Bureaucrats Are Moving To Cap Bank Overdraft Fees, Which Will Hurt the People It’s Meant To Help

“The Consumer Financial Protection Bureau (CFPB), calling the prices of bank overdraft protection “junk fees,” now proposes to interfere with these prices.
We’ve been down this road before. Last year, the CFPB proposed capping credit card late fees at $8 as part of President Joe Biden’s populist appeal to consumers who dislike this cost, which is obviously everyone. The problem, as I and many others explained at the time, is that late fees encourage timely payment, and their practical elimination leaves lenders unable to offset the risk of working with people who have lower credit.

The result will be fewer lines of credit available to those who need credit the most. But that’s a difficult outcome for most to see compared to the tangible benefit of lowering fees. Even consumers denied credit won’t know what or who to blame, so it’s no surprise that CFPB is expected to finalize the late fee rule any day now.

The next CFPB price control scheme would cap overdraft fees at levels as low as $3 per overdraft transaction. Commenting on this rule, Biden sounded perfectly populist: “For too long, some banks have charged exorbitant overdraft fees—sometimes $30 or more—that often hit the most vulnerable Americans the hardest, all while banks pad their bottom lines.” He added, “Banks call it a service—I call it exploitation.”

I get it. I remember the annoyance I felt when I was charged such fees. However, I reminded myself that it was the price to pay for not having one of my checks bounce or a debit card payment declined. It’s fair to wonder whether most of the people proposing these rules have ever had a checking account balance low enough to need the overdraft cushion.

In fact, overdraft protection is an optional, opt-in service that allows consumers to spend money they don’t have at the bank’s expense. Purchases are approved that would otherwise be declined for lack of funds. For low-income consumers, this service is sometimes vital. And indeed, consumers report by wide margins that they are glad it exists even though it naturally comes at a cost.

Thankfully for all of us, CFPB bureaucrats agree that banks should charge a fee. Unfortunately, they think they know best what these fees should be.”

“Banks might go even further. Given the slim profit margins they earn on small bank accounts, it’s possible that the loss of overdraft protection revenue results in some simply abandoning the very customers—the least well off—whom interventionists claim to be protecting.”

https://reason.com/2024/02/08/bureaucrats-are-moving-to-cap-bank-overdraft-fees-which-will-hurt-the-people-its-meant-to-help/

Congress takes aim at nation’s nuclear regulator

“Lawmakers who support a new generation of advanced nuclear power are setting their sights on what they see as the technology’s top obstacle: the Nuclear Regulatory Commission.
The Biden administration has touted small, factory-built reactors as a possible lifeline for an aging nuclear industry and a crucial step toward cutting the nation’s planet-warming emissions. But only one reactor design has gotten the greenlight from the NRC, and administration-backed advanced nuclear energy projects are struggling to get off the ground.

Key leaders in the House and Senate are now considering fundamental changes to the NRC, an independent federal agency tasked with protecting public safety and health.

The House Energy and Commerce and Senate Environment and Public Works committees are negotiating a compromise legislative package that would streamline regulations at the NRC and potentially adjust the agency’s mission statement, as I write today.

The talks come after four Senate Democrats recently kneecapped a renomination bid for one of the NRC’s longtime regulators, Jeff Baran, who was first appointed by former President Barack Obama.

Sen. Joe Manchin (D-W.Va.) was among the Democrats who called Baran an overzealous regulator overtly hostile to nuclear energy. Today, Manchin said he won’t support any nominee who’s too focused on safety.

“We’re just looking for people who understand that we have to have nuclear energy in the mix,” Manchin said.

Lawmakers believe fundamentally changing the NRC, in leadership and policy, will give so-called small modular reactors a fighting chance to succeed.”

https://www.politico.com/newsletters/power-switch/2024/01/24/congress-takes-aim-at-nations-nuclear-regulator-00137531

California’s Attack on Gig Work Predictably Drove Workers Out of Jobs

“California’s attempt at forcing gig workers to become traditional employees backfired by driving many of those workers out of their jobs.
In the wake of a new law (Assembly Bill 5) that was intended to reclassify many independent contractors as regular employees, self-employment in California fell by 10.5 percent and overall employment tumbled by 4.4 percent, according to a study released Thursday by the Mercatus Center, a free market think tank housed at George Mason University. In professions where self-employment was more common, the effects were more dramatic, and in some fields employment declined by as much as 28 percent after A.B. 5’s implementation.”

https://reason.com/2024/01/18/californias-attack-on-gig-work-predictably-drove-workers-out-of-jobs/

Rent Control for the Rich

“Documents shared with Reason show the rents paid by several New York City tenants at their rent-stabilized apartments. Other documents shared with Reason, as well as public property information, show the same tenants own additional property worth north of $1 million. Some of these rent-stabilized tenants are themselves landlords who rent out their properties for more than what their rent-stabilized apartments cost.
That includes a married couple with a four-bedroom home in the tony community of East Hampton, New York. The husband is a wine broker. The wife is a real estate associate with Sotheby’s International Realty. A county document show their East Hampton property has an appraised value of $2 million.

