Charging Ahead: Exploring issues in Financial Services

Feb 27, 2007Mar 08, 2007
B-339 Rayburn House Office Building


Session One: Tuesday, February 27th
Markets for Payment Systems
Andrew P. Morriss
H. Ross & Helen Workman Professor of Law and Business
University of Illinois

Session Two: Tuesday, March 6th
Sarbanes-Oxley: 5 Years Later
Houman Shadab
Senior Research Fellow
Mercatus Center at George Mason University

Click Here for Houman Shadab's powerpoint presentation. 

Session Three: Wednesday, March 7th
The Economics of Consumer Lending
Todd Zywicki
Professor of Law
George Mason University

2006 was a banner year for U.S. financial institutions. With record growth in both the capital markets and credit industries, many of the gloomy predictions offered at the turn of the century seem to have faded away. However, underlying this impressive growth, there are still many issues that industry experts and policymakers are looking to resolve.

It has been nearly five years since the passage of the landmark Sarbanes-Oxley Act. Many scholars agree that the legislation has helped to increase the transparency and accountability of a system gone awry in earlier part of the decade. The cost of implementation, however, has led to questions regarding the effectiveness or necessity some specific provisions of the law. With concerns being voiced regarding its effects on small business and the competitiveness of U.S. capital markets, many policymakers are reexamining their stance on the 2002 legislation.

Another important matter facing Congress are issues regarding consumer lending. With Americans taking on record amounts of debt, many in congress are concerned with what they see as a rise in irresponsible loan practices. Legislation is being debated that looks to protect unsuspecting or unsophisticated borrowers from loans that are seen as overpriced and fraudulent. However, many experts warn that such measures could be counter productive, and could end up hurting the very people they claim to help.

In recent years, credit and debit card payment systems have also been the focus of significant government inquiries and actions. Card-based payment businesses in Asia, Australia, Europe, and North America have been investigated for their methods of determining interchange fees, exclusivity arrangements, no-surcharge rules, honor-all-cards rules, and a host of other policies. Critics charge that ineffective competitive forces in the market are allowing companies to charge exorbitant fees. A few countries have gone as far as to regulate significantly lower fees. While there is no such policy in the U.S., legislation has picked up speed in congress and it is expected to be a prominent issue in the coming year.

In order to provide some economic insights into these difficult questions, the Mercatus Center will host a three day course for congressional staff. Participants will address such questions as:

• What is the current state of the Sarbanes-Oxley debate? What are the pros and cons? What possible changes might lie ahead?

• How are Americans handling the accumulation of record amounts of debt?

• What does economic research tell us about the market for consumer loans and the effects of legislation designed to protect consumers?

• How do credit card payment systems work and what insights can economics provide to help clarify this complicated issue?