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Supreme Court questions risk disclosure arguments in Facebook case
Facebook Inc. v. Amalgamated Bank examines risk disclosure requirements for companies. During oral arguments, the justices doubted shareholders’ claims.
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Photos: IMF and World Bank annual meetings draw climate, humanitarian protesters
Nearing the close of the International Monetary Fund and World Bank meetings, protesters gathered to demand debt refunds, climate action and humanitarian aid.
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IMF warns global public debt is nearing over $100 trillion and won’t stop
The IMF’s Fiscal Monitor report forecasts global public debt to surpass $100 trillion by the end of 2024, with significant contributions from the U.S. and China. High debt levels pose risks to financial stability, necessitating urgent fiscal adjustments to ensure sustainability and resilience in the face of future economic challenges.
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Yellen says U.S. is finalizing $20 billion commitment to Ukraine aid
Treasury Secretary Yellen announced the U.S. is finalizing a $20B contribution to a G7 loan for Ukraine, repaid from frozen Russian assets. New sanctions against Russia are expected soon, with funds reaching Ukraine by year-end.
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IMF growth projections “good news” for the US, underwhelming globally
The International Monetary Fund released its updated World Economic Outlook Tuesday. The US economy is projected to grow by 2.2% in 2025, up 0.3% from July’s forecast.
read moreYELLEN WARNS AGAINST BROAD TARIFFS, STRESSES THE DANGERS TO THE US ECONOMY
WASHINGTON — Treasury Secretary Janet Yellen emphasized the need for the U.S. to maintain healthy economic global relations and warned against former President Trump’s proposed tariffs on Thursday at the Council on Foreign Relations in New York.
“Calls for walling America off with high tariffs on friends and competitors alike or by treating even our closest allies as transactional partners are deeply misguided,” she said.
Yellen, a longtime skeptic of tariffs, refrained from naming Trump but addressed the overuse of tariffs and its threats to national security. She warned that today’s issues — such as Russia’s invasion of Ukraine — meant that the U.S. cannot “go it alone.”
“We cannot simply draw from an old playbook,” she said.
Yellen called attention to key sectors like semiconductors, clean energy, and electric vehicles, where maintaining U.S. production capacity is vital for supply chain resilience and technological advancements reducing dependency on China.
She added that “sweeping, untargeted tariffs” would fuel inflation, harm domestic production, and raise the cost of living in the U.S., particularly for low-income households.
The critique comes just two days after Trump’s interview with Bloomberg Editor-in-Chief John Micklethwait, where he told the journalist that “tariff” was his “favorite word.”
Previously, Trump has threatened to impose across-the-board tariffs by as much as 60% on goods from China.
Though the Biden administration has kept most of the Trump administration’s tariffs on China in place due to fair trade violations, Yellen made it clear that broad-based tariffs “is not something that the Biden-Harris administration is supportive of at all.”
Vice President Kamala Harris has offered little insight into her trade policies, but she previously called Trump’s proposals a “sales tax” on the American people.”
In an interview with the Medill News Service, Matthew Goodman, director of REAL Econ at the Council on Foreign Relations, said that he anticipated “more trade on Harris’ side,” but she may choose to target technology instead.
“The Biden administration has been particularly focused on building this small yard-high fence on some critical technologies, like semiconductors, quantum computing, biotechnology,” Goodman said. “I would expect that work to be continued and strengthened.”
He added that Trump will likely lead with “anti-China rhetoric,” while Harris will take a more diplomatic approach.
Goodman referred to Yellen’s remarks as a “legacy speech,” just in time to direct attention to the Annual Meetings of the World Bank and International Monetary Fund, taking place next week.
Yellen emphasized that multilateral development banks have been “very high” on her agenda and that she expects the World Bank and other MDBs to prioritize global public goods.
While bolstering U.S. competitiveness and supply chains is essential, Yellen said that the nation will be forced to tackle global challenges like pandemics, climate change, and financial instability to mitigate risks of negative spillover to its economy and security. These will likely be the focus of conversation for the U.S. at next week’s meetings.
Last week, undersecretary for international affairs Jay Shambaugh alluded to a Project 2025 proposal for the U.S. to pull out of the IMF and World Bank if Donald Trump wins.
Despite concerns over the looming U.S. election outcome, World Bank President Ajay Banga said this has not been a topic of conversation.
“There’s no point in speculating on something when you don’t even know what the outcome will be,” he said at a press briefing that unveiled the Bank’s new corporate scorecard this morning.
He noted that the World Bank saw a substantial capital increase during Trump’s last term.
For the Bank, global public debt seems to be at the top of the agenda, estimated to top $100 trillion — or roughly 93% of global GDP, according to new projections by the International Monetary Fund.
The bank is providing liquidity to support “some of the poorest countries impacted by debt,” according to Banga.
“My objective at the annual meetings is to focus on what the bank can do to be a good player,” he said, adding that the scorecard will promote transparency of the Bank’s results and progress.
IMF Managing Director Kristalina Georgieva also gave an outlook for the Global Economy and Policy Priorities this morning in a “curtain raiser” for next week’s meetings.
The Annual Meetings of the World Bank and International Monetary Fund will commence on Monday, Oct. 21.
Supreme Court justices seem receptive to granting treble damages for personal injuries
WASHINGTON – Supreme Court Justices appeared receptive to broadening the scope of civil Racketeer Influenced and Corrupt Organizations (RICO) cases during oral arguments for Medical Marijuana, Inc. v. Horn on Tuesday.
