Felix Salmon

Why sell-side analysts are wrong

Felix Salmon
Jun 21, 2010 15:30 UTC

Aaron Pressman has a good report on the sell-side failure to perceive the risks surrounding BP in the wake of the Deepwater Horizon catastrophe. Why was Wall Street so very bullish on the stock even as it was being pummeled in the markets?

Pressman points to a number of factors, including banks’ desire for a healthy relationship with BP, and analysts’ tendency to cluster together for comfort. Joshua Brown reckons it’s deeper than that, and that sell-side analysts tend to see everything in terms of value and discounted cash flow, which are not particularly useful tools when companies get hit by unexpected tail risks.

And more generally, as Lynn Thomasson shows, sell-side ratings are a pretty good contrary indicator:

Wall Street’s lowest-rated stocks have turned into this year’s best performers…

Huntington Bancshares Inc., the regional lender in Columbus, Ohio, had twice as many “sell” ratings as “buys” in December and jumped 66 percent this year for the fourth-largest advance in the Standard & Poor’s 500 Index. Eastman Kodak Co. and Sunoco Inc. have gained more than 20 percent after more than 30 percent of the analysts covering them at the start of the year recommended getting rid of the shares…

Coca-Cola Co., the world’s largest soda maker, had 14 “buys” and 1 “sell” rating in December and has lost 8.2 percent this year…

Pfizer Inc., the world’s largest pharmaceutical company, is down 16 percent this year even after 81 percent of analysts covering the New York-based firm said investors should buy shares.

The one part of all of this I disagree with is in Pressman’s piece:

Wrong-way Wall Street calls are more than just an academic problem. They cost real people real money.

This was the theory behind Eliot Spitzer’s war on sell-side analysts; it was dubious then, and it’s even more dubious now. Investors — even retail investors — aren’t sheep who simply do what they’re told by sell-side analysts. Institutional investors, in particular, use sell-side analysts as a source of ideas, and even more as a source of access to the company. Big investors are a little bit like bloggers, actually, but instead of linking to articles and then saying what they think, they give out soft-dollar commissions and put on their own trades. Which, like blog entries, can either agree or disagree with the original idea.

But Brown’s point is important as well. Sell-side analysts live in mediocristan, and are prone to being blindsided by the unexpected; they almost never, for instance, recommend negative-carry trades. Investors, if they’re any good, know this. No one ever made money by blindly following sell-side advice, and so we should hardly be surprised that people whose position coincided with the sell-side consensus ended up losing a lot.


In any worst-case scenario that wipes out BP shareholders, it may be foolhardy to think that bondholders would be spared. If things got that bad, the niceties of settled law would fare no better than they did in the GM and Chrysler bankruptcies.

There is considerable political risk here: in effect, there is no such thing as senior debt of BP. New equity in a post-bankruptcy BP would be handed to fishermen and other “stakeholders”, not to “greedy speculators” like yourself.

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How to avoid a fiscal panic

Felix Salmon
Jun 21, 2010 14:03 UTC

Edmund Andrews adjudicates dueling op-eds by Paul Krugman and Alan Greenspan on the subject of fiscal policy, and although he purports to come down somewhere in the middle, by the time he’s finished his prescriptions end up sounding very much like those of Krugman.

Andrews is right to dismiss Greenspan’s weird focus on the 10-year swap spread as the harbinger of doom: it’s no such thing. It’s stretching credulity for Greenspan to paint the swap spread as a sign that the market is worried about the US fiscal situation, even as the more obvious places for expressing such fears — like the interest rate on Treasury bonds — show no worries at all.

Andrews is also right that no one can have much certainty about anything right now, and that no one knows where any country’s fiscal breaking point might be. The markets have a tendency to veer wildly from complacency to panic for any or no particular reason, and as debt ratios rise, the probability of such a panic happening has to be rising as well. Andrews sounds sensible, then, when he says that it makes sense to insure against such an eventuality:

The markets can panic, without much warning in advance, just as they did about Greece and to some extent the euro-zone itself. No one knows where the tipping point between acceptance stops and panic kicks in. But there’s also no dispute that deficit and debt levels are in uncharted territory in the U.S. and in Europe. Nobody knows whether they will get back to sustainable levels or how long it will take them. Nobody knows what the bond markets’ tolerance will be like, or how all the moving parts will interact with each other…

We need insurance. We need to plan for the possibility of getting our next move wrong.

