Tell Us It Ain’t So?

With all the unprecedented mismanagement by the nation’s banks, including thousands of Visa and MasterCard member banks which collectively owned both giant credit card associations, are TARP government funds being used to bailout Visa Inc?  From today’s press release, we learn that Visa Inc. “has deposited $1.1 billion into the litigation escrow account…”   Where did this enormous capitalization come from?  With little oversight, is it possible that the government’s TARP bailout funds helped pad Visa’s litigation account?

Visa Inc. Funds Escrow Account (via corporate press release)

Transaction has the effect of a $1.1 billion Class B share repurchase

SAN FRANCISCO, Dec. 22 /PRNewswire-FirstCall/ — Visa Inc. (NYSE: V – News) today reported that it has deposited $1.1 billion into the litigation escrow account previously established under the company’s retrospective responsibility plan (the “Plan”).

Under terms of the Plan, when Visa funds the litigation escrow its U.S. financial institutions, the sole holders of Class B shares, bear the expense via a reduction in their as-converted share count.

“This transaction not only adds the necessary funds to our litigation escrow, but effectively acts as a $1.1 billion Class B share repurchase program,” said Joseph Saunders, Visa’s chairman and chief executive officer. “It has always been our stated intent to return excess cash to our shareholders in the form of dividends and share repurchases. We are obviously pleased that our strong financial position and excess cash flow allows us to do this.”

The Plan was established at the time of Visa’s initial public offering. It provides coverage and a payment mechanism for judgments or settlements in specific U.S. legal cases, protecting Visa and its Class A and Class C shareholders from any direct losses.

The deposit of the funds into the escrow account reduces the conversion ratio applicable to Visa’s Class B common stock outstanding from 0.7143 per Class A share to 0.6296 per Class A share. On a converted basis, the 245,513,385 Class B shares currently outstanding are equal to 154,566,658 Class A shares of common stock.

The deposit of loss funds has the effect of a repurchase of 20,800,824 Class A common share equivalents from the Company’s Class B shareholders. The amount paid per share represents the volume weighted average price (VWAP) of the Company’s Class A common shares for the 15-day trading period December 1, 2008 to December 19, 2008.

About Visa: Visa operates the world’s largest retail electronic payments network providing processing services and payment product platforms. This includes consumer credit, debit, prepaid and commercial payments, which are offered under the Visa, Visa Electron, Interlink and PLUS brands. Visa enjoys unsurpassed acceptance around the world and Visa/PLUS is one of the world’s largest global ATM networks, offering cash access in local currency in more than 170 countries. For more information, visit www.corporate.visa.com

 

    Contacts:
    Jack Carsky or Victoria Hyde-Dunn, Investor Relations
    Visa Inc.
    Tel: +1 415 932 2213
    E-mail: ir@visa.com

    Paul Cohen or Sandra Chu, Media Relations
    Visa Inc.
    Tel: +1 415 932 2564
    E-mail: globalmedia@visa.com

[source, Visa Inc. press release]

“Visa adds $1.1 bln to litigation fund” (via Reuters)

Excerpt.

Visa Inc, the world’s largest credit card network, said on Monday it set aside an additional $1.1 billion to cover legal expenses.

Before becoming a public company in March, Visa set aside $3 billion to cover lawsuits.

Under the terms of its initial public offering, Visa’s bank shareholders agreed to have their stake diluted to fund litigation in order to save other shareholders from direct losses from lawsuits in certain U.S. court cases.

Click here to read more

If You Thought Visa and MasterCard’s Fees Were Unfair…

Visa and MasterCard’s member banks have unfairly forced millions of merchants and America consumers to spend nearly $60 billion during the past year in unjustified and unfair credit card merchant fees.   In today’s highly advanced technological society, the interchange fees are as antiquated as were those manual credit card receipt imprinters.  

But, this is only the beginning.  Take a look at how easy the banks (which owned Visa and MasterCard – the two giant credit card associations with 80% market power) have it when securing billions more from us, the citizens who authorized the TARP $750 billion bailout. 

Click here to see if you too can get in on this extraordinary boondoggle.  Just rename your business as a bank holding company, or, add the name “Wall Street” as we did in parody.

The following is the actual application.   If you thought it was easy for Visa and MasterCard’s member banks to wield their monopolistic power and force retailers and consumers to pay about 1.7% for most electronic payment transactions, look at this.  It seems that applying for a charge card with your local retailer demands more questions and due diligence than this.   It will take you longer to fill out this standard auto lease areement, than the below application, unless you have an “authorized designee” who can do it as your proxy.

Application for TARP Capital Purchase Program (CPP)

Please complete the following information and follow the submission instructions as described

on your Federal banking agency’s website. In addition to completing the information on this

form, please provide a description of any mergers, acquisitions, or other capital raisings that are

currently pending or are under negotiation and the expected consummation date (no longer than

1 page).

In the event the applicant files an application with the appropriate Federal banking agency

prior to the availability of the investment agreement, the applicant must file an amended

application which includes updated responses to any items in the application that required prior

review of the investment agreement.

