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Republicans called the move a ban on LNG exports that would kill the domestic industry, while Democrats said it was necessary to assess the environmental impacts of the energy source.read more
The House Small Business Committee discussed the SBA’s size standards on Tuesday.read more
Senators say stronger security measures are needed to protect consumers and rebuild trust in financial institutions to address financial scams.read more
Tech CEOs accused of having ‘blood’ on their hands as senators grill them over the spread of child sexual images online
WASHINGTON — Lawmakers slammed top executives of large tech companies on Wednesday for not doing enough to prevent online exploitation of children as protesters helped pack the audience sharing victims’ pictures and grim statistics of the problem.
“There is blood on your hands,” Sen. Lindsey Graham (R-S.C.) said to Mark Zuckerberg, CEO of Meta, the parent company of Instagram and Facebook, as the audience erupted in applause. “There is an upside to everything here, but the dark side hasn’t been dealt with.”
The National Center for Missing and Exploited Children said it had received over 32 million reports of suspected child sexual exploitation in 2022 – everything from enticing children to commit sex acts online to sextortion, where people are blackmailed over explicit photos. That is a stark jump from 21.6 million reports in 2020.
To fight this increase, senators have introduced five bills that, collectively, aim to hold social media platforms accountable, improve the system for reporting exploitation, and create better punishments for the spread of such material.
All the company officials said they agreed with such efforts but were divided over whether they supported the measures in their current form. One proposal, the Kids Online Safety Act garnered the biggest split – with Evan Spiegel, the CEO of Snapchat’s parent company, vocally in support but TikTok’s CEO against it.
In the days leading up to the hearing, several platforms made “coincidentally timed” changes, according to Sen. Dick Durbin (D-Ill.), to their policy related to the spread of exploitative material. X, formerly known as Twitter, announced that it was creating a 100-person office in Austin, Texas, to police content, while Meta officials published the company’s legislative “framework” and banned direct messages between minors and people they don’t follow. The parent company of Snapchat also expanded in-app parent tools.
Senators supported these policy updates, but believe that the only way to make any permanent change is to reverse Section 230 – a provision in a law that gives social media companies immunity from actions committed by users on their platforms.
“Nothing is going to change unless we open up the courtroom doors,” said Sen. Amy Klobuchar (D-Minn.).
The audience at the hearing was particularly noticeable. Groups of protesters brought pictures of children who were victims of exploitation. Some wore shirts that said “I’m worth more than $270” – in reference to internal documents from Meta revealing that the lifetime value of a teen on their service is $270.
Joann Bogard, one of the protesters, said she expected that the CEOs would not fully support the current proposed policies, but she was skeptical of whether the head of Snapchat would follow through on his pledge to support a bill if it passed.
“It’ll be interesting to see if he actually does call off the lobbyists and doesn’t lobby against bills like the Kids Online Safety Act,” Bogard told the Medill News Service.
Zuckerberg faced a lot of criticism, with Sen. Richard Blumenthal (D-Conn.) noting that a 2021 internal memo showed that Zuckerberg denied a request to hire a 45- to 84-person engineer team focused on wellbeing and safety on Meta platforms. The team would have cost $50 million, Blumenthal said, in a year that Meta earned $39.4 billion.
Zuckerberg, in his opening remarks, cited a report from the National Academies of Science stating that there was not a causal link between social media and negative mental health outcomes for young people. At one point, he turned to try to apologize to families in the audience but was met with hostile stares.
The support for the five bills is unanimous according to Durbin – a rarity in the closely divided Judiciary Committee. But senators said they needed to act on that bipartisan backing.
“If this doesn’t turn the corner, I don’t know if you can ever turn it,” said Graham.
WASHINGTON – A recent deal between the National Football League and NBCUniversal’s Peacock to stream a wild-card game solely on that platform has prompted lawmakers to further examine the rise of sports streaming services.
On Wednesday, the House Commerce subcommittee called media industry representatives to explain the recent challenges alongside sports broadcasting and viewer trends.
“Consumers have more choices than ever when it comes to the way they watch their favorite sports,” said Rep. Doris Matsui (D-Calif.). Congress has the power to step into the fray because it can challenge the NFL’s broadcast antitrust exemption. This exemption currently enables collective selling of broadcast rights rather than individually by each team.
John Ourand, a sports correspondent at Puck News, an online news site, described the current landscape as “chaos.”
“People that are not sports fans that like entertainment programming; they’ve already cut the cord” from cable services, Ourand said.
Since March 2023, traditional broadcast television has remained the preferred method for 57 percent of Americans to enjoy sports, Statista reported. However, a surge in high-speed internet availability has led to a decline in cable subscriptions. The number of cable and related services subscribers dropped to 69.2 million in 2021, from nearly 94 million in 2017.
The wild-card playoff game on Peacock, when the Kansas City Chiefs defeated the Miami Dolphins, became the most watched streaming program in U.S. history. But both broadcast stations and consumers criticized the move because it limited access.
“When the NFL put [a playoff game] behind a streaming platform, that was clearly alarming,” Brian Lawlor, president of Scripps Sports, whose parent company owns several local stations, told lawmakers. “We are on the NBC station in West Palm Beach, so of all the NFL granted Peacock the right and the mandate that they have put that NFL game in Miami for their local fans.”
The NFL, owning rights to all its games, secured a $125.5 billion television rights deal over the next decade. Rob Thun, the chief content officer of DirecTV, described the NFL’s role in streaming.
“As the NFL has expanded its season and added new games, they’ve opportunistically taken some of those games and used that as vehicles to provide opponents for some of these streamers to then buy these exclusive games and put them into those apps,” Thun said. “That’s going to lead to further fragmentation, further frustration and higher bills for consumers.”
Costs of media distribution rights grew at an annual rate of 6.3 percent, reaching $19.8 billion in 2022, now projected to grow to $31.6 billion by 2030, according to research conducted by Morgan Stanley.
At the same time, the sales of broadcast rights to regional sports networks face uncertainty as cable subscriptions drop and costs of such media rights rise. Lawlor called for broadcast stations to be part of the equation when moving forward with streaming options.
“It’s important that local fans can view local channels with local sports,” Lawlor said. “Most of the news operations are not profitable by themselves.”