But the problem is that, as we discovered during the last financial crisis, you can’t buy insurance on the end of the world — or rather you can, but when the time comes to collect, you’re liable to discover that your insurer has gone bust.

What kind of insurance does Andrews have in mind?

At a minimum, it would include a credible plan for reducing long-term deficits. It would require targets for government spending and revenues. If I were king, the plan would allow for another round of stimulus spending but call for real belt-tightening around 2015. It would include agreements to limit future entitlements, limit our military ambition, rein in health care costs and increase tax revenues. And it would include back-up options, triggers to shift policy in case the economy performs better or worse than expected.

The problem here is twofold. Firstly, it’s fraught with risks of misfiring badly: a fractious political debate over entitlements could be precisely the trigger for the kind of panic that Andrews wants to avoid. And secondly, the triggers would be pro-cyclical, thereby defeating the purpose of delaying implementation until 2015. In any event, there’s no realistic way of putting together a plan which couldn’t and wouldn’t be overridden in the event of another economic crisis.

What’s more, Andrews actually goes further in his own scaremongering than even Greenspan does:

Look up Bruce Bartlett’s very smart recent warnings on two points. First, the U.S. is much vulnerable than most people think to a ratings downgrade on Treasuries, a move that would probably cause a long-term spike in interest rates Second, that right-wing Republicans and Tea Partiers could in their ignorance trigger an actual default by refusing to approve an increase in the government’s legal debt ceiling.

A ratings downgrade on the US simply isn’t going to happen: the ratings agencies need the US to be triple-A more than the US needs to be triple-A. And they have very good reason to keep the US where it is, for reasons explained by Greenspan:

The U.S. government can create dollars at will to meet any obligation, and it will doubtless continue to do so. U.S. Treasurys are thus free of credit risk.

The logic here is the foundation for everything the ratings agencies do: their business is based upon the idea that Treasuries are risk-free, and that all other debt instruments can be placed at some point on a one-dimensional spectrum, where they’re riskier the further they are from Treasuries. In reality, of course, debt dynamics in general, and Treasuries in particular, are much more complicated than that. But the ratings agencies will be the last to admit it: it’s their job to oversimplify and to breed complacency, which is the one part of their job that they’re very good at.

As for the possibility of a technical default caused by a 1994-style refusal to raise the debt ceiling, I’m skeptical: Treasury has all manner of rabbits in various hats that it can pull out to keep paying coupon payments through a legislative crisis, even (especially) if much of the federal government has been shut down. Besides, any technical default would be a bit like the technical default by Fannie and Freddie: no one really minded very much, because they knew that they would end up getting paid in full.

So yes, Andrews is right that it’s a great idea to start putting together a long-term plan for dealing with the deficit, which is very much in unsustainable territory. I’m quite sure that Krugman would agree with him on that front. But my feeling is that the best way to put together such a plan is to start coming up with new revenue sources, such as a carbon tax / cap-and-trade system, or a financial-transactions tax. The more income streams that Treasury has, the less likely we are to see any kind of market panic.

Update: See also DeLong.


Fewer economic theorists looking back and more practical thinkers looking forward.
This is what we need. Sterile debate is not so sterile that it can’t drift past its sell-by date.

http://nbyslog.blogspot.com/2010/06/budg et-on-tuesday-osborne-needs-to.html

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Felix Salmon
Jun 21, 2010 04:52 UTC

Renminbi ruminations: a great roundup — Alphaville

“In BP, we see a company that undertook a phony transformation and now lies in ruin.” — NYMag

The England strip: the exact opposite of a superhero costume — Guardian

Another c&d nastygram from the NYT, earlier this month — Neighborhoodies

Strategic Forgetfulness, or how it pays to be absent-minded with your mortgage payments — Thoma

BP Buys 32 of Kevin Costner’s Oil Separating Machines — Daily Tech

Everybody’s talking about Waldman’s fiscal-austerity post. Go read it, if you you like a bit of econowonk — Interfluidity


One of the links in this article set leads to a blog with a virus attached…I think it’s the Renmibi, but it could also be neighborhoodies, or any of the others. The virus was the AV M mock security suite virus.

I’d also like to note that the link to neighborhoodies doesn’t seem to display the dispute shirt anymore.

