For whatever reason Elizabeth Warren has not yet been named to head the Consumer Financial Protection Bureau. One can only surmise that Timothy Geithner, Larry Summers, and Chris Dodd, have something to do with the delay. Tim Geithner is rumored to be concerned because of the following:
Geithner, being very close to the nation’s biggest banks, is concerned that Warren, if chosen, will exercise her new policing and enforcement powers to restrict those abusive practices at our commercial banks that have been harmful to consumers and depositors…..
I believe Geithner sees the appointment of Elizabeth Warren as a threat to the very scheme he has utilized to date to hide bank losses, thus keeping the banks solvent and out of bankruptcy court and their existing management teams employed and well-paid.
Geithner’s alleged scheme is to allow banks to earn their way through all of the bad assets on its books due to the mortgage crisis caused primarily by Wall Street itself. How do banks get back in the black? By bilking consumers through excessive and abusive fees. In other words, a government sanctioned bailout taken directly from American consumers with a disingenuous air of legitimacy to cover up the the greed and excesses of the banking and financial industry. Elizabeth Warren, as the new top consumer advocate, would prevent that from happening.
As for Chris Dodd, first he said this:
“She’s qualified, no question about that,” Dodd said. “The question is whether she’s confirmable.”
Now he says this:
“My simple question about Elizabeth is: Is she confirmable?” Dodd said during a visit Tuesday with The Courant’s Editorial Board. “It isn’t just a question of being a consumer advocate. I want to see that she can manage something, too.”
Dodd’s first concern was is Elizabeth Warren confirmable? When Dodd’s initial objection received no traction because it’s clear that Warren enjoys the support of both Republicans and Democrats. If fact, it would be politically astute to name Warren because she is the most feared candidate by Wall Street. One can almost dare a Republican or Democrat for that matter to vote against a clear champion for the middle class taking on Goliath. It’s quite interesting that Dodd would oppose Warren considering the purpose of the agency is protect consumers and Warren has been doing so her entire career. Could it be that the closer Dodd gets to retirement the less he thinks about the American consumer and the more he must think about the interest of his future employers.? Warren is currently the watchdog over the government’s $700 billion bailout of the financial services industry. In the TARP watchdog role we are quite sure that the Harvard professor originally from Oklahoma has stepped on a few toes close to Dodd? Dodd’s tepid endorsement of Warren leads many to believe that he will he go the route of Tom Daschle. Influence peddler who is not a registered lobbyist. Perhaps Dodd will be an influence peddler lobbyist for Wall Street banks? Hmmmm….time will tell.
Management skills can be easily obtained through on-the-job training. However, providing real leadership and being a visionary, assets that Elizabeth Warren clearly brings, are essential components for the head of a new bureau going up against the monolith that is Wall Street. Elizabeth Warren is an independent, strong-willed, advocate for the non-rich who is the only acceptable person to head the new bureau.
Call your Senator and tell him/her to support Warren as the new Sheriff of Wall Street. Further, call the White House and tell the President that you support Warren to head CFPB. 202-456-1111
A little something from the Main Street Brigade with a shout out to Oklahoma where Elizabeth Warren was born.
NOTE:Attorney barred in the District of Columbia and California currently looking for opportunities in the private and government sectors. Specializes in ediscovery/litigation efficiency project management but can do straight litigation or litigation management. Feel free to contact me with opportunities at progress@progresspolitics.com
NOTE: Attorney barred in the District of Columbia and California currently looking for opportunities in the private and government sectors. Specializes in ediscovery/litigation efficiency project management but can do straight litigation or litigation management. Feel free to contact me with opportunities at progress@progresspolitics.com
Guess what?? Wall Street is not at all happy with Democrats due to the pending financial regulatory reform bill. The financial epicenter is said to be “revolting” against the Democratic party by way of refusing to donate to the party responsible for putting it in check. It seems that the financial sector has forgotten how it almost drove us over a ditch just a few months ago resulting in several taxpayer funded bailouts. It seems that the courting being carried out by John Boehner and other House and Senate Republicans is paying off. Republican deregulation brought massive Wall Street profits and it was a Republican administration that authorized its taxpayer funded bailout. Now the GOP is gladly accepting Wall Street money hand over fist so that it can return to office and begin the cycle all over again. This is why Democrats are said to look out for the PEOPLE of the United States and Republicans look out for BIG BUSINESS. There will be a clear choice in the fall and as hard as it tries Wall Street cannot vote only you can.
[Democratic] contributions from the world’s financial capital down 65 percent from two years ago.
The drop in support comes from many of the same bankers, hedge fund executives and financial services chief executives who are most upset about the financial regulatory reform bill that House Democrats passed last week with almost no Republican support. The Senate expects to take up the measure this month.
Attorney barred in the District of Columbia and California currently looking for opportunities in the private and government sectors. Specializes in ediscovery/litigation efficiency project management but can do straight litigation or litigation management. Feel free to contact me with opportunities at progress@progresspolitics.com
Financial regulatory reform bill, a comparison of both the House and Senate versions.
OVERSIGHT
–Senate: Creates a nine-member Financial Services Oversight Council made up of the treasury secretary, Federal Reserve chairman, a presidential appointee with insurance expertise, heads of regulatory agencies and a new consumer protection bureau that would monitor financial markets and watch for threats.
–House: Creates an 11-member council with similar duties.
