Published on Oct 11, 2024
It’s been nearly a year since the Federal Reserve proposed lowering the costs of debit card swipe fees and big banks hope the delay might mean the proposal is in trouble.
The Fed capped swipe fees at 21 cents plus a small fraction of the transaction amount back in 2011. For more than a decade, merchants pointed to research that showed how the fee was bloated. Last year the Fed relented—proposing to lower the swipe fee to 14.4 cents plus a fraction for the transaction amount.
Since that proposal was made public, the banking industry and its allies have urged the Fed to scratch the plan. The Fed ended its comment period in May and since then the banking industry and merchants have been waiting for a final rule.
There’s no telling what will be in the final Fed rule, but the Fed has made clear that it wants to get swipe card fees right, said Doug Kantor, general counsel of the National Association of Convenience Stores and a leading voice for merchants in their battles for lower card fees.
The Fed has concluded that the base cost of processing debit card transactions has “nearly halved” for large card issuers since the Fed last looked at the issue closely.
“Final rules can take time,” Kantor said. “We won’t know how we feel about the final rule until we see it but there’s no doubt that it’s coming.”
Several banking industry sources said the Fed might hold back on issuing a final rule in the wake of some Supreme Court decisions that have curtailed federal rule writing powers.
Lobbyists for both banks and merchants agreed that no decision is likely to come until next year. The Fed declined comment for this story.
Trump advisor floats “shadow” Fed chair plan to neuter Powell. Former President Donald Trump blasted the Federal Reserve’s half-point rate cut in September as a “political maneuver” during a speech at the Detroit Economic Club on Thursday.
“The fact is that the Federal Reserve brought the interest rates down a little too quickly, it was too big a cut, and everyone knows that was a political maneuver that they tried to do before the election but they did the wrong thing. It was totally a political decision,” said Trump.
Powell has publicly rejected that the September rate cut was in any way politically motivated.
While Trump accuses the Fed of trying to throw the election for Kamala Harris, one of his economic advisors is floating a plan to usurp Fed chair Jerome Powell’s authority well before his term ends in May 2026. Scott Bessent, who founded the hedge fund Key Square Group, told Barron’s that Trump should nominate Powell’s replacement over a year before Powell’s term ends. Senate Republicans could then confirm the nominee, creating a “shadow Fed chair.”
Powell would remain in control, per Bessent’s plan, but Trump’s approved successor would be able to exert considerable influence.
“You could do the earliest Fed nomination and create a shadow Fed chair,” said Bessent. “And based on the concept of forward guidance, no one is really going to care what Jerome Powell has to say anymore.”
The unprecedented plan depends upon Republicans winning back the Senate. Democrats currently hold a narrow 51-49 majority and are projected to lose seats in Montana and West Virginia, though Nebraska Republican Deb Fischer is in a tight race against independent candidate Dan Osborn. Fed chair nominations are not subject to filibuster.
Bessent, who has been floated as the next Treasury Secretary if Trump wins, told Barron’s the plan came from himself and not the Trump campaign, though he said Trump’s team was receptive to it.
TD Bank pleads guilty to felony counts of money laundering. TD Bank Group (TD) has agreed to pay over $3 billion to federal regulators to settle charges that its weak anti-money laundering controls allowed criminal enterprises to launder hundreds of millions of dollars through TD accounts. TD will pay the largest-ever penalty under the Bank Secrecy Act and is the first US Bank in history to plead guilty to conspiracy to commit money laundering, Attorney General Merrick Garland announced Thursday.
“TD Bank created an environment that allowed financial crime to flourish. By making its services convenient to criminals, it became one,” said Garland.
TD, the tenth-largest bank in the US, will pay a $1.8 billion criminal penalty to DOJ along with civil penalties to FinCEN and Office of the Comptroller of the Currency that bring the total payment to $3.09 billion. The OCC consent order caps TD’s US banking subsidiaries at their current value of $434 billion in total assets. The asset cap will remain in place at the discretion of the OCC.
TD told investors it “is focused on meeting the regulator’s expectations so it can be removed as soon as possible.” TD also agreed to restructure its corporate compliance unit and will be placed under a three-year monitor and five-year probation. It will also face more stringent approval processes for new products and services.
DOJ said that TD failed to monitor $18.3 trillion in customer activity during a six-year period, allowing three money-laundering networks to transfer over $670 million through TD accounts. At a press conference, Garland outlined how bank employees new and openly joked about the obvious money laundering being committed.
The DOJ’s anti-money laundering investigation previously scuttled TD’s proposed $13.4 billion buyout of First Horizon Bank (FHN) last year. The Capitol Forum reported that TD executives were aware that federal agencies had found serious lapses in anti-money laundering controls more than six months before it was disclosed to the public.
Aside from the corporate felony pleas, the DOJ has prosecuted two-dozen people for schemes moving illicit funds through TD Bank accounts, including two bank employees. Last year a former branch employee in New Jersey, Oscar Marcelo Nunez-Flores was charged with helping launder millions of dollars in illegal drug sales since 2022. This year DOJ accused Florida employee Gerardo Fermin Aquino Vargas of accepting bribes to facilitate moving millions of dollars to Colombia.
Real Estate Exec Warns of “catastrophic” litigation if industry abandons mandatory MLS listings. NextHome Inc. CEO James Dwiggins wrote a two–part warning this week that class-action lawsuits are inevitable if the National Association of Realtors does away with its Clear Cooperation rule and allows brokerage to offer private listings on in-house exchanges.
Large brokerages like Compass Realty say they should be able to offer the choice of private or public listings to home sellers who seek privacy. Dwiggins, a self-described free market guy, said he agrees with that view in principle. In practice, he argues, agents will begin pushing off-market listings as a good thing for clients, and sellers will follow that guidance. MLS studies have shown private listings result in lower sales compared to those on the MLS.
“Imagine the lawsuit that could arise if the CCP [Clear Cooperation Policy] goes away and all the large brokerages across the country start holding back inventory to try and double-end deals and take other agent’s buyers. Eventually, a seller who feels duped will file a class action lawsuit stating that their agent recommended this practice when they could have made more money by putting the property on the MLS,” said Dwiggins.
He projected that ending mandatory MLS listings (currently all homes must be listed on the MLS within 24 hours of being marketed) will lead to large brokerages hoarding listings and using internal inventory to lure agents away from smaller companies, creating a massive disadvantage for smaller players.