The justices seemed likely to side with Daniel Horn, the case’s plaintiff, during their questioning of Attorney Lisa Blatt, who argued for the defendants.
“If you’re harmed when you lose a job, then you’ve been injured in your business, haven’t you?” Justice Elena Kagan asked. “The simplest, clearest reading of this statutory language is it doesn’t distinguish by what causes the harm.”
Those who want to contain the scope of RICO argue that if the Supreme Court allows Horn to plead a civil RICO claim, federal courts will become overwhelmed by the volume of federal RICO lawsuits that would otherwise be prosecuted in state courts.
Horn was injured in a car accident in February 2012 and sought a natural remedy for his pain relief. Employed as a truck driver, Horn purchased Dixie X CBD Dew Drops Tincture. He was regularly subject to random drug testing and thus researched the product, which claimed to contain 0% THC, the active ingredient in marijuana.
After calling Dixie X’s customer service line and consulting the FAQs on the company’s website to confirm the product did not contain THC, Horn consumed Dixie X, but subsequently failed a drug test for his employer. He was fired, and resultantly lost his wages and benefits.
Horn filed suit against Medical Marijuana Inc., Dixie Holdings, LLC and Red Dice Holdings, LLC, the three companies who falsely advertised Dixie X. Horn’s complaint included eight state law claims and one RICO claim, which alleged the companies committed mail and wire fraud.
RICO was enacted in 1970 in order to allow the government to prosecute individuals involved in organized crime. Individuals can sue under RICO and recover treble damages, or three times the amount of damage sustained.
The U.S. District Court for the Western District of New York ruled that Horn’s case lacked RICO standing, reasoning that the loss of wages stemmed from an antecedent personal injury, that is, the unintended ingestion of THC. Horn appealed the case to the U.S. Court of Appeals for the Second Circuit, which vacated the district court’s ruling and determined that Horn could file suit under RICO.
RICO allows plaintiffs to recover damages only if they are injured in their “business or property,” and the appellate court reasoned that “business” included employment, and thus Horn suffered an injury in his business.
The petitioners of the case argue that Horn’s lost wages were not a direct result of their false advertising, but instead a derivative of the antecedent injury. Plaintiffs cannot file suit under RICO for personal injuries, and the defendants claim that civil RICO suits are resultantly also barred for damages from personal injuries.
Justice Sonia Sotomayor questioned Blatt’s argument that personal injury cannot recover damages. “You’re raising an example that leads me to think that what you’re really arguing about is proximate cause, and not really whether personal injury is recoverable or not. It is under, by your own admission, certain circumstances,” said Sotomayor.
Kagan appeared most open to the expansion of RICO’s reach to damages caused by personal injury.
“It sounds like you think maybe the Second Circuit is right,” Blatt responded to Kagan’s argument. “The Second Circuit seemed to think lost wages are always recoverable, but medical expenses never would be because that results from a physical injury.”
Justice Ketanji Brown Jackson also questioned the role of personal injury in Blatt’s argument, given Horn did not allege personal harm but rather economic harm.
Still, other Justices appeared doubtful. Justice Clarence Thomas seemed more skeptical of the plaintiff’s argument, asking Attorney Easha Anand, who represents Horn, what she considered to be the difference between injury and damages. “So, if the harm is a loss of income, aren’t you collapsing or conflating the two?” he asked.
Chief Justice John Roberts similarly seemed doubtful, calling the business or property requirement a “significant limitation” to RICO’s reach. “The business or property requirement is pretty central to the heart of RICO and what separates it from all these other cases,” Roberts said.
Attorney Cory Andrews, General Counsel and Vice President of Litigation for the Washington Legal Foundation, which filed an amicus brief on the case urging the justices to limit the scope of RICO, spoke to Medill News Service about what an expansion of RICO could mean for state tort lawsuits.
“My guess is that justices will allow the suit to go forward,” Andrews said. “It’s going to turn every run-of-the-mill state tort action into a federal RICO action where plaintiffs are able to obtain treble damages.”
Fed Governor Waller, “Shadow Fed” Weigh Monetary Policy Rules
WASHINGTON — Federal Reserve Governor Christopher Waller credited the Shadow Open Market Committee for “[elevating] the public debate about monetary policy” and added to the consideration of monetary policy rules, in a keynote address at the group’s 50th anniversary celebration on Monday.
“For me, the central question is how much and how fast to reduce the target for the federal funds rate,” Waller said during his speech. “To help answer questions like this, I often look at various monetary policy rules to assess the appropriate setting of policy.”
The Federal Reserve is an autonomous agency that maintains a strict independence from other government entities and outside influences. Still, Fed Governor Waller spoke to many of the group’s most consistent critics, members of the SOMC.
In 1973, prominent economic scholars formed the SOMC, an independent, self-appointed watchdog over the Fed’s decisions. Since then, the SOMC has been an active voice in monetary policy debates through policy papers and regular meetings. The group currently consists of academics and past Fed policymakers.
At a retrospective event hosted by Stanford University’s Hoover Institution, the SOMC reflected on its 50 years of influence and highlighted key policy objectives. Discussion frequently returned to rules-based monetary policy, one of the SOMC’s core beliefs, as listed on their website.
Rules-based monetary policy binds central banks to a formulaic approach when determining target interest rates, ensuring predictability. The SOMC has consistently favored rules-based policymaking to central bank discretion.