Consumers are also balking at paying more. A 2023 study revealed that 35 percent of sports fans found video content too expensive, dissuading them from purchasing such services.
“Sports fans now have the freedom to choose services that align with their preferences,” said Rep. Cathy McMorris Rodgers (R-Wash.), chair of House Commerce Committee. “Sports leagues recognize that they need to meet fans where they are, which is why they’re quickly moving online.”
Big Tech companies, like Amazon, are joining the mix as well, as part of a deal in which it invested in a regional sports network, showcasing a shift in local sports programming. Sports journalists like Ourand warn of these changes to the industry.
“It certainly is changing the sports media landscape because it’s getting a lot of those games,” Ourand said.
WASHINGTON – Intellectual property experts told Congress members on Tuesday that the Patent Eligibility Restoration Act (PERA) is essential to encourage more inventors to apply and get their patents approved, adding that the act would benefit American innovation and businesses.
PERA aims to streamline the U.S. patent system by placing clearer guidelines around what is and isn’t eligible for patenting. In the Senate Intellectual Property Subcommittee hearing, experts emphasized disallowing patents on naturally occurring phenomena, like genes used during diagnostic and genetic testing.
“PERA will return eligibility to important inventions,” said Intellectual Property Subcommittee chair Rep. Chris Coons (D-Del.). “It will also make clear what is not patent eligible.”
Efforts to get PERA passed grew out of two Supreme Court decisions, Mayo Collaborative Services vs. Prometheus Laboratories in 2012 and Alice Corporation vs. CLS Bank International in 2014, which placed severe limitations on the ability of inventors to be granted patents.
Many intellectual property experts have criticized the decisions, citing that they have lowered the amount of patents being issued to new inventors. Professor and witness Adam Mossoff cited that, between 2014 and 2019, there was a 1,056% increase in the number of decisions finding ineligible patent claims and a 914% increase in the number of invalidated patents.
“These numbers are striking,” Mossoff said. “They are undeniable confirmation that the Alice/Mayo inquiry caused revolution in the U.S. patent law in ways never before seen by either inventors or lawyers.”
The majority of witnesses said they believed that PERA is the solution to these unprecedented decreases in new patents.
Former Under Secretary of Commerce for Intellectual Property Andrei Iancu argues that they provide much-needed guidance for businesses to know what is patentable.
“Congress needs to create clear rules,” Iancu said. “Whatever those rules may end up being after legislative debate, at least the public deserves to know what the rules of the road are.”
Witnesses told lawmakers they look forward to how PERA could benefit the biotechnology industry. Many areas of biotechnology use patented human genes as benchmarks for diagnostic and genetic testing. By not allowing human genes to be patented, some witnesses believe that more inventors will have the ability to create companies and, therefore, competition in their own biotechnology field, lowering costs.
Personalized medicine is one area of biotechnology that some expect to see increased access to following the implementation of PERA. Mike Deem, a scientist, inventor and biotech entrepreneur, said that the policy will allow personalized medicine providers to “treat better at lower cost.”
While increased access to human genes may decrease costs for some forms of biotechnology, some experts argue that it’ll increase others in the process.
The BRCA test uses patented human genes as biomarkers to test if a patient has an increased risk of getting breast cancer. If PERA is put into law, the genes used for this testing would no longer belong to the creators of the test, complicating the process.
“The patent system does now and should prevent the protection of inventions,” said witness Richard Blaylock, “but not mere discoveries of information.”
The vague PERA guidelines were designed to allow judges to use their own interpretations when deciding whether or not something is eligible for a patent.
Leaving patent eligibility up to judges is exactly what many lawmakers believe is necessary to continue innovation and restore the U.S. patent system.
“The Patent Eligibility Restoration Act is needed to restore clarity, reliability, and predictability to our vital U.S. patent system,” Coons said.
WASHINGTON – “Shark Tank” investor and venture capitalist Kevin O’Leary urged House members on Thursday to oppose a set of proposed bank regulations that he said would harm small businesses’ access to lending.
The set of regulations, titled Basel III, would require banks to increase the amount of capital they hold by an estimated 20% on average. This extra amount that banks would have to set aside would not be available to loan out to small businesses, according to a House Small Business Committee memo.
“It’s a bad policy,” O’Leary, who has the nickname “Mr. Wonderful” on the ABC series, told the committee. He said that he felt the needs of small businesses were not taken into consideration when the regulations were being written.
Basel III is the third standard proposed by the international Basel Committee on Banking Supervision, which was created after the 2008 crisis to address the risks financial institutions posed to the global economy. The Federal Reserve has faced increased pressure to implement the regulations especially after the Silicon Valley Bank crash in March 2023.
The only committee member who spoke out in support of Basel III was ranking member Nydia Velázquez (D-N.Y.), who contended that the regulations would not hurt small businesses as much as other lawmakers stated.
“The proposed rule is just that – a proposal,” Velázquez said. “There are more than 4,500 banks in this country and less than 40% of them will be directly affected by the rule.”
Still, some experts have made the argument that community banks not directly affected by Basel III would still be indirectly affected by hampering their ability to receive money from larger banks.
Everett Sands, the founder and CEO of Lendistry, a fintech firm, urged the Federal Reserve to postpone adoption of Basel III.
“It will start at the top banks, it will then trickle down into community banks, it will then trickle down into community development financial institutions (CDFIs), and afterwards it then, obviously, would go to small businesses,” Sands said. “It is not ready for the current environment we are in today.”
Lendistry is a CDFI, or an institution that aims to lend money to people in communities who are less likely to have consistent access to lending like minorities, women and rural residents.
Rep. Morgan McGarvey (D-Ky.) noted that CDFIs may receive less funding from big banks under the Basel III regulations because they are perceived as “higher risk.” Sands added that even though there would be a perceived risk, data shows that it is “not reality.”
Many small business owners have begun to look for other avenues of funding, primarily venture capitalists.
Rep. Jake Ellzey (R-Texas), however, said that isn’t the best option for small companies. He said he was particularly concerned about family businesses where owners would not want to sell a part of their “heart and soul” to stay open in search of venture capital money.
O’Leary, a venture capitalist himself, said that this option is also becoming less viable.
