0:09:36.520 --> 0:09:39.880 of flying airplanes. And that's a surprise to most. The 0:09:39.960 --> 0:09:43.520 second thing is in Europe, where these interchange fees and 0:09:43.559 --> 0:09:47.240 swipe fees have been closely regulated and are much lower 0:09:47.280 --> 0:09:50.160 than the United States, they still offer the same frequent 0:09:50.160 --> 0:09:54.200 flyer plans and the same reward programs. So I think 0:09:54.240 --> 0:09:55.559 this is a phony issue. 0:09:56.600 --> 0:09:59.800 Yeah, you know, we saw Senator Marshall try to insert 0:09:59.800 --> 0:10:02.320 this bill into the FA talking about airlines into the 0:10:02.400 --> 0:10:06.160 FA Reauthorization Bill, and we're recording this on May fifteen, 0:10:06.240 --> 0:10:07.640 so this was earlier in the month. 0:10:08.880 --> 0:10:09.520 Will you and. 0:10:09.480 --> 0:10:11.560 Senator Marshall try again this year to pass the bill, 0:10:11.600 --> 0:10:14.560 either as a standalone package or as potentially trying to 0:10:15.120 --> 0:10:17.600 attach it to say the Farm bill or a funding 0:10:17.640 --> 0:10:19.719 bill or anything like that, or is it going to 0:10:19.800 --> 0:10:21.360 have to wait until after the November election. 0:10:21.480 --> 0:10:24.440 Well, you know most of your listeners will as well. 0:10:24.600 --> 0:10:27.880 I'm a Democrat from Illinois, Roger Marshall up or Republican 0:10:27.920 --> 0:10:30.640 from Kansas. But he is my partner in this effort, 0:10:30.679 --> 0:10:32.959 and he is very aggressive on it, and he is 0:10:33.000 --> 0:10:35.280 looking for the first opportunity to bring in to the floor, 0:10:35.320 --> 0:10:37.960 and I want to help him do it. This FAA 0:10:38.000 --> 0:10:40.040 bill had a deadline on it. We didn't want to 0:10:40.080 --> 0:10:43.400 jeopardize airlines safety in any way, and they reached the department, 0:10:43.440 --> 0:10:45.640 we couldn't push it any further, but we're looking for 0:10:45.679 --> 0:10:48.000 any and all opportunities to bring us to the floor. 0:10:49.160 --> 0:10:51.520 Do you plan to just a quick fall up on that? 0:10:51.600 --> 0:10:56.240 Do you plan to have any additional hearings if that's 0:10:56.280 --> 0:10:57.960 feasible on the bill? I know that in the past 0:10:58.000 --> 0:11:01.200 you've tried to under the Senate Judiciary to bring in 0:11:01.200 --> 0:11:04.439 the airline CEOs. Is that something news You're gonna try again. 0:11:05.040 --> 0:11:07.520 We continue to try to bring them in. Some are cooperative, 0:11:07.559 --> 0:11:09.160 some or not. We'd like to bring them all in 0:11:09.200 --> 0:11:10.880 and let them tell their side of the story and 0:11:10.920 --> 0:11:14.040 ask a few questions. 0:11:14.240 --> 0:11:17.440 All right, Senator, that's it for the substance of questions. 0:11:17.480 --> 0:11:19.880 Now we move on to the fun grab bag question, 0:11:19.960 --> 0:11:24.360 which we ask of all guests, including senators. If you 0:11:24.440 --> 0:11:28.080 were stranded on a desert island, what are three pieces 0:11:28.080 --> 0:11:30.600 of music that you would want to take with you? 0:11:30.679 --> 0:11:34.080 And it could be an album or a song, you know, 0:11:34.320 --> 0:11:34.960 it's up to you. 0:11:35.920 --> 0:11:38.480 Well, that's a hard question for me because I like 0:11:38.559 --> 0:11:40.840 a lot of different music, but I would say the 0:11:40.840 --> 0:11:44.520 top ones if I'm just stranded with three Graceland by 0:11:44.520 --> 0:11:49.160 Paul Simon, the best of James Taylor, and Collected Symphonies 0:11:49.160 --> 0:11:50.079 of great Beethoven. 0:11:52.600 --> 0:11:53.600 That's an excellent choice. 0:11:53.640 --> 0:12:03.160 Yeah, good combination. That was really interesting what the Senator 0:12:03.240 --> 0:12:06.680 said about his musical choices. I was particularly struck that 0:12:06.720 --> 0:12:10.599 he chose Paul Simon because coincidentally, Paul Simon, not the 0:12:10.720 --> 0:12:14.360 musician Paul Simon, but the former Senator Paul Simon is 0:12:14.400 --> 0:12:19.680 who Senator Durbin replaced in the United States Senate Paul Simon, 0:12:19.800 --> 0:12:22.080 as Nathan you know, as a native of Illinois, was 0:12:23.160 --> 0:12:25.440 a senator from Illinois. So I thought that was interesting. 