Opening the conference, Stanford economist John Taylor detailed the implications of a rules-based approach to monetary policy. He highlighted how the federal funds rate approached 20% in the early 1980s.
“Let’s not go back to that, whatever we do,” Taylor said. “But since then, and to some extent, it’s because the Fed has followed a more rules based system… it’s gotten lower.”
About 30 years ago, Taylor invented one of the most common monetary policy rules, the Taylor Rule. Under the Taylor Rule, the target federal funds rate should be calculated using indicators such as the inflation rate and real GDP gap.
The SOMC does not endorse any particular policy rule on their website, instead urging only that central banks share their rules “so that it can be monitored and held accountable.”
Later in the conference, former Federal Reserve vice chair Donald Kohn argued that the Fed ignored policy rules by over-emphasizing employment following the COVID-19 pandemic.
Policy rules prescribed rate hikes in advance of the Fed’s initial raise in March 2022, according to a 2024 working paper by Balint Tatar and Volker Wieland.
“I do think, arguably, Fed policy in 2021 and 2022 didn’t adhere to these systematic things,” Kohn said. “It wasn’t necessarily focused on restoring price stability.”
Waller said that, with the introduction of the Taylor Rule in 1993, there was “immediate interest” within the Fed staff. He added that before each FOMC meeting, policymakers are provided with several analyses based on various monetary rules.
“Rules have become part of the furniture in modern policymaking,” Waller said.
Still, he added, rules have limitations.
Policymakers have access to vast amounts of data, only some of which is considered under each policy rule. Rules also fail to manage risk, a key factor in policy decisions, Waller said.
“While policy rules serve as a good check on discretionary policy, there are times when discretion is needed,” Waller said. “As a result, I prefer to think of them as ‘policy rules of thumb.’”
TRUMP-BACKED DEFI PLATFORM UNDERSCORES WASHINGTON’S CRYPTO PUSH
WASHINGTON – Former President Donald Trump is endorsing a new crypto venture, fortifying his support for digital currency, which has evolved into a key campaign stance.
The decentralized finance platform, World Liberty Financial, is founded by longtime crypto entrepreneurs Chase Herro and Zachary Folkman, and backed by the Trump family. It’s now accepting user registration for eligible candidates.
Trump is among a growing number of politicians who are throwing their support behind digital currencies ahead of the November election. Regardless of who takes the White House, lawmakers will be forced to reconsider how crypto is regulated amid growing industry criticism.
World Liberty Financial will launch a governance token, WLFI, members of the team said in an X Spaces live audio stream on Sept. 16.
Trump has marketed the platform to everyday Americans, but the whitelist is only open to accredited investors.
Ogle — an advisor for the platform and crypto security expert— said the platform’s exclusivity is a product of Securities and Exchange Commission regulation, which has come under scrutiny in the build up to the 2024 election. To qualify as an accredited investor, an individual must have a net worth of at least $1 million, under the Regulation D exemption for the SEC.
“Basically it’s saying you’re too stupid because you’re poor, and so you can’t make your own decisions,” he said. “That’s unjust, and it’s not American.”
Ogle said he joined as an advisor because he expected an influx of new users, given Trump’s following. He added that bringing on new users posed security risks, but had the potential to expand the industry’s reach.
“If people do onboard here, and nothing does go wrong, then a lot of people are going to get exposure and learn about a system where they otherwise would not have had access just because of ignorance, which I’m excited about,” Ogle said.
World Liberty Financial said on X that the team is not “turning (their) backs on the everyday American.” Ogle added that, while the whitelist is limited to accredited investors, once the DeFi project’s tokens are released to the public, WLFI will no longer oversee them, allowing other users to participate freely.
But Trump’s efforts to brand himself as a pro-crypto candidate contradict his prior stances. On July 11, 2019, Trump criticized cryptocurrencies on X for being “based on thin air” and highlighted their role in illegal activity. Two years later, he told Fox Business that Bitcoin seemed like a “scam.”
More recently, Trump has been an outspoken crypto supporter. At a July 27 Bitcoin conference in Nashville, Tenn., Trump threw his support behind Bitcoin, pledging to make the United States the “crypto capital of the world” if re-elected in November. He also said that he would fire SEC Chair Gary Gensler, who drew criticism from the crypto space for his aggressive regulatory stance.
Though Trump’s shift in crypto sentiment may seem sudden, DeFi platforms actually align with his “anti-regulation, pro-business” rhetoric, according to Michael Dambra, a professor at the University at Buffalo.
DeFi platforms are blockchain-based tools that allow users to directly trade, borrow, lend and invest assets without government intervention or use of a traditional middleman.
“A future president, deregulating, and allowing more access to crypto is something that I think would be very, very pleasing to someone who mistrusts the government,” Dambra said. “Because Bitcoin, Ethereum, is sort of independent of government control.”
But support for crypto is not limited to just one side of the ballot.
Vice President Kamala Harris notably stepped away from President Joe Biden’s stance against cryptocurrencies. Since becoming the Democratic nominee, Harris has refrained from taking any strong position, mirroring the conflicting stances of her party, but on September 24, Mark Cuban said on X that the Harris team told him they opposed “regulation through litigation.”
Since 2021, spending on federal crypto lobbying nearly tripled, according to the campaign finance non-profit, Open Secrets. Lobbyists spent a record high $24.8 million in 2023, contributing to campaigns across the political spectrum.