Venture capital funding has declined 39% in the past 24 months because of inflation’s impact, he said.
“I would go as far as to say that right now, venture capital is dead,” O’Leary said. “The typical VC firm today is not worried about new deals; they’re trying to determine in their portfolios, which one should survive and which one’s they’re going to let die.”
Many in the banking industry said that the prospect of new regulations has discouraged many small business owners from continuing operations. According to a survey from Goldman Sachs of small businesses, if Basel III is finalized, 67% plan to halt expansion, 42% to lay off workers or stop hiring and 21% plan on closing their businesses.
Jill Bommarito, owner of Ethel’s Baking Company, a gluten-free bakery based in Michigan, told lawmakers Basel III is one more policy in a set of many that ignores the needs of small businesses.
“This rule would not only cut off small businesses from accessing the capital they need to grow, but it will push small business owners to predatory lenders,” Bommarito said. “As a small business… you don’t feel you matter.”
‘The very biggest problem that American families are facing’ : Lawmakers discuss federal action to tackle local exclusionary zoning policies
WASHINGTON – Experts push for federal action addressing restrictive local zoning that has stymied affordable housing availability at a Joint Economic Committee hearing on Wednesday.
Local rules prohibit building anything other than single-family detached homes in 75% of residential land in many American cities, the New York Times’ Upshot reported in 2019.
“Single-family homes with yards require more land per home than other structures, and therefore are more expensive to rent or buy,” testified Jenny Schuetz, a senior fellow at Brookings Metro.
Primarily, the federal government should look to supplement local legislative initiatives to increase construction of denser housing, said Schuetz.
“Ultimately, state and local governments have to do this, but the federal government can provide resources and support,” Schuetz said in an interview with Medill News Service.
Lawmakers and attendees suggested a lack of alignment between different levels of government has hampered progress.
“The federal government blames the states, the states blame the counties, the counties blame the localities, and then back up the chain we go – How many of you have seen this movie?” asked Rep. Katie Porter (D-Calif.) as she demanded accountability from her fellow government members.
Researchers at Freddie Mac estimated that, as of 2020, the U.S. had a housing supply deficit of around 3.8 million units. Schuetz referenced a similar figure at the hearing, as well as in another hearing on housing supply in which she testified in September.
A bipartisan tax deal announced earlier this week would increase a tax credit for low-income housing, but Porter said it’s just not enough to close the housing supply deficit. The deal still has to pass both houses, but congressional leaders have said they are hopeful it will be enacted.
“After the housing market collapse of 2008, new housing supply never recovered to keep up with demand,” said Sen. Martin Heinrich (D-N.M.), chair of the joint committee.
Reports show that the homeless population rose 12% in 2023 from the previous year. That year, the U.S. Department of Housing and Urban Development (HUD) reported the highest count of people experiencing homelessness on a single night since 2007, when the HUD started tracking the data.
“Exclusionary zoning adds to this problem, placing restrictions on where people can live and the types of housing they can live in, often enmeshed with discriminatory practices that have left a legacy of unequal opportunity,” Heinrich added.
Jenn Lopez, founder of Project Moxie, an affordable housing consulting firm, appealed to the committee, asking for more federal resources and support of local land use reform.
“I urge you to consider pairing these two practices to bolster the economy,” said Lopez. “When we provide affordable housing, we house our local workforce, create jobs and stabilize our communities.”
However, zoning reform is controversial. When Alexandria, Va., eliminated single-family zoning in October, it saw intense opposition from its residents. Colorado has been attempting to enact statewide inclusionary zoning laws only to encounter local resistance and petitions that push city councils to repeal approved reforms.
In his testimony, Falim Furth, senior research fellow at the Mercatus Center, a libertarian think tank, where he directs the Urbanity Project, noted that both Vermont and Montana have successfully banned local single-family occupancy zoning.
“These ambitious extensive limitations of local regulatory authority received supermajority support from legislators in both parties,” said Furth.
And residents can be galvanized to support changes to their local laws, added Tobias Peter, co-director of the Housing Center at the American Enterprise Institute, the center-right leaning think tank.
“If you frame it around where your kids and grandkids are going to live, that seems to have an impact,” said Peter.
Zoning law changes now often require a groundswell of local support and the united force of both federal and local jurisdictions, emphasized these advocates.
“Local and state governments are stepping way into this space and bringing their checkbooks, inviting the federal government,” Lopez told Medill News Service. “It’s time to make that next leap, that next major investment in our inventory as a country.”
WASHINGTON – Some legislators want immediate action on the FAIR College Sports Act, meant to standardize state laws on student-athletes profiting from their personal brands, but it looks unlikely that Congress can come to an agreement anytime soon.
Lawmakers and witnesses at a hearing Thursday by a House subcommittee disagreed over appropriate forms of compensation from universities for their athletes, transparency requirements for businesses making deals with athletes and even whether a federal standard should exist.
The NCAA first allowed student-athletes to profit off their name, image and likeness in 2021, if consistent with state laws. This allows athletes to sign deals with outside organizations ranging from hundreds to millions of dollars.
“The sudden transition to NIL has enabled a wild west environment where pay for play is rampant,” said Subcommittee Chair Rep. Gus Bilirakis (R-Fla.).
The FAIR Act, introduced by Rep. Bilirakis, would protect the right of students to enter into NIL contracts, with “reasonable limits” on the time they may spend on endorsements. It would also ban athletes from accepting incentives to attend an institution and require them to notify a government-created commission when they enter into a contract.
Under current NCAA rules, universities must take a hands-off approach to their athlete’s NIL contracts. Representatives and witnesses pointed to instances of collectives taking advantage of athletes’ lack of support. In one instance, reported by The Athletic, a collective agreed to pay an athlete $1.5 million across two years but included clauses in the contract that allowed them to ask for the money to be repaid, as well as a 10% commission and expenses, even if the agreement were terminated.
Meredith Page, a Division I volleyball player at Radford University, testified that many students are leaving their existing scholarships to enter the transfer portal, with collectives promising high-paying opportunities at another school, only to find that those opportunities are no longer available. There is currently no accountability mechanism when this happens, Page said.
“Until there’s some transparency and some consequence associated with this, I think we’re going to continue to have this problem,” said Charlie Baker, president of the NCAA.