0:12:26.440 --> 0:12:29.760 We should have asked the Senator why why he chose, 0:12:29.960 --> 0:12:32.120 you know, Paul Simon, and he said, Paul Simon's Graceland, 0:12:32.480 --> 0:12:33.720 which his great album. 0:12:34.440 --> 0:12:34.720 Yeah. 0:12:34.760 --> 0:12:37.120 And you know, as like you mentioned, I grew for 0:12:37.200 --> 0:12:39.760 the listeners. I grew up in Illinois, and so I 0:12:40.400 --> 0:12:44.400 really wanted to help get his help in sponsoring legislation 0:12:44.559 --> 0:12:48.640 requiring Portillo's or Buena Beef to require an Italian beef 0:12:48.679 --> 0:12:50.600 shop to be set up in the District of Columbia 0:12:50.600 --> 0:12:53.079 because if you ever go to Chicago, highly recommend the 0:12:53.120 --> 0:12:55.680 Italian beef sandwich. So much better than Philly cheese steaks. 0:12:56.040 --> 0:12:58.520 I'll say that to the day I die. But again, 0:12:58.880 --> 0:13:00.520 you know, didn't have the chance to do that, So 0:13:00.800 --> 0:13:01.679 maybe on the next time. 0:13:02.679 --> 0:13:04.439 Yeah, we'll have to have him back and pick a 0:13:04.480 --> 0:13:06.960 span some more about Paul Simon the Senator and Paul 0:13:07.000 --> 0:13:14.679 Simon musician, and I guess your culinary choices as well. 0:13:15.360 --> 0:13:19.079 All right, so let's get back to financials content, Nathan, 0:13:19.080 --> 0:13:21.599 what's going on with the House Financial Services Committee? 0:13:21.720 --> 0:13:26.640 Yeah, so we're recording this on May fifteenth, and as 0:13:26.679 --> 0:13:29.760 we record this right now, the House Financial Services Committee 0:13:29.800 --> 0:13:33.079 and the Senate Banking Unity tomorrow and May sixteenth are 0:13:33.120 --> 0:13:35.560 having a hearing from the Federal Regulators. 0:13:35.600 --> 0:13:37.960 This is the Banking Prededitial Regulators. 0:13:38.240 --> 0:13:41.280 This is Michael Barr, the FED Vice Chairman from the 0:13:41.320 --> 0:13:44.520 Federal Reserve, the acting contour over the Currency Michael Sue 0:13:44.559 --> 0:13:48.200 and the FDIC Chairman, Martin Grueberg. So there's really three 0:13:48.240 --> 0:13:50.520 things that are happening in these hearings now. The first 0:13:50.520 --> 0:13:54.880 one is we'll FDIC Chairman Martin Grumberg keep his job 0:13:54.920 --> 0:13:57.720 because in the news recently, there has been a report 0:13:57.720 --> 0:14:00.880 that has come out about highlighting the toxes of culture 0:14:01.000 --> 0:14:04.640 over at the FDIC, and Martin Gruenberg essentially is going 0:14:04.640 --> 0:14:07.720 through the ringer right now as we speak, talking about 0:14:07.920 --> 0:14:10.560 how all these changes are going to come about over 0:14:10.720 --> 0:14:14.679 at the FDIC in response to that report. This is 0:14:14.720 --> 0:14:16.640 a very difficult time for him. He's not getting a 0:14:16.640 --> 0:14:19.440 ton of support from the Democrats as I've been following 0:14:19.480 --> 0:14:22.280 the hearing, but you're also not seeing a ton of 0:14:22.320 --> 0:14:23.720 Democrats pushing. 0:14:23.400 --> 0:14:24.920 For his resignation either. 0:14:25.640 --> 0:14:28.160 There is someone in a challenge at the moment, because 0:14:28.200 --> 0:14:31.840 if the FDIC chairman were to step down, the FDIC 0:14:32.000 --> 0:14:35.520 then becomes a locked entity of being two and two, 0:14:36.440 --> 0:14:39.720 and the Republican Vice Chairman would be put in place 0:14:39.760 --> 0:14:41.840 and in charge until the Senate were to be able 0:14:41.880 --> 0:14:44.680 to confirm a new FDIC chairman, which probably wouldn't be 0:14:44.720 --> 0:14:47.040 able to happen this year anyway. So if Chairman Greenberg 0:14:47.120 --> 0:14:50.240 steps down, things like the Boso three endgame are going 0:14:50.280 --> 0:14:52.120 to be at risk. But as of right now, it 0:14:52.200 --> 0:14:54.800 looks like he's still able to keep his job. 0:14:55.320 --> 0:14:55.520 Now. 0:14:55.600 --> 0:14:57.440 The Bosle three end game is getting a lot of 0:14:57.440 --> 0:15:00.480 intention here in the Hearings twelve as well. So Bloomberg 0:15:00.520 --> 0:15:02.760 News put out an article just last week saying that 0:15:02.800 --> 0:15:05.920 the Bozo three endgame. The regulators are aiming to finalize 0:15:05.920 --> 0:15:08.560 this by August. That is an out of consensus view. 0:15:08.760 --> 0:15:10.920 I don't think anybody in Wall Street thinks that that 0:15:10.960 --> 0:15:14.440 can happen. But right now the regulators are still proceeding. 