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Why companies will stick with Twitter

Felix Salmon
Jun 21, 2010 04:45 UTC

I was offline for much of Friday for various reasons, with the World Cup not even being the main one. Instead, I was across the street from Reuters, at the Nasdaq, sitting on one panel and giving a keynote speech to a group of financial PR professionals interested in social media in general, and Twitter in particular.

The main thrust of my speech was that if blogs started to blur the distinction between journalists and the public at large, then Twitter has made things even fuzzier: everybody (companies, executives, PRs, hacks, flacks, bloggers, individuals) is interacting on a very level playing field. And insofar as there are certain people on Twitter who are very influential, there’s a good chance that they’re not the journalists at large media outlets whom PR people have historically spent most of their time trying to cultivate.

What’s more, Twitter gives companies the ability to speak directly to the public without going via journalists (or even mere bloggers); and it also allows them to keep tab on what the public thinks without using journalists and media commentators as an imperfect proxy. Public relations is, after all, the art of relating with the public: journalists are just a means to an end. And the public has never been as easy to relate with as it is now, in the age of Twitter.

Which is why I think that Simon Dumenco is wrong. He’s convinced that corporate presence on Twitter is going to end up feeling much more like those toll-free customer service lines, sooner rather than later:

Social-media as a corporate meme is still pretty interesting and exciting and attractive… a lot of the smart, ambitious, college-educated, well-socialized people in corporate environments are getting sucked into social media. Some of these bright young folks can say things like, “Oh, I manage social media for X Corp.” or “I monitor social media for Y Industries” — and it sounds pretty cool. But what they’re really doing is slaving away at a virtual call center. (If Mom and Dad, who helped pay for college, really understood that, they’d weep.)

Which ain’t gonna last. Old-school customer-service phone lines tend to be staffed by not-so-helpful, not-particularly-well-educated, not-so-patient workers because, let’s be honest, talking to cranky, pissy customers is shit work. (Or the call center employees are well-educated, but non-native speakers of English squeezed into cubicles on another continent. Either way, they’re probably biding time.)

But the difference with Twitter is that it’s public. Every so often, some enterprising blogger will put a customer-service call online, to one company’s embarrassment and everybody else’s general merriment. But most of the time, companies can get away with shabby service because they can’t be seen behaving unhelpfully.

A company with a large number of Twitter followers, and which engages helpfully with its customers on Twitter, in full view of the world, is a company which is doing wonders for its reputation and which is well placed to be able to deal nimbly with any reputational problems that might arise. Whereas a company which doesn’t have that infrastructure in place is likely to end up like Eurostar. (Let’s not even get started on BP.)

More generally, Twitter is growing so fast that the executive ranks of most companies are increasingly full of people who use Twitter regularly. Just as corporate flacks try to get interviews with executives into the WSJ because that’s the paper the executives read, they’re also going to try to keep the company’s presence on Twitter high-profile and shiny because that’s something the executives are likely keeping a close eye on themselves.

So expect a lot more pressure, both top-down and bottom-up, on companies to embrace the Twittersphere. Meanwhile, the people being squeezed will be those in the middle, who have to actually implement the corporate response. If the delegates at the conference on Friday are any indication, they’re still a bit slow to engage. But they’ll get there soon. They have no choice.


Twitter has very low recall value. Companies will need to constantly update and will need to be interesting.

http://www.digitalpost.org/2010/06/seo-g uide-to-twitter-user-psychology.html

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Are foreclosures racist?

Felix Salmon
Jun 18, 2010 15:34 UTC

If you’re a high-income Latino with a mortgage, you’re almost twice as likely to be facing foreclosure than a high-income non-Hispanic white person. And in general, the foreclosure crisis is hitting blacks and Latinos much harder than it is whites, according to a startling new report from the Center for Responsible Lending.

Overall, there have been 790 foreclosures per 10,000 loans to blacks, and 769 for Hispanics — compared to just 452 to non-Hispanic whites. And within every income group, the disparities are startling: here’s the chart.


The “Disparity Ratio” here is essentially the likelihood of being foreclosed upon, compared to the likelihood of a similar-income non-Hispanic white being foreclosed on. It’s interesting that the disparity ratio is pretty stable for blacks, but rises sharply with income for Latinos. I’ll hazard a guess and say that this probably has something to do with a lot of middle- and high-income Latinos in California and Arizona being sold subprime mortgages, even when they qualified for a prime loan.