In response to this surge, lawmakers from both parties have adopted pro-crypto stances and introduced legislation to deregulate digital currencies. Both House Majority Whip Tom Emmer (R-MN) and Senate Majority Leader Chuck Schumer (D-NY) have suggested that bipartisan crypto legislation could pass their chambers by early 2025.
With the amount of “money involved,” Ogle said that cryptocurrency may not be a divisive issue among voters in the upcoming November election. He said that the division will exist more amongst “fuddy duddy” politicians who are “behind the times.”
“The people who are complaining are kind of yelling about the rain coming,” he said.
Neither World Liberty Financial nor the Trump campaign responded to a request for comments.
Supreme Court Weighs Federal Jurisdiction in Class Action Case
WASHINGTON – The U.S. Supreme Court heard oral arguments Monday in a case that could significantly impact when federal courts can retain jurisdiction over cases after plaintiffs amend their complaints to remove federal claims, with major implications for businesses facing lawsuits in state courts.
At the core of Royal Canin U.S.A., Inc. V. Wullschleger is the question of whether federal courts should assess their jurisdiction at the time a case is removed from the state court or when plaintiffs amend their complaints. The Supreme Court’s ruling can affect future litigation strategies involving federal and state law claims drawing significant attention from business groups such as the U.S. Chamber of Commerce and 22 state governments, highlighting its importance to both corporate and state court systems.
The case began when two Missouri pet owners, Anastasia Wullschleger and Geraldine Brewer, filed a class action lawsuit against Royal Canin and Nestlé Purina, alleging deceptive practices over pet food prescriptions.
The companies removed the case to federal court due to “federal ingredients” in the claims, but the plaintiffs later amended the complaint to remove those references, seeking a return to state court where Missouri consumer protection laws apply.
The Eighth Circuit held that there was no valid federal question jurisdiction and rejected supplemental jurisdiction over state claims thus remanding the case to state court.
The petitioner argues that the plaintiff’s post-removal amendment, which removed federal claims from the complaint, does not divest the court’s jurisdiction. The supplemental jurisdiction statute allows the court to continue adjudicating state claims, even when federal claims are no longer present in the complaint.
They cited precedents such as St. Paul Mercury Indemnity. Co. v. Red Cab Co. and Carnegie Mellon University v. Cohill to support their case. “Your Honor, we think, if you were to rule for the other side, that would be upsetting a hundred years of precedent, every single court of appeals decisions,” argued Katherine B. Wellington, counsel on behalf of petitioners, in response to Justice Sonia Sotomayor. “That would be changing the rules.”
However, Robin Effron, civil procedure and litigation law scholar, said, “When you’re looking at the statutory text here, you get a different answer… It would put some precedent in a different light, but not overturn it.”
Justice Ketanji Brown Jackson also expressed skepticism. “So what I don’t understand is why the plaintiff has to be stuck with the jurisdictional consequences of claims they are no longer bringing? They’ve given up their ability to seek relief on the federal claims,” Jackson said.
The respondent contends that their amended complaint is a valid strategy that should allow the case to return to state court. Their legal team asserts that the removal of federal claims eliminates federal-question jurisdiction and that retaining the case in federal court would undermine the principles of federalism.
Further, they argue that a case originally filed in federal court must be dismissed when federal claims are dropped, the same should apply to removed cases. The respondents said they believe the text of Section 1367 should not be interpreted differently for original and removed cases and that the Supreme Court, as a supervisory body, should adhere to the statutory text, even if it contradicts lower court rulings.
While the case may have implications for businesses, mechanisms like the Class Action Fairness Act (CAFA) already exist to keep class actions in federal court. “CAFA is the main barrier for keeping class actions mainly in state court – CAFA is already there to get class actions into federal court,” said Effron.
Legal experts have raised concerns about potential inefficiencies if courts lose jurisdiction based on amendments.
“Jurisdictional issues could be put into pleadings or not at the whim of the parties,” said Scott Dodson, Director of the Center for Litigation and Courts, who filed an amicus brief. “That could result in inefficiency down the road, with cases having to be dismissed late in the game because there’s no longer jurisdiction.”
The case presents the justices with a complex decision that will balance the integrity of federalism, statutory text, and longstanding precedents.
Employment surges, shifting expectations for interest rate cuts
WASHINGTON – The U.S. economy added 254,000 jobs in September, the United States Bureau of Labor Statistics (BLS) reported Friday. The report dramatically surpassed economists’ projections; the Dow Jones consensus forecast, for instance, predicted a gain of only 150,000.
BLS also revised employment data from July and August upward by 55,000 and 17,000 respectively. The unemployment rate came in at 4.1% — a slight downtick from 4.2% in August.
Source: US Bureau of Labor Statistics
September’s employment data will impact the Federal Reserve’s monetary policy decisions during their next meeting in November.
“(The report) does a couple things,” said Jason Schenker, Chairman of The Futurist Institute and President of Prestige Economics. “One, it should reduce and assuage fears and risks about recession. And two, it reduces the probability that the Federal Reserve will be under pressure to cut rates by 50 basis points on November 7.”
Between March 2022 and July 2023, the Federal Reserve raised its target interest rate from near 0% to 5.25-5.50%. After holding rates steady for a year, the Federal Reserve cut rates by a hefty half a percentage point in September. Before Friday’s employment data was released, Chairman Jerome Powell of the Board of Governors of the Federal Reserve signaled that September’s decision was not indicative of future aggressive cuts.