0:15:14.600 --> 0:15:17.440 Is if that's the case. My view on it is 0:15:17.440 --> 0:15:19.680 is that until I hear from the regulators otherwise, we 0:15:19.800 --> 0:15:22.200 have to presume that the regulators do think that they 0:15:22.240 --> 0:15:25.240 can get this done by August. But the challenge here 0:15:25.440 --> 0:15:29.360 is is something called the Administrative Procedures Act, and right 0:15:29.400 --> 0:15:31.920 now the Bozo three or the FED. I'm going to 0:15:32.000 --> 0:15:33.640 use the FED because they're taking the lead on this. 0:15:34.400 --> 0:15:36.520 The FED is saying, okay, we are going to make 0:15:36.600 --> 0:15:40.920 broad immateial changes. That's their words, broad and material changes 0:15:41.000 --> 0:15:43.720 to the Federal Reserve or to the Boso three endgame. 0:15:44.080 --> 0:15:46.960 The question is, can you make broad and material changes 0:15:47.360 --> 0:15:50.080 that A they can get the rule out by August 0:15:50.320 --> 0:15:53.080 and B they can get the rule in order to 0:15:53.160 --> 0:15:55.360 pass the court so that Elliott's not writing on this 0:15:55.480 --> 0:15:56.560 a year or two from now. 0:15:57.080 --> 0:15:58.720 That's a tall challenge. 0:15:59.160 --> 0:16:01.480 And for what it's worth, the August deadline is really 0:16:01.480 --> 0:16:04.280 coming about because the Congressional Review Act, which would allow 0:16:04.320 --> 0:16:07.440 a Republican House Senate and President Trump, if he were 0:16:07.440 --> 0:16:10.280 to win in November, would allow them to overturn it 0:16:10.360 --> 0:16:13.680 if it comes out after August ninth. So the FED 0:16:13.720 --> 0:16:16.560 has a huge challenge. I don't envy their summer plans 0:16:16.600 --> 0:16:19.760 because they're going to be working late nights in order 0:16:19.840 --> 0:16:23.200 to get this out. But as of right now, I'm 0:16:23.240 --> 0:16:25.440 still presuming that the FED is going to try and 0:16:25.440 --> 0:16:28.760 get it done by August. But don't be surprised if 0:16:28.800 --> 0:16:30.720 in the next month or so they're going to say 0:16:31.320 --> 0:16:34.000 we have to actually propose this again or we're going 0:16:34.080 --> 0:16:36.680 to push it off the next year. FED Vice Chairman 0:16:36.720 --> 0:16:38.920 Michael Barr wouldn't commit to any of this in the hearing. 0:16:38.960 --> 0:16:42.160 He's saying flat out, we're still working through the process 0:16:42.240 --> 0:16:44.640 and we haven't made a decision, but we have committed 0:16:44.640 --> 0:16:46.320 to making broad material changes. 0:16:47.600 --> 0:16:48.880 So you know, we'll see. 0:16:49.280 --> 0:16:53.280 But something equally important is what's going on with the 0:16:53.360 --> 0:16:56.000 courts at the moment and the CFPB. So, Elliott, I've 0:16:56.040 --> 0:16:58.040 just been reading a lot of headlines on the CFPB. 0:16:58.960 --> 0:17:01.400 What's going on there? Something with credit card late fees, 0:17:01.440 --> 0:17:03.120 and then there was something else with the Supreme Court, 0:17:03.200 --> 0:17:05.919 and the CFPB funding. And folks, look, I know what 0:17:05.960 --> 0:17:08.040 I'm asking. This is just a loaded question for Elliott. 0:17:08.040 --> 0:17:10.040 But you know, Elliott, if you could tell us what's 0:17:10.080 --> 0:17:10.959 going on in the CPB. 0:17:11.359 --> 0:17:14.399 Yeah, well, I would never venture to say that this 0:17:14.400 --> 0:17:16.960 stuff is more important than what you're covering. They're equally important, 0:17:16.960 --> 0:17:21.280 no doubt. So yeah, So I'll start with the Supreme Court. 0:17:21.280 --> 0:17:26.840 We're waiting for ruling on the constitutionality of the CFPB's funding. 