Chase Griffin, a Division I football player at UCLA with more than 40 NIL deals, said the oversight mechanisms would discourage businesses from offering these deals, yielding less compensation for student athletes’ hard work.
Griffin also pushed against an oversight body appointed by the government, based on responses to a survey of college athletes that he helped lead. When Rep. Lori Trahan (D-Mass.) asked Griffin who student-athletes trust the least, he answered, “Congress.”
“That should concern each one of us here today, that the very people this committee is looking to ‘protect’ don’t actually trust that we have their best interest at heart,” Trahan said. “I don’t think that, as drafted, the bill that we’re focusing on today will do much to change that.”
Meanwhile, the National Labor Relations Board has brought a case against the University of Southern California, the Pac-12 Conference and the NCAA arguing that college athletes should be classified as employees.
The student-athlete witnesses emphasized that they would not like to become university employees. Kaitlin Tholl, a Division I softball player at the University of Michigan, cited concerns over getting fired for poor performance and confusion over the financial consequences.
“Will I be taxed? Will I lose my scholarship? Will I be paid minimum wage? There’s so much that goes into it that I think people need to be careful what they wish for,” Tholl said.
WASHINGTON – Congressional lawmakers and witnesses examined whether slower U.S. infrastructure growth and disruptions in the supply chain are hurting basic transportation needs during a hearing on Wednesday assessing the state of the industry.
Rep. David Rouzer (R-N.C.), chair of a House Transportation subcommittee who presided over the hearing, cited the Iranian-backed Houthi militant group in his opening remarks as a significant threat to a crucial global shipping route in the Red Sea. Rouzer said major shipping carriers must now opt for longer, costlier routes, such as around the Cape of Good Hope in South Africa.
He also condemned the ongoing migrant crisis at the southern border, which forced American border officials to close two crucial rail bridges from Mexico into Eagle Pass and El Paso, Texas, in December. The closings came after U.S. Customs and Border Protection found a resurgence of smuggling organizations moving migrants through Mexico on freight trains, according to a CBP statement.
Rep. Jeff Van Drew (R-N.J.) contended that the mass influx of illegal immigration is disrupting supply chains “even thousands of miles away from our southern border.”
Van Drew said the rail border crossings account for roughly $34 billion in commerce. “How much more money does our country need to lose through the effects of these illegal crossings? How much more evidence does this administration need before it will finally take action? Enough is enough.”
One freight brokerage executive, Jeff Tucker, the CEO of Tucker Company Worldwide, said his company is closely watching for disruptions to cargo at the border.
“There is a humanitarian crisis associated with what’s happening down there, with individuals jumping onto the train — children, women, men, people of all ages. I’m glad that I am not the one in charge of having to deal with this mess,” he said.
He implored politicians to work closely and communicate with transportation industry workers, who witness the daily effects of supply chain disruptions. “When we’re surprised and don’t have any opportunities to divert our routes, that’s very painful,” Tucker said to Van Drew.
Rouzer asked about the ripple effect of cargo vessel attacks in the Red Sea on America’s supply chain. He called upon Stephen Edwards, the CEO of the Port of Virginia, one of the country’s largest and busiest container ports, on what he’s seen.
“The initial impact is the delay in vessels arriving both in Asia and coming back to the United States, and the redeployment of ships to cover those slots elsewhere,” Edwards said. He said international ocean carriers must reschedule their ships, estimating an extra seven days for cargo ships traveling from Southeast Asia to the East Coast of the United States.
Company officials also said the U.S. increasingly relies on its southern neighbor for manufactured goods and raw materials due to escalating trade disputes with China and other disruptions, according to Tucker.
He said regional manufacturing in Mexico eliminates the concerns of a single point of failure — a phenomenon in the supply chain world where one failure causes the takedown of the entire system — that sparked when the U.S. solely relied on China for critical goods.
“I don’t know how many members here have been to the border. I’ve been there, toured it, and it’s a heck of a thing,” Tucker said. “We all know how much freight came from China and the Far East, and now a lot more of it will come through the border, where we now have major security concerns.”
Rep. Troy Nehls (R-Texas) cited one company that was deeply affected by the rail closures — the Union Pacific Railroad. He said it reported nearly 4,500 railcars were held south of the border and asked Tucker how his organization handled a similar rate of shipping suspension.
Tucker said most of his goods, such as grains, are perishable and that delivering delayed consumable goods has significant ripple effects on the country’s access to nutritious, fresh food.
As the U.S.-Mexico border issues continue, shipping companies must learn to pivot quickly to maintain significant profit and public trust. “As I said earlier, way more freight is moving north from Mexico. Please expect that to continue over the next decade. We just can’t afford to have a closure like that again.”
WASHINGTON – The Consumer Financial Protection Bureau and the White House announced Wednesday an initiative cracking down on overdraft fees to increase transparency for consumers.
A new proposed rule would force banks and credit unions with more than $10 billion in assets to outline more disclosures as well as cap overdraft fees for these institutions.
The bureau is accepting comments on its proposed rule until April 1. If finalized, the rule would go into effect Oct. 1, 2025.
“Many of the nation’s largest banks morphed this market into a junk fee harvesting machine,” CFPB Director Rohit Chopra said in a press briefing on Tuesday before the announcement.
An overdraft fee today is around $35 per transaction, according to the FDIC, and often disproportionately affects low-income families that cannot maintain high bank balances. But the majority of consumers’ debit card overdrafts are less than $26 and are repaid within three days, the CFPB said.
Instead, the bureau is proposing a benchmark overdraft fee as low as $3 or up to $14 while seeking public comment to determine the appropriate amount. Alternatively, banks can set their own fees if they can show they are charging a breakeven amount, according to Chopra.
“Many financial giants have sought ways to ratchet up revenues from their deposit account customers,” said Chopra, calling their pursuit of these institutions over the years a “cat and mouse game.”
Several Republicans and banking industry representatives were quick to denounce the proposal.
“The proposal would make it significantly harder for banks to offer overdraft protection to customers, including those who have few, if any, other means to access needed liquidity,” said Rob Nichols, president and CEO of the American Bankers Association.
