After two consecutive outsized jumps in consumer credit in the months of March and April, when gas prices surged and inflation resumed its track higher, lifting most prices as a result of the war in Iran, moments ago the Fed published itslatest consumer credit (G.19) report for the month of May and it was a doozy: instead of the expected $17.5BN increase, in May total consumer credit unexpectedly shrank for the first time since November 2024.
The move was driven by a notable slowdown in nonrevolving credit, coupled with the biggest drop in revolving (credit card) debt since late 2024.
Specifically, car and student loans (collectively non-revolving credit), rose by a modest $5.1 billion.
It was unclear what was behind the muted rise: recall that for the first quarter of 2026, student loans surged by $28 billion while auto loans posted a $2.4 billion decline, perhaps due to the very high interest rates on the debt (we will get an update for Q2 next month).
What is interesting, is that while auto loans have barely budged since late 2023, staying around 1.55 trillion for nearly three years, student loans have resumed their ascent, and after a modest decline in late 2023, student loans are once again at all time highs just shy of $1.9 trillion.
At the same time, revolving credit, which mostly means credit card debt, unexpectedly sharnk by a notable $5.3 billion, following two months of $10BN+ increases.
It will be interesting to see if the paydown of credit card debt reflect in weaker retail sales for the month of June, which we will know when the report comes out in one week's time.
Finally for those keeping tabs, after a modest decline in the previous two quarter, the average interest rate on credit card accounts assessed interest rose to 22.15%...
... a level last seen three years ago, when the Fed rates was almost 2% higher, which confirms our long-running observation that credit card rates go up but they never go down.
One final observation: after a period of about 6 years when the average amount financed by auto loans was around $25,000 (from 2008 to 2014), this amount has grown dramatically, and in Q1 2026 it hit a new record high of $42,500, the highest on record. Just in case there was confusion what is behind the relentless increase in car prices...
Iraq formally agreed to US demands to halt dollar flows to Iran and its network of militias in the country, The Wall Street Journal reported on Wednesday, citing government officials. The decision comes in the wake of increased pressure on Iraq to limit dollar liquidity for Iranian proxies.
As part of the agreement, the Trump administration has voiced a readiness to lift a suspension of US currency shipments to Baghdad, which has been in place for four months and left Iraq in dire need of dollar-denominated cash from its oil sales.
The Federal Open Market Committee (FOMC) released its June meeting minutes on Wednesday, indicating that interest rate cuts are likely to occur even later than expected, as no changes were anticipated in the target range through the beginning of 2027 and one rate cut in the second quarter of next year.
The report added that policymakers were divided last month over the trajectory of interest rates. "A few participants commented that ... there was a case for raising the target range for the federal funds rate, but those participants indicated that they supported maintaining the current target range at this meeting."
The minutes continued by noting that core goods price inflation had "risen relative to a year earlier," which the staff judged as largely reflecting the effects of tariffs and AI-related price pressures.
The Mark Zuckerberg-led company arrived at the gigantic sum — which is nearly as large as the company’s entire market cap — based on how the attorneys general of California, Colorado, Kentucky and New Jersey have argued penalties should be calculated if they win the case.
The two sides are scheduled to face off in Oakland federal court on Aug. 18.
“A sanction of that size has no analog in the history of consumer protection enforcement,” Meta’s attorneys wrote in the late Monday filing, adding that the states’ proposals were “unsubstantiated” and “outlandish.”
A total of 29 states are attached to the lawsuit against Meta, which accuses the company of major violations of the Children’s Online Privacy Protection Act. The legislation bars the collection of data from underage users without parental consent.
They further allege that Facebook and Instagram were designed to be addictive to kids, causing a wave of issues ranging from anxiety and depression to self-harm and even suicide.
California, Colorado, Kentucky and New Jersey are also targeting Meta for allegedly misleading the public about safety risks.
Meta, which has strenuously denied wrongdoing, said the four states’ proposed remedies go far beyond the scope of the case. They also accuse Meta of improperly double- or even triple-counting teen users who allegedly experienced harm based on how long they use Facebook and Instagram each day.
“These remedies have no basis in the record in this case, are entirely unmoored from the claimed deceptive statements or unfair practices, are based on features this Court has held are immune from liability under Section 230, and violate the legal and due process limits on the scope of [Unfair Practices Act] penalties,” the company’s lawyers wrote, referring to the section of the Communications Act of 1934 that broadly protects online platforms from being held liable for content posted by their users.
While the states’ specific proposals remain under seal, plaintiff attorneys said at a court hearing last month that they were guided by local laws and the estimated number of underage users in each state who were affected.
“Our lawsuit alleges Meta has prioritized profits over the safety of kids and fueled the mental health crisis we see impacting a generation of American children,” a spokesperson for the California attorney general’s office said in a statement. “The California Department of Justice looks forward to holding Meta fully accountable at trial in August.”
The $1.4 trillion in penalties is nearly equal to Meta’s entire market cap.Bloomberg via Getty Images
Representatives for the attorneys general of Colorado and New Jersey declined comment. Kentucky’s AG did not immediately respond.
Meta shares were up 3% in trading Tuesday.
US District Judge Yvonne Gonzalez Rogers, who is overseeing the case, shot down an attempt by Meta to get it thrown out on June 30, stating in part that there were still material factual disputes as to whether the company’s apps were designed to be addictive.
