Elizabeth Warren wrote about the proposed Capital One/Discover Financial Services merger in The Wall Street Journal. Let's review some of the nonsense... EW: "[The merger] would create America’s biggest credit-card issuer, allowing it to charge customers exorbitant fees." RS: Nonsense. The CFPB has already proposed a cap on late fees, and will surely do the same on all of the other fees associated with credit and other payment cards. ___ EW: "Allowing a giant bank to run its own network to process billions of credit-card transactions would create a new Wall Street monster with greater power over American families and small businesses." RS: Nonsense. There are roughly 9,000 banks and credit unions in the US. Americans have choices today. Ironic that, two days before it publishes Warren's screed, the WSJ published an article titled "Why People Are Switching to Their Hometown Banks." Doubtful that the Senator read the article. Her comment isn't even an honest representation of what she and other like-minded politicians and regulators want, namely, FEWER small and mid-size banks and credit unions. ___ EW: "This may be a sweet deal for a handful of corporate executives and investors. It’s a bad deal for everyone else. When big banks get bigger, they dismantle customer service and slam Americans with junk fees." RS: Nonsense. Not paying your bills or not paying them on time has consequences. Companies--big or small--can't make their payments, whether it be to suppliers or employees. There are consequences to not paying your bills--and those consequences are NOT "junk fees." There is a kernel of truth in Warren's statement when she says the deal is "bad for everyone else." You know who's in that group of "everyone else"? Visa and Mastercard. The whole Credit Card Competition Act--which Warren supports--is all about hurting V/MC. So here's a merger that would help accomplish her goal of diminishing the V/MC's power, but she's against it. Hypocrite. ___ EW: "It’s bad for small businesses because bigger banks shrink small-business lending." RS: Banks of all sizes shrink lending when the economy turns down and lending to small businesses becomes riskier. Improve the economy and small biz lending increases. ___ EW: "the biggest credit-card companies charge significantly higher interest rates than smaller banks. The fees amount to as much as $500 a year in added costs for consumers. That’s money that could go toward rent or car repairs." RS: Those aren't fees, they're interest payments. People incur interest payments because they pay exorbitant prices for things like car repairs and have to use their credit cards. ___ EW: "Every consumer will see upticks in prices for everything from diapers to school clothes." RS: Can't be worse than the uptick we've seen from current economic policies. ___ I'm out of space. The nonsense continues here: https://lnkd.in/egWe6Njf
?? Jim Marous
8 个月
You hit all the high (Low) points here. It feels like EW is taking a page out of her playbook from more than a decade ago and not changing a word. She needs to realize the marketplace has evolved significantly. The term 'junk fees' being used to describe interest rates is insane. Finally, she needs to look at both Discover and Capital One, who are two of the most aggressive players in the marketplace (good thing). They have a wide array of products for people in every demographic category and use data to drive better product design for the consumer.
David Jordan
8 个月
As you pointed out some of the criticisms of the deal are emotive than factual. However, I do have a concern that Capital One is a credit provider, where MC/V are network providers. When a credit provider offers a service to another credit provider, you are walking into a dangerous area of collusion.
Paddy Ramanathan
8 个月
Glad to see that you are back on the right side and calling spades ??, maybe you never left
Peter Davey
8 个月
Well stated Ron Shevlin. I see it very similarly as you and EW continues to be out of her mind and disconnected from the real world of finance.
Jamie Lovell
8 个月
Ron - thanks for calling out the challenges with Warrens approach. The interesting thing is that new charters, BaaS and Open Banking are areas that would help and are not being actively addressed by the "Fees are bad" or "insufficient competition" crowd. Still waiting to be able to take my direct deposit and direct debits with me when I switch a bank - we can do it with cell phone numbers why not account and routing info?
Bill Fanter
8 个月
Ron Shevlin We need mandatory retirement ages for all elected officials It’s the reason why the US deficit is out of control and the country continues to go backwards in time Enough is enough with all these old politicians
David True
8 个月
After championing the CFPB, one wishes EW would consider what they're doing before writing a piece like this.
Jonathan Schultz
8 个月
100% agree with everything here Ron Shevlin, especially your second to last one re: big banks charge higher rates…then go to the small bank to get a lower rate. It’s an open market. What were your thoughts on your referenced “people going to hometown bank” WSJ article? I’ve been wrestling with it in my mind for the past 2 days. I think my takeaway — the winners will figure out how operate with scale but serve like a boutique, small bank. It’s a hard business model but I think it’s possible. It’s like how Marriott has purchased boutique hotels to offer scale benefits but keep its local unique flare.
Jason Dyro
8 个月
It'll be interesting to see who Warren and her ilk blame for the resultant retail failures and consumer harm coming out of the CFPB rule. Read most retailers financials and you'll find a significant revenue stream is generated by them on the back of participation in the store card and cobrand credit card programs. When that revenue, which subsidizes the retail operation, is removed, how are they going to replace it? Cut cost through headcount reduction? Raise prices? Close stores? Who is assessed a late fee? The minority of the population who fails to make payments on a debt they incurred. Who is impacted by higher prices to compensate for loss of revenue? Everyone that shops there whether they pay with cash, store card, or open loop credit. The end result, as is the case with most regulation stood up as a political talking point, is harm to the US consumer. But as long as the likes of Elizabeth Warren have their great Satan with which they can throw their poisonous barbs, no care is really paid to the eventual and inevitable gut punch that will befell their constituency.
International Fintech & Banking Advisor & Matchmaker / LinkedIn Top Voice
8 个月I cannot like this post enough.