0:17:27.280 --> 0:17:31.280 If you recall, the Fifth Circuit in New Orleans a 0:17:31.359 --> 0:17:34.479 couple of years ago held that the CFPB's funding was 0:17:34.600 --> 0:17:39.280 unconstitutional because it's not part of the congressional appropriations process. 0:17:39.840 --> 0:17:42.680 The case was argued in the Supreme Court back in October. 0:17:44.080 --> 0:17:48.120 I would say the consensus view is that the CFPB 0:17:48.240 --> 0:17:51.040 did a lot better than people expected, and I think 0:17:51.040 --> 0:17:53.720 a lot of people expect the CFPB to win in 0:17:53.760 --> 0:17:57.320 the Supreme Court. I might still be one of the 0:17:57.359 --> 0:18:01.560 outlier views on that because I still think the Supreme 0:18:01.560 --> 0:18:05.120 Court is going to hold that the CFPB's funding is unconstitutional. 0:18:06.000 --> 0:18:08.840 We're waiting the decision. It could come as soon as 0:18:09.400 --> 0:18:13.439 you know, Thursday morning, May sixteenth. Again, we're recording this 0:18:13.600 --> 0:18:17.040 on May fifteenth. So if the decision comes out, it 0:18:17.040 --> 0:18:19.880 comes out, and you know, you can say we said 0:18:19.880 --> 0:18:21.240 it here that it might come out then, but it 0:18:21.280 --> 0:18:24.080 could come out also later, you know, later in May 0:18:24.280 --> 0:18:28.199 or in June, even But that case is important has 0:18:28.280 --> 0:18:30.920 ramifications for a lot of what the CFPB does, including 0:18:31.760 --> 0:18:35.480 rules that it has proposed and enforcement actions as well. 0:18:36.720 --> 0:18:41.600 Just last week, actually on May tenth, the CFPB's credit 0:18:41.640 --> 0:18:45.640 card late fee rule was put on hold by a 0:18:45.680 --> 0:18:50.000 federal judge in Texas on the grounds that the CFPB's 0:18:50.040 --> 0:18:52.760 funding was held on constitutional by the Fifth Circuit and 0:18:52.760 --> 0:18:56.560 as a result, the rule was promulgated by an unconstitutional 0:18:56.600 --> 0:19:00.720 agency and therefore, you know, the the judge said that 0:19:00.760 --> 0:19:03.280 the challengers to the CFPB credit card late few rule 0:19:03.440 --> 0:19:05.680 were likely to win their case, and so he put 0:19:05.680 --> 0:19:08.399 the rule on hold while they continued the litigation on 0:19:08.480 --> 0:19:11.760 the merits that case. By the way, the CFPB credit 0:19:11.760 --> 0:19:14.280 card late fee rule has been one of the quirkiest 0:19:14.760 --> 0:19:18.800 procedural cases that I've ever seen. I think, you know, 0:19:18.840 --> 0:19:22.720 when the challengers brought the lawsuit in Texas, in federal 0:19:22.760 --> 0:19:24.600 court in Texas, which is in the Fifth Circuit, they 0:19:24.600 --> 0:19:27.719 anticipated that you know, they'd get a swift victory, to 0:19:27.800 --> 0:19:30.800 get the rule put on hold, you know, almost immediately, 0:19:30.840 --> 0:19:32.960 and then win on the merrits down the road. That's 0:19:33.200 --> 0:19:36.760 really not what happened. And you had a judge down there, 0:19:36.840 --> 0:19:40.639 Judge Pittman, who he's a trumpetpointee, so everyone sort of 0:19:40.680 --> 0:19:43.400 thought it'd be easy sailing for the challengers, but instead 0:19:43.760 --> 0:19:46.840 he questioned whether his court was the proper venue for 0:19:46.880 --> 0:19:50.840 the litigation, and he actually sent the case to Federal 0:19:50.880 --> 0:19:54.600 Court in Washington, d C. But it only stayed there 0:19:54.600 --> 0:19:57.159 briefly because the challengers then went to the Fifth Circuit 0:19:57.200 --> 0:20:00.960 and asked for that transfer to be va, which the 0:20:00.960 --> 0:20:03.560 Fifth Circuit did, and the case then went back to 0:20:03.640 --> 0:20:08.160 Texas before Judge Pittman, and then he granted the preliminary injunction. 0:20:08.240 --> 0:20:11.320 So the rules on hold, Nathan, is the short, short 0:20:11.320 --> 0:20:16.280 answer to the short answer to my longer answer, and 0:20:16.920 --> 0:20:18.720 we'll see where it goes from here. They still have 0:20:18.760 --> 0:20:21.920 to you know, the CFPB says that the venue still 0:20:21.920 --> 0:20:25.360 has to be decided actually, so it's possible the case 0:20:25.440 --> 0:20:27.960