The company suffered major legal setbacks earlier this year in back-to-back court losses – one in California state court that found Meta liable for fueling social media addiction for a woman identified as KGM, and another in New Mexico, where a jury found that Meta failed to protect kids from online sex creeps and misled the public about safety risks on its apps.
Still, the $1.4 trillion penalty is likely far higher than what Meta will ultimately face in the case brought by state AGs.
In the KGM case, Meta and fellow defendant Google were ordered to pay a total of $6 million in damages, with Meta on the hook for 70% of that sum.
In New Mexico, Meta was ordered to pay $375 million in penalties. Company spokesman Andy Stone touted the verdict as “just a fraction of what the state sought.”
Military-style rifles, flash grenades andeven powerful sonic devicesnicknamed the “Voice of God” are among the weapons owned by police departments at California’s public colleges and universities.
An investigation found schools have failed to comply with a state transparency law requiring them to disclose what they own, how the equipment is used, and to give the public an opportunity to weigh in.
CalMatters reviewed records from all 148 University of California institutions and found several campuses only updated or published required reports after being contacted by reporters.
California lawmakers approved the military equipment transparency law in 2021.Los Angeles Times via Getty Images
Lawmakers approved the military equipment transparency law in 2021 following nationwide calls for greater oversight of police departments.
Under the law, campus police can only acquire military equipment if officials determine there is no reasonable alternative for protecting public safety.
Schools are also required to publish annual inventories, disclose how often the equipment is used, and hold public meetings where students and community members can ask questions or voice concerns.
According to CalMatters, compliance has been uneven.
Some colleges had not posted required inventories online, while others omitted details required by law, including the quantity of equipment or manufacturer descriptions.
Several campuses also acknowledged they either had not held the required public forums or could not demonstrate how those meetings had been publicized.
The investigation also found inconsistencies over which weapons should be disclosed.
San Jose State University and San Francisco State University reported owning AR-15-style rifles, even though California State University’s systemwide military equipment policy does not specifically authorize them.
Cal State spokesperson Amy Bentley-Smith told CalMatters the rifles are considered standard-issue weapons and therefore exempt from certain reporting requirements, though San Jose State’s own report categorized them as specialized firearms.
One of the most striking pieces of equipment is the Long Range Acoustic Device used by UCLA police.MediaNews Group via Getty Images
One of the most striking pieces of equipment identified by CalMatters is the Long Range Acoustic Device, or LRAD, used by UCLA police.
The devices can project amplified voice commands over long distances during demonstrations and emergencies, earning them the military nickname “Voice of God.”
They are also capable of emitting extremely loud warning tones, although UCLA officials said they only use them as public-address systems during crowd management situations.
Richard Mejia, UCLA’s director of emergency communications and information, told CalMatters the university does not use the devices to produce the high-pitched warning tones they are capable of generating.
CalMatters reported UCLA deployed the acoustic devices dozens of times during the 2024–25 academic year. AFP via Getty Images
Elsewhere, San Jose State’s inventory included tear-gas grenades and a submachine gun that campus officials said they do not intend to use.
“We will never use them,” Capt. Jermaine Thomas told CalMatters, adding the department plans to destroy both the grenades and the submachine gun.
The investigation also found that some colleges used the reporting process to reevaluate their equipment.
After inquiries from CalMatters, Compton College adopted a military equipment policy for the first time, held a public meeting and created additional oversight committees for its police department.
“As a leader, you have to understand what mistakes are made. You have to fix the mistakes,” Compton College President Keith Curry told CalMatters.
Other campuses, including Chaffey College, MiraCosta College, Southwestern College and several community college districts, also updated policies or said they planned to improve compliance after being contacted during the investigation.
CalMatters reported that Mt. San Antonio College ultimately had not purchased the rifles as of June 2026. NurPhoto via Getty Images The review also highlighted student concerns about the growing presence of military-style equipment on campus, particularly following large pro-Palestinian demonstrations that swept California universities in 2024.
“The entire campus was talking about it,” student César Tlatoāni Alvarado told CalMatters while describing opposition to a proposal for Mt. San Antonio College to acquire AR-15 rifles.
“There were so many students that were yelling,” Alvarado told CalMatters. “They were screaming at the administration. They were upset, they were frustrated. They felt betrayed.”
CalMatters reported that Mt. San Antonio College ultimately had not purchased the rifles as of June 2026.
According to the investigation, several colleges also said they are now committed to fully complying with California’s military equipment transparency law and, in some cases, reducing the amount of military-style equipment kept by campus police.
Allen Hancock College: Six semi-automatic rifles and four less-lethal launchers.
El Camino College: Six semi-automatic rifles, 11 less-lethal launchers and 300 pepper-ball munitions.
Other campuses reported owning less-lethal launchers but no publicly listed semi-automatic rifles, including Cal State Bakersfield, Channel Islands, Chico, Dominguez Hills, Fullerton, Humboldt, Long Beach, Los Angeles, Monterey Bay, Northridge, Pomona, San Diego, San Luis Obispo, San Marcos, Sonoma, Stanislaus, Napa Valley College, Palomar College, and the Foothill-De Anza Community College District, according to CalMatters’ review of campus records.