“We are not on any preset course,” he said at a National Association for Business Economics meeting in Nashville, Tenn. last Monday.
Source: Fedprimerate.com
Still, prior to Friday’s report, many experts predicted another strong rate cut at the Federal Reserve meeting in November. On September 30, CME FedWatch projected around a 35% chance of an additional 50 bps cut.
Since the report, that figure has dropped significantly. As of October 7, the group predicts about an 87% chance of a 25 bps cut in November.
Some economists believe the September data spurs confidence in the labor market, which some worried was slowing in the past months.
“I think this is better than a soft landing in a lot of ways,” said Tara Sinclair, a macroeconomist and professor at George Washington University.
A ‘soft landing’ is how many experts describe the economy’s best-case scenario for post-pandemic recovery. It entails reducing inflation, while limiting unemployment and dips in GDP.
Sinclair added that the September data was especially optimistic considering the falling unemployment rates for Black and Latino workers, groups who are “typically overexposed to risk of weakening labor market.”
Even so, future data could sway the economic outlook. September’s inflation data will be released this week, and before the Federal Reserve’s November meeting, there will be an additional jobs report. Inflammatory data in these reports could turn the tide toward stronger rate cuts.
Schenker suggested that election uncertainty could also motivate aggressive action from the Federal Reserve.
“Look back to what happened in 2000 with the hanging chads, and that led to a recession in the beginning of 2001,” Schenker said. “The Fed members have been around long enough to know that, and they will know that if it looks like you're going to be in an intractable, politically uncertain place after the election, then a 50 basis point rate cut could very well be on the table.”
Gen Z looks for more financial guidance and protection amid rising debt and consumerist culture
WASHINGTON — “Money comes & goes, but I’ll never be in my 20’s again.” Meet the generation that has opened their wallets to this TikTok trend.
They’d rather spend money now than invest for retirement or write monthly budgets.
Generation Z demonstrates the lowest levels of financial literacy of any adult generation, according to a 2023 report by the TIAA Institute, an arm of the giant retirement firm. This generation is goaded by a consumerist social media culture that promotes exhibition while underplaying the finances needed to sustain it.
Gen Z, born between 1997 and 2012, has prioritized living in the now. A survey by Experian, one of the three giants that set consumer credit scores, revealed that 63% of the group would rather spend on an experience than invest in their retirement.
Economists like Laurence Kotlikoff, a Boston University professor and research associate at the National Bureau of Economic Research, agree that rampant consumerist culture has stifled the generation’s financial mobility.
“Everything is about advertising, and you’re looking at Instagram and you’re getting ads every instant,” said Kotlikoff.
TickPick, a popular marketplace for entertainment tickets, recently advertised on Instagram with the slogan “money will come back.” They are one of several companies that have capitalized on a TikTok trend encouraging users to spend money to live in the present.
“We’re constantly bombarded with people telling us to buy this, buy that,” said Stephen Lin, co-founder of an advocacy group called Gen-Z for FinLit.
Stephen Lin (right) and Matthew Shadid (left) of Gen Z for FinLit are fighting for more.
Only 25 U.S. states require some financial literacy course to graduate.
Matthew Shadid is Gen-Z for FinLit’s other co-founder and an undergraduate student at Babson College in Massachusetts. He calls these kinds of advertisements “psychological manipulation.”
“From a marketing standpoint, that is an amazing advertisement,” Shadid responded. “But that is a horrible sentiment, and that’s the reason so many young people don’t really think about their futures.”
Now, nearly half of Gen Z already carries some form of debt, including through credit cards and student loans, according to BankRate. Another report, this one from the online financial site CreditKarma, said the generation is racking up debt faster than any other.
Gen Z’s financial stresses aren’t all a result of their decision-making. Many in their generation faced an uphill climb as they entered the job market amid the COVID-era recession.
Credit is tempting: Consumers tend to view it like free money, according to Shadid. He says the recent statistic on credit card debt is a measure of how accessible capital is for their generation.
“It just leads to so much pain down the road,” said Shadid.
President Joe Biden touted his administration’s crackdown on junk fees and corporate greed at his State of the Union address this year, while just last week, the Consumer Financial Protection Bureau announced a cap of $8 on credit card late fees that will go into effect later this spring. Currently, credit card companies charge an average of $32. The bureau estimates the ruling will save consumers $10 billion in late fees.
Several groups representing big banks, including the U.S. Chamber of Commerce, have mobilized to sue, but the CFPB is doubling down.
The Gen-Z for FinLit founders say it is a step in the right direction, but not enough.
“There are a lot of predatory consumer practices, whether it be overdraft fees, buy now, pay later, or other payday loans that are really affecting Gen Z consumers,” said Lin, himself a college student at New York University’s Stern School of Business. “These Gen Z consumers, who don’t have that financial knowledge, can’t really handle this themselves.”
Lin and Shadid acknowledge there are many economic factors working against their generation–rising prices, inflation that is outpacing wage growth, and student loan debt, to list a few.
Generation Z is more likely to be college-educated, employed full-time, and earning higher wages than their parents were at the same age three decades ago, according to Elizabeth Renter, a data analyst at American personal finance company NerdWallet.
But, Renter said, Generation Z contends with their own unique challenges.
“Student loan debt and housing affordability weigh more heavily now than they did in the 1990s,” she said.