Why would Latinos be more susceptible to being taken advantage of in that way than non-Hispanic whites? Now I’m really speculating, but it stands to reason that financial sophistication is a function not only of your income today but also of your family’s income when you were growing up. If rich Latinos are more likely to come from poor families than rich whites, then that might explain some of the disparity here.

Even so, it’s very depressing to see the results here. Already the median non-Hispanic white family reported $171,200 in net worth versus only $28,300 for non-white and Hispanic families, and this crisis is only making matters worse. The CRL reports:

The indirect losses in wealth that result from foreclosures as a result of depreciation to nearby properties will disproportionately impact communities of color. We estimate that, between 2009 and 2012, $193 billion and $180 billion, respectively, will have been drained from African-American and Latino communities in these indirect “spillover” losses alone.

Those are really big numbers. One might have hoped that blacks and Hispanics might have been less badly hit by the foreclosure crisis simply by dint of their much lower levels of homeownership. But it seems that isn’t the case.

Update: Barry Ritholtz reckons we might be seeing the effects of unemployment here, since unemployment, too, has hit blacks and Hispanics worse than whites. It’s a good point.


The problem is that you can turn down those with poor credit and be called racist or you can offer them credit with a higher interest rate to cover the anticipated losses and be called a racist and then when you have to foreclose on the defaulters you will be called a racist. Those looking for racists will always be able to find them according to their criteria.

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Felix Salmon
Jun 18, 2010 06:34 UTC

German ETFs enable investors to stop paying taxes on dividends — Index Universe

Tom Florio Leaves Condé Nast — Mediabistro

HuffPost buys Adaptive Semantics to keep up with 100,000 comments a day — TechCrunch

Tina Gaudoin Quits WSJ Magazine — Fishbowl NY


“The Huffington Post very much sees itself as a social news network, and its success is tied to engaging its readers in a variety of ways, from leaving comments to sharing posts across the Web via Twitter and Facebook. It recently started awarding readers badges. JuLiA could help to feature the best comments or to award specific badges. For instance, if a reader leaves a lot of comments on posts about Afghanistan, Iraq, and Hillary Clinton, they could get a Foreign Policy badge. That is just a hypothetical example, but the technology opens the door to those kinds of features.”

I’m pretty sure I’d be in the same situation as I was in Webelos, i.e., unable to get badges. In any case, my commenting rule is:

Gold Hat (Bedoya): “Badges? We ain’t got no badges. We don’t need no badges! I don’t have to show you any stinkin’ badges!”

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When states don’t pay their debts

Felix Salmon
Jun 17, 2010 21:11 UTC

Greg Ip reports on how Illinois is going to have to start making unnecessary unemployment payments just because it’s refusing to pay its debts:

Illinois owes Shore Community Services, a non-profit agency in suburban Chicago, some $1.6m for services to the mentally disabled. The agency has had to lay off a dozen staff. Jerry Gulley, the executive director, says his outfit’s line of credit could be exhausted soon. The bank will not accept the state’s IOUs as collateral. “That’s how sad it is,” shrugs Mr Gulley.

Ip explained to me that these aren’t physical IOUs, like California issued, and they’re certainly not bonds — they’re just unpaid receivables. But even so, this is crazy: there’s no way that Illinois should allow the employees of a noble non-profit to be laid off just because it hasn’t got around to paying its bills. It’s the job of the state to encourage employment, not layoffs.

Other banks are reportedly accepting state receivables as collateral, but it seems to me that Illinois would do well to set up a formal system of paper IOUs, which would presumably be much easier to borrow against. More generally, I think that there’s a very good chance we’re going to see quite a lot of state-issued scrip in the years to come, not only from Illinois but also from other states with similar CDS spreads, like Portugal. As Ip notes, these states “do not issue their own currency, so inflating away their debt is not an option”. But issuing scrip is the next best thing.

The problem with states like Illinois, California, and New York is not the willingness of the executive branch to remain current on its debts; rather, it’s the ability of the legislative branch to make the kind of tough fiscal decisions which are politically dangerous. The more dysfunctional the state legislature — and all three of them are pretty gruesome in that regard — the more likely it is that the state treasury will find itself in a position of simply not being able to meet its contractual obligations as they come due.

