NCLIR Releases CFA Mega-Merger Study
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NCLIR Releases CFA Mega-Merger Study At a May 2 Capitol Hill press confer- "Most of these funds made their way ence organized by the National back into the investment stream, yet Council for Low Interest Rates, CFA Ex- still placed upward pressure on rates," ecutive Director Stephen Brobeck re- Brobeck said. "A portion of the funds re- leased a study linking the 1984 merger ceived by shareholders of target com- boom to recent interest rate hikes. panies was used to purchase goods or This event kicked off a legislative con- services or to pay capital gains taxes, ference on high interest rates featuring thus 'leaking out' of the stream. Another speeches by Sen. Alan Cranston (D-CA), larger portion was reinvested in stocks Sen. Max Baucus (D-MT), and Operat- or bonds, where it was less available to ing Engineers President and NCLIR banks." Chairman J. C. Turner. Besides Brobeck Moreover, even when the funds were and Turner, Rep. Geraldine Ferraro deposited in banks, there was always a (D-NY), Rep. John LaFalce ID-NY), and delay of several days to several weeks AFL-CIO Director of Housing and Mone- between the borrowing and the tary Policy Henry Schechter spoke at deposits. the press conference. At the press conference and follow- ing legislative conference, several other factors were cited as causing high rates. Turner blamed "tight-money policies Both in number and endorsed by the Reagan Administration dollar value, the merger and maintained by the Federal Reserve Board." Rep. Ferraro pointed to huge binge of the first four Treasury borrowings necessary to cover months of 1984 was Federal deficits. Sen. Cranston endorsed the NCLIR's Attending the NCLIR Capitol Hill press conference in early May were (left to right); unprecedented, legislative agenda as "a good place to Henry Schechter, AFL-CIO Director of Housing and Monetary Policy; Rep. John according to a new start" in bringing down interest rates. LaFalce (D-NY); CFA Executive Director Stephen Brobeck; Rep. Geraldine Ferraro The cornerstone of this program is rein- (D-NY); Jack Gillis, CFA Information Director; and Operating Engineers President CFA study linking the stating the Credit Control Act of 1969, and NCLIR Chairman, J. C. Turner. 1984 merger boom to with improvements, which according to Turner, "would restrict credit for cor- The NCLIR is a broad-based coalition Association, United Auto Workers, recent interest rate porate takeovers, for speculative invest- which includes CFA, the Operating En- Carpenters Union, and other national hikes. ments, for international money-market gineers, National Farmers Union, groups. speculation, and for other non-essen- American Public Power Association, (Copies of the merger study can be purchased from tial purposes." National Rural Electric Cooperative CFA for $5 each; free to CFA members.) The CFA study revealed that both in numbers and dollar value, the merger binge of the first four months of 1984 was unprecedented. 1983 was a year of Consumer Federation of America near-record merger activity, yet the will hold its Fourteenth Annual value of the big mergers in thisyearwas Awards Dinner on Thursday, June 14 to far exceeded by those in 1984. In 1983, 14th Annual honor distinguished consumer leaders there were 42 deals of at least $200 mil- in Congress and the public sector. Sena- lion each, worth a total of $26.0 billion, Awards tor Paul Tsongas and Congressman according to the study. Through April John Dingell will be awarded the Philip 26 of 1984, there had already been at Hart Public Sendee Awards, and Arnold least 32 mergers of this size, completed Dinner Mayer, Vice President of the United or near completion, worth more than Food and Commercial Workers Inter- $41 billion. The latter figure included national Union, will receive the Philip the $13.4 billion SOCAL paid for Gulf, Hart Distinguished Consumer Sendee and the $10.1 billion Texaco paid for Award. The Outstanding Consumer Getty. Media Service Award will be presented These mergers, the CFA study points to Roberta Baskin of television station out, increased the demand for credit in WLS/ABC in Chicago. two ways. Before making the 32 acquisi- tions, aggressor companies arranged In addition to honoring CFA's award lines of credit with banks totalling, in recipients, the dinner is the major fund- early 1984, at least $62.4 billion. These raising event of the organization. If you loan commitments restricted the ability would like to attend, contact Karen Epp- of banks to make medium and long- steiner, CFA, 1314 14th Street, N.W., term loans, thus curbing the availability Washington, D.C. Z0005 or call (202) of credit and pushing up rates. 