In the face of these stressors, Lin calls personal finance education an “equalizer” and “game changer.”
Currently, only 25 U.S. states require some financial literacy course to graduate; the youth-run advocacy group is pushing for more.
“The only thing you can control is your education and the decisions you make based off that. The macro factors are the macro factors – and that’s it,” said Shadid.
Haley Sacks, affectionately known as Mrs. Dow Jones online, is a financial expert who has made herself an educational resource to younger generations.
People’s money mindsets – the way they approach money – are fixed by the age of 7, Sacks said during a talk sponsored by Washington Post Live.
With the proliferation of social media and streamlined payment mechanisms that younger generations have grown accustomed to like “tap to pay” and “buy now, pay later” – Sacks says it’s harder for young people to foster healthy spending habits.
Sacks said younger generations have evolved their definition of the American Dream.
“With the changing tides and the world that we’ve inherited, the financial education needs to change too,” Sacks continued. “It’s a completely different economy and world that we’ve inherited.”
For Gen Z, the American Dream is all about freedom of choice, whether that be the traditional path of home ownership or paving your own way, Shadid said.
For some, that means breaking societal expectations, and choosing to live at home with their parents.
“Looking at your own financial circumstance, and understanding that your financial journey is yours and not someone else’s is an important mindset to have,” Lin said.
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Sanders presses for 32-hour workweek in new bill and hearing
WASHINGTON — Sen. Bernie Sanders (I-Vt.) is calling on Congress to press for a 32-hour workweek without any loss in pay, noting that Americans are working longer hours than people of any other wealthy nation even with the advancement of technology.
“Despite these long hours, the average worker in America makes almost $50 a week less than he or she did fifty years ago after adjusting for inflation,” Sanders said, chairman of the Health, Education, Labor and Pensions Committee, during a hearing on Thursday that focused on the issue.
He noted that it has been 80 years since Congress had held a hearing on the topic, and he called several worker advocates to testify about the benefits of reducing standard work hours. He is introducing new legislation that has the backing of several unions including the AFL-CIO.
Shawn Fain, the president of the Union Auto Workers, testified on Thursday in favor of the legislation, saying working fewer hours has advantages such as higher productivity and employee well-being.
“Those who make this country run, who build the products and contribute the labor, have less and less time for themselves, for their families, and for their lives,” Fain said in his testimony.
“The working class people are not lazy, they are fed up, they are fed up with being left behind, stripped of dignity, as wealth inequality in this nation spirals out of control,” he said.
He added that workers today are living paycheck to paycheck and working deep into their 70s and 80s because they cannot afford to retire.
Sanders said that over the past 50 years, technology has undergone tremendous progress, yet the majority of the financial benefits have gone to the wealthiest, while worker wages have either stagnated or declined.
“Today’s CEOs earn 350 times more than the typical employee, and workers across the nation are witnessing the disintegration of their families. … people have to miss out on family time in order to work longer hours,” he said,
Sanders’s proposal has the backing of other Democrats, including Rep. Mark Takano (D-Calif.) who introduced companion legislation in the House. In practice, many companies could implement the measure by instituting four, eight-hour work days.
But it is unclear whether the bill will garner enough bipartisan support to become law. Sen. Bill Cassidy (R-La.), ranking member of the committee, said businesses need to maintain a 40-hour workweek to remain competitive not just locally but globally and a government mandate for a 32-hour workweek will be catastrophic.
“Government should not undermine an employer’s ability to keep their doors open with unreasonable mandates,” Cassidy said in his opening statement. He suggested that requiring such a cut in work hours will require companies to pay at least 25% more to employees, which could result in jobs being shipped overseas.
He added that businesses are always allowed to voluntarily try out a 32-hour workweek themselves.
Some representatives of the business sector also came out in favor of the shorter workweek. Jon Leland, chief strategy officer of Kickstarter, a crowdfunding platform, testified that his company went to a four-day workweek in 2022 after the pandemic.
“The truth is, a lot of time at work is not used efficiently,” Leland said in his testimony. “In the six months of the pilot, our ability to hit our company goals jumped from 62% to 95%”
Leland found so much benefit in the concept that he co-founded WorkFour, an organization to help companies transition to a four-day workweek.
A ‘comeback story’ for American manufacturing
WASHINGTON — President Biden boasted his administration’s infrastructure investments — with an emphasis on clean energy projects — in his State of the Union address to the nation Thursday evening.
In his opening remarks about the economy, Biden noted his administration had created nearly 800,000 manufacturing jobs, with more to follow in 2024.
He touted his commitment to domestic manufacturing, a priority of his since his election to office, as a result of the Bipartisan Infrastructure Law’s Build America, Buy America provisions.
“Buy American has been the law of the land since the 1930s,” Biden said. “On my watch, federal projects like roads, bridges and highways will be made with American products built by American workers, creating good-paying American jobs.”
He rooted his accomplishments in Belvidere, Ill., where Biden backed the United Auto Workers labor union in revitalizing and converting the Belvidere Assembly Plant into an all-electric facility. A nearby $3.2 billion battery factory will manufacture materials for the vehicles.
The president said infrastructure investments like these are part of America’s “comeback story.”
“Instead of watching auto jobs of the future go overseas, 4,000 union workers with higher wages will be building that future here in America,” Biden said.