The rule “would undermine the Bureau’s consumer protection mission,” Rep. Patrick McHenry (R-N,C,), chairman of the House Financial Services Committee, and another committee member, Rep. Andy Barr (R-Ky.), said in a statement.
According to a CFPB report, banks generated $15.47 billion in revenue in 2019 from overdraft fees.
The proposed rule is part of the Biden administration effort to crack down on junk fees. It aims to close a regulatory loophole found in the 1968 Truth in Lending Act, which enables banks to lend money to consumers facing overdrawn accounts without issuing consumer protections that apply to other forms of credit.
“Banks call it a service – I call it exploitation,” President Joe Biden said in a prepared statement.
The proposal is expected to cut the average overdraft fee by more than half. The average American family that is subject to these fees would save an estimated $150 a year, while consumers as a whole could save $3.5 billion every year, according to White House’s National Economic Council Director Lael Brainard.
“Companies shouldn’t be able to sneak charges onto your monthly statement,” Brainard stated. “Not only do those hidden fees inflate prices, they make it difficult to accurately comparison shop and impede competition.”
In 2017, the CFPB sued TCF Bank for unfair junk fees, noting that a former bank CEO even named his boat “Overdraft.” At the time, TCF bank managers could rake in up to $7,000 for increasing overdraft fee activity.
“The result was tricks, traps, and bullying that resulted in an overdraft opt-in rate triple the rate at other banks,” Chopra said. “TCF was part of a broader trend–big banks using a lending carve out to build business models that root for their own customers to run out of money in order to extract more fees from them.”
The CFPB has since gone after several large banks such as Regions Bank and Wells Fargo on similar infractions.
“We’re not shutting banks from profiting or shutting consumers from credit,” said Chopra. “These overdraft loans will simply have to play by the rules.”
WASHINGTON – Strong economic performance, including solid retail sales growth, signals a good likelihood that the Federal Reserve board will cut interest rates this year, Federal Reserve Board Governor Christopher Waller said Tuesday.
In the fourth quarter of 2023, real GDP grew around 2% and unemployment stayed below 4%.
“For a macroeconomist, this is almost as good as it gets,” Waller said during an event hosted by the Brookings Institution, a respected policy research organization.
He indicated that he would closely examine the December retail sales report, which was released Wednesday. It showed a monthly gain of 0.6%, much higher than the November increase of 0.3%.
In October during another speaking event, Waller cautioned that the economy would need to cool through slower economic growth and employment, or inflation would begin to stagnate or even rise again. The fourth quarter of 2023 indeed saw a slowdown, with much lower growth in business investment and government spending, and more tentative slowing of consumer spending, Waller said.
Now, three months later, he is more confident the economy will continue along its current trajectory, maintaining low inflation alongside moderate economic growth and an improved balance between job vacancies and unemployed people.
The retail sales report is another good sign. Waller pointed to depletion of excess savings and increased credit card usage among consumers as potential indications of a spending slowdown, but sales in December exceeded economists’ expectations.
Waller did not specify how much the Federal Open Market Committee would cut its benchmark rate: the overnight borrowing rate for banks. That rate is used as a tool to set all other rates like consumer loans and savings rates, and currently stands at a range of 5.25% to 5.5%. But last month, the FOMC indicated that at least three rate cuts could take place in 2024.
Many consumers are still feeling the pinch of high prices, but they are also seeing higher incomes, said Joanne Hsu, director of the University of Michigan Surveys of Consumers, which publishes the Index of Consumer Sentiment that measures people’s feelings about the economy. Most respondents said they expect to see income growth in the year ahead, she said in an interview.
The last measure of the index for December showed that consumers are feeling more positive about the economy. The 14% increase in December reversed a downward trend in consumer sentiment from the past four months.
Inflation is consumers’ top concern, and respondents had far more positive long-term expectations for inflation in December than in November, Hsu said.
“Earlier in 2023, consumers absolutely noticed that inflation was continuing to slow down. The problem was they weren’t really sure that that inflation slowdown was gonna stick,” Hsu said. “I think people were paying really close attention to prices in December, with the holiday season and holiday travel. And I think what they were saying was that, yes, prices still remain high, but it was many consecutive months of slowing inflation.”
The White House and many journalists have dubbed 2023’s economy a “miracle,” bringing inflation back under control since its peak around 9% in June 2022, the highest rate since the 1980s. Simultaneously, the year saw high economic growth, more than 2.5 million jobs added and record-high household wealth. Economists increasingly see a “soft landing” on the horizon, slowing the economy to control inflation while avoiding a recession.
However, Waller also said the Fed should not rush to cut interest rates. Inflation has fallen significantly in 2023, but largely from easing of supply chain issues, which may obscure the effects of consumer demand, he said.
“People have been talking a lot about, ‘oh, all the last six months shows this was all supply, all supply, all supply.’ Well, if these are temporary supply shocks, when they unwind, the price level should go back down to where it was. It’s not,” Waller said. “The level of prices is permanently higher.”
When the supply-side effects fade, consumer demand will need to fall to keep inflation on its current downward path. Otherwise, inflation may rebound. Waller said he will take a close look at the January Consumer Price Index report and revisions for 2023, coming in mid-February, to see if the positive picture on inflation changes.
Craig Austin, assistant teaching professor of logistics and supply chain management at Florida International University, believes the supply chain — rather than demand — is behind the increased price levels, even though effects from the pandemic have faded.
“There’s always disruption,” Austin said in an interview, citing uncontrollable shipping disturbances such as El Niño and attacks in the Red Sea. “I think demand is good, but it’s not what’s driving the prices. It’s really going to be supply chain issues.”
Austin believes low demand and greater supply chain efficiencies will continue to bring down inflation in 2024, possibly even to the point of a recession.
Waller is more confident, based on December figures, that the economy can continue along its current trajectory of a soft landing. But the Fed will not begin moving until they are convinced inflation is near target, he told the audience at Brookings.
“The key thing is the economy’s doing well. It’s giving us the flexibility to move carefully and methodically,” Waller said. “The worst thing you’d have is, it all reverses and we’ve already started to cut.”
WASHINGTON — The leader of the U.S. Chamber of Commerce emphatically praised American free enterprise and innovation at the Chamber’s annual State of American Business address.