387-6121. The reception will begin at 6 At least $29.9 billion of credit lines p.m., followed by a buffet dinner at 7 were actually drawn down to complete p.m. The event, which will also feature deals. These loans exceeded the record music and entertainment, will be held in borrowing in all of 1981 for larger the Congressional/Senate Room of the mergers, according to the study. Capital Hilton Hotel, Washington, D.C. Senator Tsongas Represen ta five Dingell CONSUMER FEDERATION OF AMERICA Page 2 May 1984 • CFAnews The Truth About Formaldehyde: Everything You Credit Card Surcharges Wanted To Know But by David I. Greenberg, poor people who do not qualify for Were Afraid To Ask CFA Legislative Director credit cards, people who pay by check, and people who pay cash thinking that REPRINTED WITH PERMISSION FROM they are avoiding the high costs of What is formaldehyde? Does formaldehyde cause cancer? Is there a safe level of USA TODAY. credit cards. exposure? These are the questions consumers are asking in the light of Fed- Editor's Note: The ban on credit card It would be simple to end this hidden eral government regulations concerning the use of formaldehyde in foam insula- surcharges—which was enacted in t976 tax on cash customers by allowing mer- tion and pressed wood products. These are also the questions answered in a new and extended in 1978 and 1981—ex- chants to charge credit card users for all pamphlet, available from CFA. pired in early 1984. American Express, the costs of their cards. Such a sur- Formaldehyde—Everything You Wanted to Know But Were Visa, and MasterCard are furiously lob- charge would not create any new costs, Afraid toAskis part of an educational campaign CFA is develop- bying Congress to re-enact a ban, which it would just end merchants' need to ing to help consumers cope with air pollutants in their homes. may come up for a vole this summer. raise all prices in order to recover the "Air pollution may be 10 times greater inside our homes as out- fees they pay to credit card companies. Everything You Wanted Legislative Director David Greenberg To Know side," said Anne Averyt, Product Safety Director for CFA, and Would discounts for cash work better explained CFA's opposition to a credit But Vfcre Afraid author of the formaldehyde pamphlet. "As we make our homes than credit surcharges? To Ask card surcharge ban in the March 4 edi- more energy efficient and reduce the exchange of air, while in- It's difficult to know, since less than tion of USA Today, reprinted below. creasing the number of toxic products in our homes, we maybe 10 percent of retailers offer such dis- trapping harmful pollutants and jeopardizing our health." WASHINGTON—The debate about counts, even though they have been credit card surcharges is over who legal for 10 years. Formaldehyde is one indoor air pollutant that has received should pay for the costs of credit cards. To use a cash discount, merchants considerable national attention. It is used as an adhesive or (tight now, without knowing it, cash must first raise the prices of ail their "glue" in the manufacture of urea-formaldehyde foam insula- consumers are paying billions of dollars goods to reflect credit card costs and tion (UFFI) and pressed wood products like plywood, particle- in costs created by credit card users. then offer cash customers a lower price. board, medium density fiberboard and panelling. It can cause a That's because one of the costs of credit Why not just leave prices as they are number of short-term effects such as headaches, nausea, and raids is hidden in the overall prices of and charge credit card users for the respiratory problems, and has been linked to cancer in laboratory studies. goods in tin? marketplace. additional costs they alone create? The CFA pamphlet, the first of its kind to explain the causes, risks, and solutions This hidden credit card cost comes If we did that, could credit sur- for formaldehyde problems, is available free from CFA. Send a self-addressed from a fee that credit card companies charges be used as a sneaky way to raise stamped business envelope to Formaldehyde, Consumer Federation of America, (-barge merchants for each credit card prices for credit cards without giving 1314 14th Street, N.W., Washington, D.C. 20005. Limited bulk quantities are avail- sale. The fee averages 3 percent, but can cash customers a break? able on request. be as high as 6 percent of each credit Unlikely. The retail market is intense- card purchase. ly competitive. Any merchant trying to in 1980, merchants paid $1.5 billion in get away with the unfair use of sur- these Ices to American Express, Visa charges would lose business to com- and MasterCard. Like all merchants' petitors who could offer both cash and costs of doing business, the fees end up credit customers a better deal. Beer Bill: in the prices of goods.