These are just two of 46,000 projects the president promoted last night, aiming to modernize roads, bridges, ports, airports and public transit systems. Most projects have a clean-energy focus, with his administration hiring at a rapid pace to meet demand and slow climate change.
Biden said his clean-energy policies have attracted $650 billion of private sector investments in advanced manufacturing, making progress on priorities such as installing nationwide EV charging stations.
“I’m taking the most significant action on climate change in the history of the world,” Biden said. “I am cutting our carbon emissions in half by 2030 and creating tens of thousands of clean-energy jobs.”
Dogecoin case argued at Supreme Court, importance questioned by justices
WASHINGTON — Justices seemed poised to remand Coinbase, Inc. v. Suski to the Ninth Circuit Court – a case related to a $1.2 million Dogecoin giveaway in 2021. The lawsuit originated from a claim that Coinbase – a cryptocurrency exchange platform – did not specify that a purchase was not required to enter the giveaway.
Liberal-leaning justices questioned the framing and scope of the case while conservative justices seemed more interested in the parties’ purpose for bringing the case to the Supreme Court and were eager to return it to the lower court.
“Can we just remand and say that’s for the Ninth Circuit to — to figure out in the first instance?” Kavanaugh said. “And if we do that, are we done?”
In 2021, to stimulate the purchase and sale of Dogecoin on its platform, Coinbase held a $1.2 million sweepstakes giving away the cryptocurrency to users. To enter the giveaway, users were led to believe that they had to “buy or sell $100 or more in DOGE on Coinbase.”
However, per the official rules of the sweepstakes, there was “no purchase necessary” to enter or win, with an alternative mail-in entry option being available. After being led to believe that they had to purchase Dogecoin to enter the giveaway, David Suski and three other users filed a lawsuit against Coinbase, Inc.
“If Coinbase’s digital ads had made clear to Plaintiff that there was a 100% free entry option, then Plaintiff would not have given Coinbase his $100, or paid Coinbase any commissions to acquire Dogecoins,” Suski’s initial putative lawsuit against Coinbase said.
After the suit was filed, Coinbase wanted the dispute to be resolved through a third party, citing an arbitration provision in the Coinbase user agreement. The official rules of the sweepstakes, however, stated that the California state and federal court system have “sole jurisdiction of any controversies” related to the giveaway.
Now, with these two contracts overlapping, the Supreme Court is deciding if the sweepstakes’ agreement affects the delegation clause in the Coinbase User Agreement.
“In this case, the Court is asked to resolve whether the effect of a second contract modifying the first has any impact on the delegation clause,” Jay E. Grenig said in an American Bar Association preview of the case.
The case was brought before the Supreme Court after the Ninth Circuit Court ruled in favor of Suski’s party in 2022. That case affirmed that the official rules of the sweepstakes hold greater effect than the Coinbase User Agreement because they apply to all entrants of the contest, “including entrants who are not subject to the User Agreement because they used an alternative mail-in procedure.”
In the briefing of the case, however, both parties agreed that the Ninth Circuit Court did not come to a proper ruling on the case. In the argument, Coinbase argued that the Ninth Circuit failed to apply the FAA’s severability framework and Suski’s party argued that the “existence and formation part of the Ninth Circuit’s analysis was wrong.”
Considering this, some justices, primarily Kavanaugh and Gorsuch, questioned why the case was brought to the Supreme Court in the first place.
“Why didn’t you just go to the arbitrator to get a quick answer?” Justice Gorsuch asked. “Why litigate it all the way to the Supreme Court of the United States?”
Liberal justices were more concerned with the scope of the case and how much deferring from delegation clause precedents may impact other arbitration agreements.
Judge Sotomayor was the most concerned about the impact of rule changes to delegation clauses. Coinbase’s party, however, claimed they were not asking “to create any federal rules.”
“These are huge changes,” Justice Sotomayer said. “You are now creating a whole set of federal rules on what constitutes a superseding agreement or not.”
Suski’s party is also seeking a putative class action lawsuit against Coinbase for damages related to the 2021 sweepstakes.
The Court will decide the case by June.
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Supreme Court tilts toward exempting national banks from state laws
WASHINGTON – Supreme Court justices on Tuesday seemed skeptical of arguments that state laws can override national banking rules, but some did wonder whether the state policies did “significantly interfere” with a national law.
New York is one of the 13 states with laws that require mortgage lenders to pay interest on escrow accounts. Borrowers must set aside money in these accounts to pay for property taxes, insurance and other expenses related to home loans.
In 2010, Alex Cantero, Saul Hymes and Ilana Harwayne-Gidansky took out mortgages from Bank of America to buy their homes in New York. The dispute arose when Bank of America refused to pay interest rates on their escrow account, as New York state law required.
The Dodd-Frank Act, enacted in 2010 after the 2008 financial crisis, set rules on when the National Bank Act (NBA) can supersede state laws on consumer money matters. If a state law gets in the way of a national bank’s operations, the NBA usually applies. A federal district court ruled in favor of Cantero, but the U.S. Court of Appeals for the Second Circuit reversed the decision, saying the NBA is more important than state law regarding banking powers.
The Supreme Court agreed to hear the case, which could significantly affect consumer protection laws in banking and influence how state financial regulators safeguard individuals in the financial sector.