“The State of American Business is optimistic,” said Suzanne P. Clark, president and CEO of the U.S. Chamber of Commerce to the nearly ten thousand viewers tuning in virtually from around the world. Clark said this optimism is evidenced by the volume of business formation this past year, which clocked in at 5.6 million business applications according to the United States Census. This is the highest yearly figure on record.
“Free enterprise has made life simpler and better for everyone by scaling technologies, expanding choice, driving down prices, and boosting every American’s buying power,” Clark declared. She later added, “When you make a five-year plan or when you simply show up for work and give the best of what you’ve got–your energy, your ideas, your talent–it’s all optimism.”
Much like last year’s address, Clark primed her keynote speech by addressing the percolating pessimism towards the economy and government.
“Does America have challenges? You bet we do. Are we, at the U.S. Chamber of Commerce, pessimistic about it? Not on your life,” Clark stated strongly. “All of us at the U.S. Chamber wants to counter-program against the negativity,” she reprised later.
While the Chamber president lauded the power of free enterprise, Microsoft Vice Chair and President Brad Smith heartily endorsed AI as a supplemental force to businesses this year. He laid out three main applications of AI for tasks related to core business procedures, such as pharmaceutical companies using it for drug discovery, back office functions like human resources, finance and legal, and finally in an emergent application Smith calls a “co-pilot”, in which workers use AI to streamline work done on software like Microsoft, Word, Excel, and more.
“People’s jobs will change–even if it’s not a new job or a job that goes away,” he added.
Even so, Smith stressed that humans must remain in control of the technology.
“Unless we have some regulation, we’re likely to have market failure,” said Smith, citing a report filed by an AI commission formed in the U.S. Chamber of Commerce in 2022. “That is not a sentence that most people would expect to see in the executive summary of a report from the American Chamber of Commerce, and yet it is precisely right.”
While AI brings promising advancements to workforce productivity, it remains unclear how the economy will perform and affect businesses this year.
Clark’s speech came just hours after the release of the first U.S. inflation report of 2024. The Consumer Price Index has either remained steady or decreased since August 2023, falling from 3.7% to 3.4% over three months, according to the Bureau of Labor Statistics. The popular inflation proxy went up 0.3 percentage points this December.
“I think we’re expecting growth in 2024, perhaps slower growth than we saw in 2023,” Clark ventured. “I think we [America] remain the economic envy of the world in 2024.”
While the unprecedented uptick in inflation may have consumers spooked and sounding the alarms, Jai Kedia, Research Fellow at the Cato Institute Center for Monetary and Financial Alternatives, says it is wise to step back and consider the overall trend.
“The macroeconomy is constantly subjugated to external shocks that cause our macro indicators to sort of stray away from their mean value,” said Kedia. “Businesses do have reasons to be optimistic regarding inflation, at least because that does seem to be coming down.”
Kedia notes that the inflation cooldown did not cause a significant increase in the unemployment rate–a good indication that the economy is in for a much-desired “soft-landing”.
Even so, according to Kedia, high interest rates, induced by the Fed’s persistent contractionary policy, may continue to be a headwind facing businesses this year.
“With mortgage rates and auto loan rates and credit card rates being as high as they are, it’s likely that consumers respond by shrinking the amount of expensive durables that they buy, which is something businesses will have to contend with,” Kedia continued.
However, if inflation continues to flatline as a whole, momentum pressing the Fed on when they will start cutting rates will likely mount.
“Sometime later this year, the Fed will start to think about and most likely implement rate cuts–especially if there’s any increase in the unemployment rate at all.” Kedia said. “That’s almost certainly going to happen.”
After China’s surprised chip breakthrough, Washington has new worries about future of export controls
WASHINGTON – When Commerce Secretary Gina Raimondo was in Beijing in August to discuss trade with economic officials, she and others in the tech industry were shocked by a new smartphone, unveiled by Chinese telecom giant Huawei.
The phone was named the Mate 60 Pro, featuring a seven-nanometer processor developed by a Huawei subsidiary and produced at the Chinese semiconductor fabrication plant SMIC. It immediately set off alarm bells among Western nations because it meant that China had achieved this breakthrough despite extensive measures the U.S. and its allies have taken, through export controls and trade restrictions, to block the country from accessing cutting-edge technologies in the sector.
The phone renewed the concerns that U.S. export control policies were not effective. Some lawmakers and experts have called for tougher and more comprehensive sanctions, while chipmakers and China watchers have warned against cutting Chinese companies out of the global semiconductor supply chain.
The U.S. chips blockade against China began gradually. In 2019, the Department of Commerce under the Trump administration cited violation of sanctions against Iran to add Huawei to the so-called Entity List. Companies wishing to export U.S. technologies to Huawei and its international subsidiaries are required to obtain licenses from the department’s Bureau of Industry and Security, or BIS. SMIC was put on the same list in 2020.
In October 2022, Commerce strengthened its blockade by implementing a series of blanket export controls. The new restrictions limited the export of advanced semiconductors, necessary for training artificial intelligence models. They also targeted semiconductor manufacturing equipment (SME) that are required to produce chips smaller than 14 nanometers. Japan and the Netherlands, two key exporters of advanced SME, also followed suit in 2023.
The launch of the Huawei Mate 60 Pro, however, suggests that the U.S. strategy of freezing China’s semiconductor manufacturing abilities may be in serious jeopardy.
“U.S. sanctions have failed”
Huawei and SMIC’s success in manufacturing and selling a seven-nanometer chip in a commercially available device shows that U.S. sanctions have failed, said Dylan Patel, a semiconductor analyst at the research firm SemiAnalysis.
“The sanctions have too many holes in them,” Patel said, adding that the Commerce Department’s BIS was giving out export licenses “too easily.” Although BIS now routinely denies licenses to Huawei and SMIC, companies can still obtain a license to sell semiconductors and SME to other Chinese entities, including some shell companies.
It is also widely known to the industry that SMIC can manufacture semiconductors at the seven-nanometer level without technologies the U.S. explicitly blocks, Patel said. As early as 2021, SMIC began shipping a seven-nanometer chip for cryptocurrency mining.
