The new Consumer Financial Protection Bureau is right around the corner  Talk has now turned to who might run the powerful agency and what it might do.  The WSJ names names…

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Lately, business could really use a friend. Regulatory panic has followed fresh on the heels of the financial meltdown. Grand political ideas that competing interest groups can smother in good times tend to burst out in post-bust regulatory orgies. Legislators tend to focus on reining in unbridled business with little concern for how laws might reduce the economic blessings business can confer. When reform’s fires rage, rhetoric rules, difficulties melt away and compromises suddenly materialize, wrapped in vague statutory language that grant broad discretion to regulatory agencies.

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Judge Posner offers his thoughts on financial reform, mostly negative, at Bloomberg.   The thrust of the essay is that the financial regulation produced by the political process has, at best, a poor nexus to the actual causes of the economic crisis, and that what we are left with is primary reorganization and reshuffling to look busy.  Judge Posner discusses the political advantages to reshuffling as a response to government failure…

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Danny Sokol has posted the most downloaded antitrust law professors.  I come in 4th behind Damien Geradin, David Evans, and Herb Hovenkamp.   It is flattering to be in company like that by any measure.  Cool.  But, as Danny points out, what is even cooler is that George Mason is one of only a handful of schools with more than one faculty member making the list, with my colleague, co-author, and fellow Bruin economist Bruce Kobayashi coming in at #15.

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Intel’s rebates are apparently given rise to a potentially whole new class of suits based on the notion recipients of the rebates at the center of the Commission’s antitrust action should have been disclosed.   The WSJ reports…

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Late in the Senate’s proceedings on the financial regulatory reform bill, the Senate adopted – with no hearings and minimal debate – a controversial provision proposed by Sen. Richard Durbin, Illinois Democrat, that imposes price controls on interchange fees for debit and prepaid cards. The amendment also allows merchants to override several rules of payment card networks that currently protect consumers from abusive practices by merchants. While big-box merchants and convenience stores are declaring this a victory against the financial services industry, if the amendment survives in conference committee, consumers and small banks will be the real losers.

Summary

Fresh off of the most substantial national liquidity crisis of the last generation and the enactment of sweeping credit card regulation in the form of the Credit CARD Act, Congress continues to deliberate, with a continuing drumbeat of support from lobbyists, a set of new regulations for credit card companies. These proposals, offered in the name of consumer protection, seek to constrain the setting of “interchange fees”— transaction charges integral to payment card systems—through a range of proposed political interventions. This article identifies both the theoretical and actual failings of such regulation. Payment cards are a secure, inexpensive, welfare-increasing payment mechanism largely unlike any other in history. Rather than increasing consumer welfare in any meaningful sense, interchange fee legislation represents an attempt by some merchants to shift costs away from their businesses and onto card issuing banks and cardholders. In particular, bank-issued credit cards offer a dramatic improvement in the efficiency and availability of consumer credit by shifting credit risk from merchants onto banks in exchange for the cost of the interchange fee—currently averaging less than 2% of purchase value. Merchants’ efforts to cabin these fees would harm not only consumers but also the merchants themselves as commerce would depend more heavily on less-efficient paperbased payment systems. The consequence of interchange fee legislation, as Australia’s experiment with such regulation demonstrates, would be reduced access to credit, higher interest rates for consumers, and the return of the much-loathed annual fee for credit cards. Interchange fee regulation threatens to constrain credit for consumers and small businesses as the American economy begins to convalesce from a serious “credit crunch,” and should be accordingly rejected.

I share Prof. Ribstein’s concerns about the federalization of corporate governance contained in the Dodd bill.  Though Senator Carper wasn’t able, in the end, to get the proxy access provisions out of the Dodd Bill, which I think were the most troubling, we did eliminate another of Senator Schumer’s ideas. (The corporate governance provisions of the Dodd bill were taken from Sen. Schumer’s “Shareholder Bill of Rights.”)  The initial draft of the Dodd Bill included a restriction prohibiting any publicly traded company from having a staggered board.  I suspect we have the good work of Senator Carper and Congressman Castle’s offices to thank for their continued work against that provision.  The option to have a staggered board is part of the Delaware brand’s advantage.  Nearly 80% of Boards and their shareholders used to embrace the staggered election approach, since then some (but not most) companies’ shareholders have pushed, and been successful, in changing to annual elections under existing rules, a development which Delaware’s freedom-of-contract philosophy embraces.  Now roughly 50% of publicly traded firms have staggered boards.  I should add…this, like most corporate governance changes, is not exclusively a Delaware issue…as Delaware is home to only 50% of publicly traded companies and 60% of the Fortune 500.

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I purchased my copy of Peter Klein’s latest —  The Capitalist & The Entrepreneur: Essays on Organizations and Markets — today.  It is available for purchase here and here.  And if you wont to sneak a peak, you can see the full version here.  The role of the entrepreneur is one of the more under-theorized subjects in economics and, in turn, law and economics.  Peter is an insightful and thoughtful economist with the right toolkit to bring to bear on this project.  He is one of my favorite thinkers about these subjects (he is also my second favorite Klein, no small compliment in these quarters).   I’m greatly looking forward to the book.

Read the full piece here.