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Banks Should Back Single Credit Card

NEW YORK — The U.S. government wants banks who sit on the board of either Visa or MasterCard to issue 100 percent of their new cards through that association, in its strictest proposal yet during an antitrust trial.

As the rules stand now, banks can have significant stakes in both networks, a policy the government claims keeps Visa and MasterCard from truly competing with each other.

Visa and MasterCard, which are owned by major banks, also should repeal laws now blocking their member banks from issuing cards from rivals like American Express Co. (AXP.N) and Morgan Stanley Dean Witter & Co. (MWD.N) unit Discover, the government said in a proposed final judgement filed on Friday.

The card networks are on trial in a Manhattan federal court this summer after the government sued them for allegedly harming consumers by preventing industry competition and dampening innovation. Visa and MasterCard together control more than 75 percent of U.S. credit card sales.

The latest proposals are stricter than originally expected. Previously, the government had indicated it wanted banks who sit on the governing board of MasterCard or Visa "dedicate'' around 80 percent of their card portfolio to that brand.

MasterCard decried the government's proposed remedies as preposterous.

"The Justice Department has come forward with what I would call a preposterous remedy that ties the hands of banks that elect to sit on the board of either membership association,'' Noah Hanft, MasterCard U.S. counsel, said. "That would result in less choice not only for banks but also for consumers.''

Visa spokesman Kelly Presta said the remedy "looks like it could have been written by American Express. American Express is the only one who will benefit.''

The card networks have alleged throughout the trial that American Express lobbied the Justice Department to sue Visa and MasterCard, to tap into their bank networks. American Express has countered that the networks are only trying to distract attention from their own anti-competitive practices.

Other banks who are members of one of the two card networks but are not on the governing boards would not have to choose to

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