“A ruling for Bank of America would deal with a significant blow to consumers, not only with regard to escrow account mortgages but also with regard to potential practices and regulations that states may impose in the interest of protecting consumers,” Steven Schwinn, a law professor at the University of Illinois Chicago, said in an interview. “On the other hand, if the court rules for the plaintiffs here, that could mean that not only do plaintiffs get interest on their escrow accounts, but it could allow states to regulate national banks in other areas to protect consumers.”
The court was skeptical of arguments by Cantero’s lawyer regarding whether state laws can “significantly interfere” with national banking laws.
Justice Neil Gorsuch contended that requiring banks to adhere to a set interest rate on a mortgage escrow account interferes with how the institutions operate.
“Do you need a trial? That’s just common sense, isn’t it?” he said.
Justice Brett Kavanaugh also noted that when a bank has to pay the customer money it wouldn’t otherwise pay, it does seem to be “significant interference.”
“It’s almost putting a tax on the bank to sell the product,” said Kavanaugh.
Some justices referred to the Barnett Bank of Marion County v. Nelson case from 1996. In this case, the Supreme Court acknowledged the states have the “power to regulate national banks” as long as “doing so does not prevent or significantly interfere with the national bank’s exercise of its powers.”
“I don’t see how you can win after that,” said Justice Samuel Alito.
Smita Ghosh, an appellate counsel at the Constitutional Accountability Center, a nonprofit think-tank, said in an interview that by passing the Dodd-Frank Act, Congress decided it would allow states to regulate national banks as long as they weren’t stopped from doing business.
“A ruling favoring Bank of America would make it harder for states to regulate national banks,” Ghosh said. “It would allow national banks to be exempt or above from all state laws, and that’s not what Congress intended.”
But generally, national banks are seen to be more affected by state laws than the federal government in their day-to-day operations, Ghosh acknowledged.
Though justices leaned toward deferring to Bank of America in this case, some recognized that institutions should be aware of the implications of operating in a federal system.
“National banks have to live in reality,” said Gorsuch. “We live in a federal system with 50 states
A decision for the Cantero v. Bank of America case is expected by late June.
Supreme Court hears arguments in case that could have implications for independent contract truckers
WASHINGTON – The Supreme Court heard oral arguments Tuesday in a case involving commercial truckers that could expand the definition of transportation workers to include people who drive goods for companies that are not in the transportation sector.
The case, Bissonnette v. LePage Bakeries Park St., involves whether workers who were treated as independent contractors are exempt from settling disputes via arbitration as set forth in the Federal Arbitration Act of 1926. Companies like Amazon are following the case closely to see if it would have implications for the way it treats its independent contractors who transport their goods.
Neil Bissonnette is part of a group of truckers who filed a wage-dispute lawsuit against Flowers Foods, the company that makes Wonder Bread and other baked goods. The act in question exempts employment contracts of “seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” The court must decide whether Bissonnette and his fellow truckers fall under that exemption from arbitration.
Flowers and its distributor, Lepage Bakeries, tried to argue that Bissonnette and his colleagues don’t qualify for the exemption and thus must go through mandatory arbitration rather than the court system for any dispute.
In a similar case, Domino’s Pizza, LLC v. Carmona, the U.S. Court of Appeals for the Ninth Circuit recently held that workers performing similar duties, such as delivering pizza, are exempt from mandatory arbitration because they are “engaged in foreign or interstate commerce.”
Most of the justices’ questions focused on the language of the controversial exemption.
Justice Amy Coney Barrett asked the workers’ lawyer, Jennifer Bennett, about the history and current applicability of the exemption.
Bennett spoke of the labor strikes beginning in 1919, fueled by workers on lumber boats and in shipyards employed by companies in industries other than transportation.
“Group-based arbitration makes transparent issues that are coming up amongst transportation workers before they end up in nationwide strikes that are going to interrupt national commerce,” she said.
Bennett’s principal argument was that the original language in the exemption said nothing about whether an employer sold transportation.
She also argued that Flowers Foods was being too narrow in its definition of “seamen” because their truckers were engaging in the transport of goods just as “seamen” aboard a ship carry goods for trade and commerce.
“Even if we were to accept every single one of Flowers’ arguments on seamen, they still haven’t shown that this employer-based industry requirement has anything to do with the words of the statute,” Bennett said.
The justices took a harder line with Traci Lovitt, the lawyer for Flowers Foods and its distributor, Lepage Bakeries.
Lovitt argued the plaintiffs provided too broad of a definition for “seamen” and called their argument “flatly inconsistent with the notion of a transportation worker,” as well as in a previous case involving the same law. She also said the independent truck drivers – who she argued are owners of the baked goods rather than employees of the bakery – “look nothing like railroad employees or seamen.”
Justice Ketanji Brown Jackson asked Lovitt about the source of her argument that workers must be in the industry to be exempt from arbitration, claiming Congress did not write the limitation in the statute.
Though Lovitt attempted to answer Jackson’s question, the justice continued to probe, “Where is the industry piece coming from?”
In her dissent, Bennett said she didn’t hear an argument from the justices that the text implied an employee needed to work for a transportation company.
“If Congress were really trying to get at people who could disrupt commerce, they would not have included an employer-based limitation. I think that’s why we don’t see one in the statute,” she said.
Bennett said the employer-based industry test would be challenging to apply; therefore Congress didn’t include the requirement in the statute in 1926.
Justice Brett Kavanaugh said the number of workers who will be exempt and companies who will go to court will be “massive” if the respondents lose.
The court is expected to issue a decision by the end of its current term in June.
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Medill Today | November 21, 2024