The couple’s address on that same document is a rent-stabilized apartment in Lower Manhattan where the legal rent as of September 2023 is $931 a month. Online rental listings show market-rate one-bedroom apartments in the same neighborhood renting for anywhere from $3,000 to $7,000.

Another woman, an anthropologist with her own consultancy firm, is listed as the lessee of a Brooklyn Heights apartment with a legal monthly rent of $2,436. Market-rate one-bedroom apartments in the same neighborhood go from $4,000 to $5,000 a month.

County property records show that the same woman owns a home in the Long Island community of Greenport, New York. She advertises it as a vacation home for rent on her personal website, and it’s listed on several rental websites with a quoted monthly rental price of $12,000.”

“This is all perfectly legal. New York’s rent stabilization law has no means-testing requirements. That means people of any income can benefit from its suppressed rents.

Wealthy tenants are getting some of the best deals out of the state’s rent stabilization law. An in-depth Wall Street Journal analysis from 2019 found that regulated rents in richer Manhattan are around half that of market-rate rents. Regulated rents in working-class areas of Queens and the Bronx are at most few hundred dollars less than market rents.

Higher-income rent-stabilized tenants were paying 39 percent less rent on average than their peers in market-rate apartments. Lower-income rent-stabilized tenants were paying only 15 percent less than their peers in market-rate apartments.”

https://reason.com/2024/01/09/rent-control-for-the-rich-2/

USDA Announces New Rules That Could Ease Another Baby Formula Shortage

“the Department of Agriculture announced new rules for the implementation of the Access to Baby Formula Act of 2022. The new rules seek to allow the government to temporarily waive tight restrictions on formula purchases made with Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) funds during emergencies and future baby formula shortages.
In February 2022, Abbot Nutrition, the largest baby formula manufacturer in the United States, announced that it was recalling three popular brands of baby formula following complaints of bacterial contamination at a manufacturing facility in Michigan. The supply shock that followed was worsened by already existing pandemic-era supply chain issues. Within months, out-of-stock rates in 10 states had climbed to over 90 percent.

Making matters worse, restrictive labeling regulations by the Food and Drug Administration and heavy tariffs made importing formula produced in the European Union practically impossible. Low-income families who used WIC to buy formula were particularly affected by the shortage, because states hand out lucrative, exclusive contracts to a single baby formula manufacturer, meaning WIC users can only buy formula from the single company their state is contracted with.

In May 2022, Congress passed the FORMULA Act, which temporarily lifted heavy tariffs on baby formula imports. The change allowed massive imports of foreign formula, easing the shortage. That same month, the Access to Baby Formula Act of 2022 was also passed, which would allow the government to temporarily waive restrictions on WIC purchases of baby formula.”

“the USDA finally released proposed rules concretely implementing the directions in the law. According to the proposed rule, the secretary of agriculture would gain the permanent ability to waive WIC rules during an officially declared period of emergency and 60 days after the emergency period. The rule also requires that state WIC contracts with formula manufacturers include explicit remedies in the case of a formula recall. Importantly, new contracts will allow WIC users to purchase other companies’ formulas if the contracted company experiences a recall. Additionally, the new rules would require state WIC agencies to create a plan for “alternate operating procedures” in the case of a shortage or another emergency situation.

While these new rules will make it easier for families using WIC funds to access formula during shortages, state governments shouldn’t be handing out exclusive, crony contacts to baby formula manufacturers in the first place. And while these rules might help during a shortage, the government would do well to remove the massive tariffs on baby formula to prevent another shortage in the first place.”

https://reason.com/2023/12/21/usda-announces-new-rules-that-could-ease-another-baby-formula-shortage/

Let Foreign Airlines Serve Domestic Routes in the U.S.

“Argentina’s new, libertarian President Javier Milei announced a so-called “open skies” initiative that will scrap many of the regulations prohibiting foreign airlines from operating flights between Argentinian cities. Combined with the abolition of government price controls on airfares, the new rules will allow foreign airlines to directly compete with Aerolineas Argentinas, the national airline that has managed to lose an estimated $8 billion since 2008 despite having a monopoly on domestic flights.
America, thankfully, does not have a government-owned monopoly responsible for domestic air travel. However, the federal government does prohibit foreign airlines from operating flights between American cities. That means Americans have only a few choices when it comes to flying domestically—and on some less commonly traveled routes, maybe no choice at all.

Those restrictions on “cabotage” by foreign-owned and -operated airlines are naked protectionism for the shrinking number of American-based airlines. As always, consumers pay the price—and could reap the benefits of greater competition.

A 2020 paper by researchers at the Brookings Institution, Bayes Data Intelligence, and Washington State University, for example, found that American travelers would realize $1.6 billion in annual benefits from the entry of just one foreign airline into the U.S. market.

Some of those benefits would be rather straightforward: lower prices created by greater competition. But other benefits would likely materialize too. If given the chance to expand their operations into the United States, low-cost European airlines like Ryanair could bring their innovative business models to this side of the Atlantic.