Institution Name:

Address of Institution:

Primary Contact Name:

Primary Contact Phone Number:

Primary Contact Fax Number:

Primary Contact Email Address:

Secondary Contact Name:

Secondary Contact Phone Number:

Secondary Contact Fax Number:

Secondary Contact Email Address:

RSSD, Holding Company Docket

Number and / or FDIC Certificate

Number, As Relevant:

Amount of Preferred Shares

Requested:

Amount Of Institution’s Authorized

But Unissued Preferred Stock

Available For Purchase:

Amount Of Institution’s Authorized

But Unissued Common Stock:

Amount Of Total Risk-Weighted

Assets As Reported On The

Holding Company’s Or Applicable

Institution’s Most Recent FR-Y9,

Call Report, Or TFR, As Relevant:

Institution Has Reviewed The

Investment Agreements And

Related Documentation On

Treasury’s Website (Yes/No):

Describe Any Condition, Including

A Representation Or Warranty,

Contained In The Investment

Agreements And Related

Documentation, The Institution

Believes it Cannot ComplyWith By

November 14, 2008 And Provide A

Timeline For Reaching

Compliance

 

Type of Company:

 

Signature of Chief Executive

Officer (or Authorized Designee):

Date of Signature:

 

 

Crude closes at $36.22 a barrel, down 59% this year

The Federal Reserve  lowers interest rates to near zero, oil prices plunge 60% in under a year, Chrysler shuts all its U.S. plants for 30-days, yet merchant interchange rates and Visa and MasterCard’s discount fees stay sky high.  Why?

“Throwing money at credit card industry not the answer” (via Daily News)

Now we learn that Treasury Secretary Henry Paulson has a plan to save Christmas by using taxpayer funds to bolster the credit card market. But before we shower taxpayer dollars indiscriminately at every down-at-heel, ragamuffin credit card lender, we should take a hard look at how they got themselves into so much trouble. Just throwing money at the credit card industry without requiring a systemic change in how it does business is merely asking for a repeat of the crisis.

The card industry’s business model is the heart of the problem and needs to change. Just as with subprime mortgages, the credit card business model creates a perverse incentive to lend indiscriminately and let people get into so much debt they can’t pay it back. 

Card issuers make money on every credit card transaction, regardless of whether the consumer pays interest. The bank that has its name on the card receives around 2% of every transaction in a fee paid by the merchant (and passed on to all consumers in the form of higher prices). This is called the interchange fee. The banks will collect about $48 billion in interchange fees this year.

Because interchange is based on transaction volume, it creates an incentive for banks to issue as many cards as possible, regardless of the creditworthiness of the borrower. So, by creating a huge revenue stream unrelated to interest, interchange encourages banks to engage in reckless lending – and virtually every credit card loan is a “liar loan” with no income verification.

Click here to read more.

“What Bank Mergers Mean for Credit Cards” (via Center For American Progress)

In the case of credit card issuers, however, ramping down antitrust enforcement is a mistake—a merger is forever and the cost of increased concentration…. Click here to read more. 

“Culture Shock for IPOs: Pay Disclosures ” (via WSJ)

From The Wall Street Journal on Dec 8th, by reporter Lynn Cowan  [see link], is an article about executive pay.  The executive excesses at MasterCard and Visa could be further signs that the two giant credit card cartels are generating massive revenues from its discount interchange fee and other monopoly-generated charges. 

Excerpt:

MasterCard’s final prospectus in May 2006 contained 15 pages describing how much and what types of  compensation executives were paid, but wasn’t very specific about how bonuses or incentives were determined, listing 18 possible goals, from stock price to revenue, that could be used.

Two years later, rival Visa’s March 2008 IPO documents contained an executive compensation section that totaled 28 pages, and included how its executives’ pay compared to peer companies; the names of those peers; and what measurements, such as net income, that are used to determine executives’ bonuses.

MasterCard wasn’t spared forever. After the rule took effect, its next proxy statement’s executive-pay section had doubled in size to 30 pages, and contained much of the same level of detail that Visa provided.

For example, instead of listing 18 possible goals, it specified that net income and return on equity targets would be the basis of cash bonuses.

Visa declined to comment.

MasterCard spokesman Chris Monteiro said the disclosure process “certainly took time and effort” but resulted in a “transparent and detailed view” of the company’s compensation structure.

$25 Oil vs. $60 Billion Visa & MasterCard Interchange Fees?

The greedy banks and auto industry execs failed their shareholders and Americans. Their mismanagement is being rewarded with billions, or is it trillions in free money?

Everything has turned upside down.

Accountability is irrelevant and Washington lobbyists are all powerful.   Look at today’s Merill Lynch & Co assessment that oil might soon be trading at just $25 a barrel, according to a Bloomberg report.   If gas can plunge from nearly $150 to under $50 in just a few weeks, due to the economic seizure, why are the Visa and MasterCard merchant interchange fees – fueled by its member banks – continuing to rise? 

Something is very broken and wrong.

Tulips, Silver, Housing Market and Oil Speculators Have Nothing on MasterCard and Visa