Outright default on a state’s bonded debt is still unlikely:

The assumption of many investors is that the federal government would never let a state default. It might allow an isolated case, but if a default looked like the start of a wave, the federal government would surely blink—just as Europe did when confronted by Greece.

This is surely right, and I doubt that any state is going to attempt to pay its bond coupons in scrip. Everything else, however, is fair game — including payments for services to the mentally disabled.


This is a real problem, before retirement our company cleaned fleets of vehicles, and about 30% of our business was fleets owned by government agencies (all levels of government) and in the 80s, I cannot tell you how bad the receivables had gotten, 120-180 days out was common, it was a nightmare. Many small businesses think they are set to have government contracts, not so, you become their bank, and when they cut budgets or run out of money, you don’t get paid, it’s crazy. Most people don’t realize how they use the business community, state governments are the worst, your money comes out of another area or region usually, and they don’t care, and when they cut staff, they don’t return calls either.

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English masters of the dead bat

Felix Salmon
Jun 17, 2010 18:54 UTC

John Gapper isn’t letting the World Cup get to him: he knows that when it comes to Tony Hayward’s Congressional testimony today, the sports metaphor of choice has to come from cricket rather than football. “Tony Hayward plays a dead bat to Congress” is his headline, and he’s right: Hayward isn’t interested in winning anything, here, he’s just interested in letting the hearing time out by being infuriatingly passive and unhelpful. He’s simply letting the attacks come, refusing to show any spark of humanity or willingness to engage.


Here, then, are two masters of the dead bat. One of them epitomizes England across the Caribbean and the world; the other one is Geoffrey Boycott. I wonder whether Hayward was a cricket fan as a lad.

(Photo by Larry Downing for Reuters)


We already know why the BOP failed. Sorry, but your pro-BP nonsense won’t work with everyone.

There is no and will be no “investigation” – that’s simply gratuitous pablum. Why wait for something that will never be generated?

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Interchange and free checking

Felix Salmon
Jun 17, 2010 14:46 UTC

Why do most people hate their bank? Because their relationship is based on the lie of “free checking”, and a relationship based on a lie is always going to be a dysfunctional relationship. Checking is never free, but in recent years banks have been able to conjure the illusion of free through a system of regressive cross-subsidies, where the poor pay massive overdraft fees and thereby allow the rich to pay nothing.

Interchange fees are a cross-subsidy too: this time it’s merchants who help pay for the checking accounts of the rich. In fact, they do more than pay for their checking accounts, they pay them a nice tax-free income, when the rich people accept debit rewards cards.

With the federal government finally cracking down on overdraft fees, and with the Durbin amendment threatening interchange fees to boot, the fiction of free checking looks as though it’s reaching the end of its natural life:

More than half of all checking accounts are currently unprofitable, according to a report issued last month by Celent, a unit of Marsh & McLennan Cos. It costs most banks between $250 and $300 a year to maintain one of the roughly 200 million checking accounts, according to industry estimates.

Checking accounts pay zero interest these days, but even being able to borrow money for free from depositors isn’t worth $300 per year to a bank. If a checking account has $1,000 in it on average, and the bank can lend that money out at 7%, net of defaults, then it’s making $70 a year on the account, which isn’t enough to cover its costs.

The natural answer, here, is to restart charging monthly fees on modest-balance checking accounts — and to shed few tears when your low-balance customers leave:

The offers of free checking without any minimum balance requirements attracted a new wave of low-income customers, who previously went to check-cashing stores. Some consumer advocates have warned that the elimination of free checking could drive some of those customers out of the banking system.

From the banks’ perspective, though, many of those customers aren’t profitable.

All of which provides some important background in understanding the stance of Patrick Adams, the CEO of St Louis Community Credit Union. Adams’s customers are relatively poor: his credit union is designated a Community Development Financial Institution, which targets the African-American community in St Louis. And he’s dead-set against any regulation of interchange fees, which provide an important source of income for his institution; he’s written three blogs on the subject, here, here, and here.

Adams, unlike Harriet May, was willing to provide me with concrete numbers:

We have 25,000 debit card holders with a 50/50 split on debit vs signature. We had 3.2 million debit card transactions in 2009 totaling $892,490 in debit interchange income or an average per transaction of just under 28 cents per. At an average interchange rate of 1.3%, our average member debit transaction is for 21.40. Our all in expense (including fraud) is $521,000.