Indeed, as the Cato Institute’s Scott Lincicome pointed out in a post for The Dispatch last year, the elimination of national monopolies and cabotage regulations in Europe during the 1990s has produced a flourishing market that includes legacy brands (like Air France and Lufthansa) along startups like Ryanair, WOW, and others.

The result: “These airlines have low prices, lots of fans, and (unsurprisingly) tons of capacity,” Lincicome wrote. In the United States, a similar arrangement could lead to “lower fares, more routes/capacity, more jobs—and no federal subsidies or brute force needed.””

https://reason.com/2023/12/26/argentina-will-deregulate-airlines-america-should-do-the-same/

California’s New Minimum Wage Is Predictably Killing Food Delivery Jobs

“A new California law will require that most food-service workers get paid at least $20 per hour starting next year.
But hundreds of pizza delivery drivers in the Los Angeles area are about to discover Thomas Sowell’s famous adage that the true minimum wage is zero.

Pizza Hut announced Wednesday that it would lay off about 1,200 delivery drivers in Los Angeles, Orange, and Riverside counties, CBS News reported. Pizza Hut franchises are outsourcing delivery to third-party apps like GrubHub and UberEats as a cost-saving measure in advance of the new law taking effect.”

https://reason.com/2023/12/27/californias-new-minimum-wage-is-predictably-killing-food-delivery-jobs/

Federal Shipping Regulations Sank One of America’s Biggest Offshore Wind Projects

“That Reuters report doesn’t include a specific mention of the Jones Act—the century-old law that effectively bans foreign-built ships from operating between American ports, and that subsequently drives up the cost of shipbuilding and shipping in the United States—but the subtext is pretty clear. In a call with reporters a few days after the project was canceled, Ørsted CEO Mads Nipper cited “significant delays on vessel availability” caused “a situation where we would need to go out and recontract all or very large scopes of the project at expectedly higher prices.”
That’s what the Jones Act does. As Reason has reported on many other occasions, the Jones Act is a nakedly protectionist law that severely limits competition in the American shipping market by requiring that ships operating between U.S. ports are American-built, American-crewed, and American-flagged.

Building offshore wind farms requires ships that can deliver supplies to the construction site and some specialty ships that serve as a base for building the turbines. While there are plenty of ships around the rest of the world that can do that work, companies like Ørsted can’t use those ships to build wind farms in American coastal waters.”

https://reason.com/2023/12/05/federal-shipping-regulations-sank-one-of-americas-biggest-offshore-wind-projects/

FTC Fights Grocery Store Merger That May Bring Down Prices

“a Kroger-Albertsons merger would not create a monopoly in the grocery market. According to a recent report by Retail Info Systems, Walmart remains the nation’s largest grocer, controlling 17 percent of the grocery market. The second and third largest grocers are Amazon and Costco. Kroger and Albertsons are only a distant fourth and sixth with market shares of 4.4 percent and 2.2 percent, respectively.
Grocery stores have experienced a declining market share, while superstores and online competitors have grown. For example, like many traditional grocers, Kroger’s market share has declined in recent years while Walmart’s has increased. Even if Kroger and Albertsons were to merge, it’s not clear that their combined market share wouldn’t continue to decline. The merger would simply enable Albertsons and Kroger to bulk up and compete with larger competitors, like Walmart.

In addition, Kroger’s decision to sell stores in overlapping markets where Albertsons operates means the merger would not increase concentration in any market. This has traditionally been enough for the FTC.

The national grocery market is also becoming more competitive, not less. No longer limited to brick-and-mortar supermarkets and independent grocery stores, the grocery market now includes a growing assortment of e-commerce stores, like Amazon, discount grocers like Aldi and Lidl, and delivery providers like FreshDirect and Instacart. These newer market entrants have fundamentally altered grocery shopping.

The merger will heighten competition among larger competitors, which will drive down prices for consumers. While a merger would not make Kroger and Albertsons the dominant industry players, it would allow them to compete more effectively with others, putting pressure on all major retailers to keep prices low as they fight to preserve their customer base. In fact, Kroger and Albertsons have indicated that the merger will generate $500 million in new cost savings for them that they plan to use to cut consumer prices. In addition, they plan to expand their lineup of affordable store brand products and spend $1.3 billion on improving customer service at Albertsons stores.”

https://reason.com/2023/11/24/ftc-fights-grocery-store-merger-that-may-bring-down-prices/

California’s War on Fast Food Jobs

“The unions are claiming a victory for workers, but it’s not hard to guess the result. Higher prices will mean fewer customers and reduced profits. That means fewer restaurants and fewer jobs. Although the legislation only applies to fast-food chains with more than 60 outlets, it will drive up costs for mom-and-pop restaurants. They will have to compete for workers with chains that must pay a much-higher wage.
That’s not the only bad news. “Making it illegal to pay less than a given amount does not make a worker’s productivity worth that amount—and, if it is not, that worker is unlikely to be employed,” wrote famed economist Thomas Sowell. In other words, restaurants will not hire people who aren’t productive enough to justify the wage.”

https://reason.com/2023/11/24/californias-war-on-fast-food-jobs/