For SME the U.S. closely restricts access to, like lithography, the printing of circuit patterns onto silicon wafers, SMIC can purchase older-generation machines or push equipment it already owns to achieve similar results.
The firm also continues to have access to chemicals and software necessary for designing and manufacturing the chips but are not part of the current export controls, Patel said.
“While they might want to prevent China from making seven-nanometer chips, they don’t restrict the equipment required for it properly. So then it kind of makes it pointless, if you will,” Patel said. “The lawmakers need to be much more willing to what is required, rather than trying to straddle the line and play this game.”
Huawei and SMIC did not respond to requests for comment.
And China is not standing still in the face of tightening sanctions. Both the national and local governments have made significant investments to onshore its semiconductor supply chain, said Arrian Ebrahimi, a semiconductor expert who previously worked at the Semiconductor Industry Association, the leading trade group for the industry in Washington.
Ebrahimi said the Chinese national government has also attempted to take a more centralized approach to direct investments to address the country’s “strategic needs” and choke points in the supply chain where China relies on foreign technologies, rather than projects that yield the most financial return.
China has also countered U.S. chip controls with trade and export restrictions of its own, harming some of the biggest U.S.-based tech companies. In May, the country banned the sale of chips from Micron, a top U.S. manufacturer of memory and storage chips, to Chinese companies that handle “critical information infrastructure.”
In July, China announced that it will now require permits for the export of rare earth metals, including gallium and germanium, both of which are crucial to semiconductor manufacturing.
The competing visions
Despite SMIC’s manufacturing capabilities being an open secret in the industry, Huawei’s new phone surprised lawmakers and officials in Washington.
In hearings before Congress, Raimondo called reports about the phone upsetting and “incredibly disturbing.” And a group of 10 House Republicans sent a letter to BIS, in which they said they are “extremely troubled and perplexed” by Huawei and SMIC’s bypassing of U.S. export controls.
Some lawmakers have taken Huawei’s phone as a mandate to double down on the chips blockade. Rep. Mike Gallagher (R-Wis.), the chair of the House Select Committee on the Chinese Communist Party, called for ending all U.S. exports to Huawei and SMIC following the Mate 60 Pro announcement.
Gallagher, a frequent advocate for tougher China policies, told the Medill News Service that he is urging the Biden administration to continue tightening export controls and closing loopholes that allowed Chinese companies to access sensitive U.S. technologies.
“It is time to respond by imposing maximum economic sanctions on bad actors like Huawei to protect our national security and send a clear message to anyone currently selecting vendors for their next-gen wireless and fiber telecom networks,” Gallagher said in a statement to Medill News Service.
The Commerce Department did not respond to a request for comment, but at a national defense forum in early December, Raimondo urged lawmakers to provide more money for her department to enforce export controls.
“I have a $200 million budget. That’s like the cost of a few fighter jets,” she said. “If we’re serious, let’s go fund this operation like it needs to be funded.”
Gallagher and two other Republican lawmakers responded harshly, saying any funding talk will need to match enforcement actions, like revoking existing export licenses to Huawei, and changes to make BIS “a true national security agency.”
But, U.S. chipmakers have been pushing back against further crackdown on semiconductor exports to China. The New York Times reported in October that officials from Nvidia, Intel and Qualcomm have met with high-level White House officials, including Raimondo and Secretary of State Antony Blinken, to argue against tougher export controls.
All three companies have extensive business interests in China. Qualcomm, a chipmaker specializing in wireless technology, reported that almost 64% of its revenue came from China in 2022.
After Commerce announced in October additional export controls, SIA issued a statement cautioning against “overly broad, unilateral controls” and urged the administration to coordinate with allies and ensure market competition.
Jeffrey Bean, the program manager for tech policy at the think tank ORF America, also expressed concern over the idea of completely cutting off China from access to U.S. semiconductor technologies.
“Outright total semiconductor decoupling at this point would be highly damaging to the PRC, but also highly damaging to the U.S. industry and the U.S. tech economy, who still draw a significant portion of their revenue from that market,” Bean said.
Bean noted that many U.S. allies and the chipmakers themselves have adopted strategies to diversify their supply chain and reduce dependency on China. But, a complete semiconductor decoupling from China will cause U.S. companies to cede the Chinese market and hurt their revenue and, by extension, their R&D budgets intended to retain technological leadership.
Cooling the temperature
After months of exchanging top officials and diplomats, President Joe Biden met with President Xi Jinping of China in mid-November on the sidelines of the Asia-Pacific Economic Cooperation summit in San Francisco.
During a news conference following the meeting, Biden said the two sides have agreed to resume military-to-military communication and cooperate on curbing fentanyl production but announced no deliverables on export controls or trade policy.
Jake Werner, the acting director of the East Asia program at the Quincy Institute, a foreign policy think tank, argues that although the U.S. has cast its restrictions on China as making the U.S. more competitive, those restrictions in effect exclude China from high return and strategically important markets, which can lead to global destabilization.
SMIC’s success in manufacturing seven-nanometer chips could be an opportunity for the U.S. to reconsider its approach in the semiconductor arms race, Werner said.
“To me, it indicates an opening to rethink the entire goal, because I think the goal was unsound to start with,” Werner said. “If the goal is successful, it will poison the relationship. It will prevent China from contributing what it could to innovation that actually is needed globally.”
One of those areas could be AI security. China has outpaced the U.S. in passing comprehensive legislation on AI regulation. In early November, China also signed an agreement to cooperate with the U.S., UK and the European Union in managing the risk AI poses, particularly in cybersecurity.
Some experts have speculated that China may leverage cooperation in AI security to negotiate for eased export controls, but the Biden administration has made clear in the past that it is unwilling to negotiate on issues that have national security implications.
“I think the answer to competition should be redoubling competition and should not be trying to reduce the ability of companies to compete,” Werner said.
Senators debate effects of regulating Wall Street and press corporate CEOs on exploitation of American consumers
WASHINGTON — Ordinarily, Chairman Sherrod Brown, D-Ohio, begins each hearing in the Senate Banking Committee with an opening statement on the matter at hand, but he was beaten to the punch on Wednesday by JPMorgan Chase CEO and billionaire establishment Democrat mega-donor Jamie Dimon.
