For this week’s monopoly round-up, as usual I’ll discuss the good and bad monopoly-related news of the week, plus what’s happening in the election. More smoke signals on Harris and Lina Khan, oil prices spiked, the government broke the organ transplant monopoly, White House chief of staff Jeff Zients and Sheryl Sandberg were exposed for document destruction to cover up for misdeeds at Facebook, and more.

First, though, I want to highlight a little-noticed fight over the Federal Reserve’s attempt to consolidate more financial power into the hands of large banks, and the populist regulator - Rohit Chopra - who is single-handedly holding it up. Because I think in many ways, this conflict, which is largely within the Democratic Party, illustrates the broader fight happening in America. It’s hidden, seen only in flashes, but it’s about all the money and power in the world.

We’ll start with this story on Fed Chair Jay Powell’s choice to transfer $1.1 trillion to large financial institutions over the past two and a half years when he helped raise interest rates, which is about $3000 from every single American.

How did this transfer happen? “Lenders got higher yields for their deposits at the Fed but kept rates lower for many savers,” wrote the FT, with subsidies higher for big banks than small ones. There’s a lot of discussion in the media about whether rates should go up or down, but for some reason, the trillion dollar transfer doesn’t come up.

The Fed is, at its core, a price-setting agency, choosing the value of loans and bonds throughout the economy, as well as regulating the banks who manage that credit through direct supervision and implied bailouts. The Fed is thus an important center of commercial power, and banks are privately run government institutions, chartered to handle payments and credit.

Powell sees value in helping large banks garner more profits, and uses his price-setting capacity to centralize power. In doing so, he’s just reflecting a broadly held ideological view among monetary economists and lawyers valuing efficiency in the form of scale over resiliency or commerce. For instance, Vice-Chair Michael Barr, a classic Democratic neoliberal establishment lawyer with a background in consumer protection, gave a speech in September justifying relaxing requirements on large banks, centering his view on the importance of efficiency as a value.

As a result of this philosophy and the policies it implies, the Fed deprives all sorts of businesses of capital by allowing firms like Bank of America and JP Morgan - who don’t really do commercial lending - to hoard lending capacity, versus the thousands of smaller banks who do. One reason for the housing shortage, for instance, is that there aren’t enough banks who specialize in lending to build apartment buildings.

This policy framework has signposts. For instance, JP Morgan CEO Jamie Dimon is a billionaire, purely through stock grants of a bank that is backed by the government, and Fed policy choices, like allowing JPM to buy distressed lender First Republic with government assistance even though there were higher offers, or the Fed refusing to implement executive compensation for large banks rules mandated by Congress. Dimon’s level of wealth accumulation in what is effectively a government entity is pure extraction. Or to put it another way, it’s a policy choice to prioritize the personal wealth of JP Morgan’s CEO over the broad distribution of credit.

As another example, take payments. The Fed was originally created to clear checks in 1913, and is supposed to manage our payments system. In case you haven’t noticed, payments in the U.S. today are slow and fragmented, controlled by large banks. The Fed has pretended to try to address this problem by building a network called FedNow, which facilitates real-time payments. But it has intentionally sabotaged it, refusing to even tell members of Congress if anyone is using FedNow.

Most of our bank regulators operate the way Powell does, harming business by concentrating money in the hands of banks who steward it poorly. It’s not just the Fed, the other main bank regulator, the Office of Comptroller of the Currency, is often worse. Earlier this week, for instance, Acting OCC chief Michael Hsu - a Janet Yellen disciple - had his agency file a brief with a court asking a judge to invalidate an Illinois law restricting the right of credit card companies to charge certain fees. “The Illinois Interchange Fee Prohibition Act,” it said, “is an ill-conceived, highly unusual, and largely unworkable state law that threatens to fragment and disrupt this efficient and effective system.”

That is a remarkable legal statement, considering the fact that a few weeks ago, the Department of Justice Antitrust Division sued Visa for monopolization, over high fees, no innovation, and coercive behavior towards business. But it’s pretty standard - once again we see the “efficiency” frame peaking out. I generally cover the antitrust agencies, which means I’m often positive on the Biden administration policy framework. But it’s very important to acknowledge that the regulators I generally observe control about 0.02% of the Federal budget, and most of the governing apparatus has continued to turn the U.S. into a Soviet-ized apparatus.

And that brings me to the fight over something called Basel III, which is an attempt started after the financial crisis to make big banks less risky. The idea is large financial institutions have to keep a larger buffer in case they suffer losses. That would make large banks less profitable and safer, and move capital to smaller institutions. It’s a fairly obvious regulation. It wouldn’t reduce lending, but it would reduce the need for bailouts. There is a cost, in that bank CEO bonuses and share buybacks might be reduced.

For years, the Fed pretended it was going to impose stricter rules on big banks, until Powell met privately with large banks earlier this year and relaxed them. It was a big scandal, but the four Democrats appointed to the Fed board - Philip Jefferson, Lisa Cook, Michael Barr, and Adriana Kugler - are afraid to dissent.

That said, the Fed has to negotiate these rules with other banking agencies, notably the OCC and the the Federal Deposit Insurance Corporation (FDIC). But the Fed has traditionally been the cool kid of the banking world, massively prestigious, versus the beta types at the other agencies. So their agreement is considered pro forma. Moreover, Powell got agreement from the OCC’s Hsu and FDIC Chair Martin Gruenberg to go along. Seems like just one more sad give-away.

Enter Rohit Chopra, who is the head of the Consumer Financial Protection Bureau and the former commissioner at the Federal Trade Commission who originally hired Lina Khan. Chopra is despised by bankers, having coined the term “junk fee.” He’s been an extraordinary regulator, banning Navient from student loan servicing and disallowing the use of medical debt in credit scores. He also had the most trolling opening line of a speech from a public official I’ve ever read, when he spoke at his alma mater, Wharton in 2022. “Today,” he said, “my classmates, students, and other alumni are now financiers, convicted felons, and everything in between.”

Chopra, in other words, is not someone who gets intimidated by complexity, political pressure, or suave bankers. And as the head of the CFPB, he’s on the board of the five member FDIC, two of whom are Republicans who have pledged to vote no on the Basil reforms because they don’t think it’s enough of a give-away. Chopra has signaled he’s also a no, though in his case it’s because it’s too generous to big banks.

And that means that either Powell changes the proposal, gets a Republican vote, or the Basel giveaway to large banks is dead. There’s immense rage in the industry and among regulators at Chopra’s stance, but a few hardy souls in the banking world understand the point.

Access to capital is a monopoly issue. Right now, our financial system facilitates low cost capital to dominant players while limiting smaller firms and ordinary people to either no credit or high cost credit. Cheap capital for incumbents is a barrier to entry across the board in every industry, and inhibits entrepreneurs from getting into all sorts of markets, from homebuilding to aerospace to search.

And ultimately, that’s because Jay Powell and the smug economists at the Fed like it that way. As the anti-monopoly revolution continues, we’ll have to smash the independence of the Fed, because while that’s framed as some sort of neat and clean attempt to insulate the central bank from politics, it’s really just a variant of the monopoly-friendly consumer welfare standard in another guise. Oh, and we should fire Michael Hsu as well while we’re at it.

And now, the good and bad news of the week, plus what’s happening in the campaigns related to market power...