We project that a 50% reduction in interchange would cost us $446,000 of top-line revenue. Something has to give if we lose that revenue. A $20 per year annual fee works, but we don’t want to fee our members.

Essentially, St Louis Community CU is getting about $35 of top-line revenue per year, per debit card. If that revenue disappears, it hurts the credit union’s finances. And so Adams is railing against interchange regulation:

Here’s another surefire lock of a bet. You will be more frustrated than ever. Your costs at the bank will be up. Your costs at the retailer will be up. You will be confused as to which retailers accept your debit card and which ones don’t. You will have no clue what the minimums and maximums of your debit card activity will be because there will be no consistency among retailers.

As a result, you will carry more cash and more checks… And, what about this double-dip possibility? You’ll use more checks at the check-out counter and the retailer will charge you a processing fee for doing it. (See, their handling of checks and cash are more expensive than debit cards.) You’ll pay for that, as well.

If this legislation is passed, I will mark my calendar to re-visit this issue a year after enactment. If I am wrong, I will eat the biggest piece of humble pie ever, including a public apology to everyone – starting with Senator Durbin. I must tell you that I’m extremely confident that an apology won’t be forthcoming.

I’ll take Adams’s bet. Yes, the costs of a checking account will be more transparent and visible to consumers. But costs at the retailer will not rise, since the retailer’s costs will have fallen. There will be no confusion about which retailers accept which debit cards, and debit-card minimums and maximums will be a non-issue. People will not carry more cash, and they certainly won’t carry more checks. And Adams will owe a public apology to Durbin.

Because some of Adams’s predictions are a bit vague, let’s drill down to the one where it’s easy to get hard data from his own credit union. Let’s look at the number of checks that Adams processes per checking account on the day that interchange regulations are signed into law (assuming that happens), and one year later. If it’s risen, I’ll be proved wrong, and will happily donate $100 of my own money to his credit union. If it has fallen, I’d like him to write a $100 check to my own credit union, Lower East Side People’s. Deal?

The fact is that if the biggest and most efficient banks in the world can’t make money from providing checking accounts to low- and moderate-income individuals, then it’s not going to be easy for credit unions to do so either, especially because low-income individuals tend to be high-touch customers who do a lot of their transactions at the teller window. Credit unions like St Louis Community and LES People’s pay for the cost of providing those checking accounts in many different ways, including, when we’re fortunate, getting large donations from the federal government.

In recent years, I can well believe that St Louis Community has been very happy to see its interchange income rise, especially from its signature debit cards. Signature debit is a low-security, high-fraud product, but it’s also very lucrative for banks: it’s so lucrative, in fact, that many of them strongly encourage their customers to use them by offering back cash or other rewards. They wouldn’t do that if their interchange fee revenue was eaten up in fraud costs. At places like St Louis Community, the customers don’t have the option of choosing a reward card, so all that money flows straight to the credit union instead.

St Louis Community is keen on extracting other fees from its customers, too: it’s urging all of them to opt in to its “Overdraft Privilege Service”, in which customers have the privilege of paying $15 when their debit card transaction brings their checking-account balance below zero. Yes, that’s lower than most bank overdraft fees — but the fact is that for most people, in most circumstances, they’d be better off simply seeing their debit or ATM transaction denied if they don’t have the money in their account. This service might be “a life-line when emergencies happen”, to quote the website, but the overwhelming majority of overdraft fees are not racked up in emergency situations, and indeed the customer never has the option whether or not to pay the fee: the money is debited and the fee is charged automatically.

The economics of low- and moderate-income credit unions are not easy, and certainly the loss of interchange fee revenue is going to make it harder to find those $300 of profits per checking account needed to cover costs. But it’s wrong to simply try to extract ever-rising fees from merchants as card usage rises and people write fewer and fewer checks which need, by law, to be redeemed at par. The fact is that if one of Adams’s customers wants to pay for an item, then PIN debit is by far the cheapest way of doing it, from the credit union’s perspective — there’s no cash handling at the teller or the ATM, there’s no check processing, the money just automagically leaves one account and enters another. Debit cards are a great way of bringing credit unions’ costs down. That should be enough: they shouldn’t be a major profit center in their own right.


This seems like a problem with a fairly easy solution — since we’re all better off when households have access to basic financial markets, the government should simply subsidize checking under certain circumstances.

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