Minutes before senators entered the room, Dimon walked in and turned to the crowd, puffing out his chest and issuing a reverberant greeting: “Good morning! They should make you pay to come to this!”
Shortly after, senators sparred with some of the wealthiest corporate executives from the most powerful banks in the country over regulations and corporate lobbying in the committee’s annual hearing to conduct oversight of Wall Street firms on Wednesday.
Brown gaveled the hearing into session and proceeded with a scathing opening statement, decrying Wall Street firms’ lobbying efforts against recent regulation proposals and condemning the reckless corporate conduct that has negatively impacted working-class Americans’ access to equal opportunity.
The chairman said the “enormous” influence that banks and their CEOs wield should come with reasonable regulation and significant responsibility to protect American consumers’ best interests.
“You may be private companies, but the risks you take and the mistakes you make don’t just affect you. They don’t even just affect your customers, not even just your shareholders, not even just your workers,” Brown said. “The mistakes you make affect the whole economy, and as we all remember from 2008 and 2009, they can certainly affect American taxpayers.”
Alongside Dimon, other banking CEOs called to testify before the committee as expert witnesses included Charles Scharf from Wells Fargo, Brian Moynihan from Bank of America, Jane Fraser from Citigroup, Ronald O’Hanley from State Street, Robin Vince from BNY Mellon, David Solomon from Goldman Sachs and James Gorman from Morgan Stanley.
The banks owned by these eight CEOs collectively hold nearly $15 trillion in assets and trillions of dollars in investments. They also hold more than half of the deposits in the United States and more than $80 trillion in client assets. Brown dubbed these corporate executives “eight of the most powerful people in the country.”
Before the hearing commenced, several senators walked down to the witness podium and jovially greeted each of the eight corporate CEOs, which does not normally happen between committee members and expert witnesses before testimony or questioning.
During the hearing, however, exchanges were sometimes less friendly.
Senators debated mostly along party lines about whether corporate executives or bureaucrats in Washington, D.C. were primarily responsible for adverse economic consequences on American consumers and working-class citizens.
Indeed, while Democratic committee members pressed the banking CEOs about their resistance to reasonable regulations, Republican senators sided with the private sector titans, suggesting that government intervention in Wall Street firms’ dealings would actually hurt average people more.
Sen. Elizabeth Warren, D-Mass., pressed Dimon and the other executives on criminals’ use of major banks and cryptocurrency to facilitate transactions that ultimately fund terrorists, drug traffickers and sanctioned countries.
Warren said terrorists are now using “cryptocurrency” to circumvent obstacles previously created by the Bank Secrecy Act in 1970 so they can continue to use American banks for bad-faith financing.
“I believe that none of you want your banks to be used to finance terrorist attacks, but let’s be clear: none of you runs these anti-money laundering programs out of the goodness of your hearts,” Warren said.
Dimon echoed Warren’s concerns about cryptocurrency, saying if he had “a government role,” which some argue he already does through mere financial influence, he would “shut down” cryptocurrency due to the threats it poses in being exploited by bad actors.
In March, the Federal Reserve and Treasury Department fined Wells Fargo $125 million for allowing a foreign bank to make hundreds of millions of dollars in transactions on its platform and thus violating prohibitions on dealing with Iran, Syria and Sudan, which are all presently subject to U.S. sanctions.
Scharf brushed over the significance of this previous sanction violation, further ensuring his bank’s general commitment to rooting out illicit transactions.
“Preventing bad actors from abusing our services is a top priority,” Scharf said. “We work in industry groups, we work with the government, we work with the regulators to make sure that we’re doing everything we possibly can to prevent that abuse.”
Despite several senators’ concerns, the corporate CEOs continued to emphasize the important role they believe their banks play in trickling wealth and opportunity down through the economy.
Dimon touted the role he feels Chase banks play in creating jobs for ordinary Americans, growing wealth for the U.S. economy and representing national interests abroad. He said large banks are the “guardians of the financial system.”
“The country benefits from thousands of banks and credit unions of all sizes serving all corners, and we must acknowledge that there are some things that can only be done by large and complex banks, things that are essential to a thriving U.S. economy and American competitiveness,” Dimon said. “Our collective work is important in good times but essential in troubled times.”
The executives also called on Congress to impose less stringent restrictions on their institutions and allow them to navigate the market freely.
Gorman expressed particular frustration with Congress’ most recent proposed regulations that specifically target excess fees imposed by banks and other financial institutions.
“This doesn’t make sense,” Gorman said. “You shouldn’t punish institutions for making fee-based businesses.”
Some senators echoed this sentiment, scapegoating “Washington bureaucrats” for the lack of American working-class opportunities.
Among senators who appeared keenly receptive to the corporate arguments, Sen. John Kennedy, R-La., thanked the CEOs for their contributions to the U.S. economy and directed subtle shots at Democratic colleagues who had pressed them earlier in the hearing.
“Unlike some, I do not think you are crooks,” Kennedy said. “In fact, you’re all American companies and I’m proud of you. And I thank you for supporting the most sophisticated and powerful economy in all of human history, and the jobs you create for Americans in doing it.”
Other senators assigned the blame to corporate greed and unregulated wealth monopolization on Wall Street, commending the CFPB for clawing back funds from banks.
Sen. Bob Menendez, D-N.J., who still attends committee hearings despite facing broad calls to resign after being indicted on federal bribery charges and allegedly conspiring to act as a foreign agent for Egypt, pressed each CEO about the money they had to return to customers in redresses at the direction of the Consumer Financial Protection Bureau in the last 12 years.
Menendez revealed that CFPB clawed back $360 million from JPMorgan Chase, $819 million from Bank of America, $1 billion from Citigroup and $2 billion from Wells Fargo, which he said would have come “out of the pocket of American consumers” without the bureau.
“From just the four of you, that’s over four billion dollars returned to hard-working consumers in the past dozen years,” Menendez said. “And yet this critical agency is under constant attack from my Republican colleagues. A lawsuit before the Supreme Court is threatening its very existence. And time and time again we’ve seen why the CFPB is so necessary.”
Senators will have one week to submit questions for the record, which the banking CEOs will then have 45 days to answer as lawmakers continue to quarrel over how to grow the economy and whether regulating Wall Street firms will return prosperity to the average American consumer.