CONSUMER PROTECTION
–Senate: Creates a Consumer Financial Protection Bureau within the Federal Reserve to police lending, taking powers now exercised by various bank regulators. Those regulators could appeal bureau regulations to the oversight council, which could veto the regulations with a two-thirds vote. Federal regulators could override state consumer laws on a case-by-case basis. Currently states have a more difficult time applying their laws to national banks. Excludes from oversight any small business that does not engage in financial services.
–House: Creates a stand-alone Consumer Financial Protection Agency to police lending. There’s no process to veto agency regulations. State law provision is similar to Senate’s. Specifically excludes from agency oversight real estate brokers and agents, accountants and tax preparers and auto dealers.
FEDERAL RESERVE
–Senate: The Federal Reserve would retain supervision over bank-holding companies and state-charted banks. It also would police large, interconnected nonbank institutions that the oversight council determines could pose a threat to the economy. With council approval, the Fed could break up large, complex companies that pose a grave threat to the financial system. The Government Accountability Office, Congress’ investigative arm, would conduct a one-time examination of the Fed’s emergency lending to financial institutions in the months surrounding the 2008 financial crisis.
–House: The Federal Reserve would lose consumer protection regulation authority and ability to unilaterally inject money into financial institutions. The GAO would be given broader power to conduct audits of the Fed.
CAPITAL STANDARDS
Senate: Banks with more than $250 billion in assets would have to meet capital standards at least as strict as those that apply to smaller banks. Banks would not be able to include as top tier capital certain securities that are tax deductible subordinated debt.
House: Any large bank holding company identified as posing a potential risk to the economy would be required to put up additional capital — more money and assets on hand. In computing capital requirements, regulators would include a bank’s off-balance sheet activities, such as trusts held for clients. These companies also would face a leverage cap of 15-1 debt-to-net capital ratio.
DERIVATIVES
–Senate: Trades of derivatives, the complicated financial instruments blamed for accelerating the Wall Street crisis, would have to take place in regulated exchanges. Banks would have to spin off all their derivatives business into subsidiaries.
–House: Also regulates derivatives, but contains more exceptions for corporations that use derivatives as a hedge against price fluctuations, not as a speculative investment. The House does not require banks to spin off their derivatives business.
BANK RESTRICTIONS
–Senate: Regulators would devise rules to prohibit bank holding companies with commercial bank operations from speculative trading with their own accounts. Large, interconnected companies would have to put more money in reserve.
–House: The oversight council may prohibit any activity, including speculative trading by commercial banks with their own accounts, if it finds that the activity could threaten the stability of the financial system. Large, interconnected companies would have to put more money in their reserves.
EXECUTIVE PAY
–Senate: Shareholders would have the right to cast nonbinding votes on executive pay packages. The Fed would set standards on excessive compensation that would be deemed an unsafe and unsound practice for the bank.
–House: Shareholders would have the same right. Regulators would have a say on compensation practices, not on pay itself.
RATINGS AGENCIES
–Senate: An independent board would select ratings agencies to assess the risks of new financial products, replacing a long-standing practice where banks select and pay ratings agencies to rate their new offerings. The bill would also require a wholesale re-evaluation on how the government uses ratings agencies to assess risk. Ratings agencies are blamed for giving too high ratings to bad mortgage-related securities.
–House: Ratings agencies would have to register with the Securities and Exchange Commission and would face increased liability standards.
MORTGAGE LOANS
Senate: Lenders would be required to obtain proof from borrowers that they can pay for their mortgages. The would have to provide evidence of their income, either though tax returns, payroll receipts or bank documents. That provision seeks to eliminate so-called stated-income loans where borrowers offered no proof of their ability to make mortgage payments.
Attorney barred in the District of Columbia and California currently looking for opportunities in the private and government sectors. Specializes in ediscovery/litigation efficiency project management but can do straight litigation or litigation management. Feel free to contact me with opportunities at progress@progresspolitics.com.
Attorney barred in the District of Columbia and California currently looking for opportunities in the private and government sectors. Specializes in ediscovery/litigation efficiency project management but can do straight litigation or litigation management. Feel free to contact me with opportunities at progress@progresspolitics.com
Wall Street is continually threatening to repatriate its industry overseas if it feels that increased U.S. regulation puts its industry at a competitive disadvantage to its counterparts in other countries. Well one blogger did the work of testing this theory by reviewing the financial industry regulatory structures in London, France, Japan, Germany, and Hong Kong, the five prominent centers for the industry in the world outside of the the United States.
LONDON
In December the British government introduced a one-time 50 percent “super tax” on banker bonuses over $41,000. On top of that, Britain’s got a valued-added tax of 17.5 percent on most goods and most bankers will see tax rates of around 40 percent. Starting in 2011 any income over $230,000 will be taxed 50 percent.
FRANCE
On top of the one-time 50 percent bonus tax French authorities recently imposed on bank bonuses, the tax-to-GDP ratio in France is the fourth highest among the 30 countries in the OECD. (The United States has the fourth lowest in the OECD.). Ordinary income taxes range up to 40 percent – and France has a net wealth tax that starts at .55 percent of assets over roughly $1.6 million.
GERMANY
With progressive personal tax rates up to 47 percent, Germany’s no tax haven. The government will even impose a 8-9 percent ‘Church Tax’ if you live in certain areas. Sixty percent of capital gains from the sale of stock will get taxed at a 25 percent rate. Effective corporate tax rates are usually between 30 and 33 percent.
JAPAN
A single banker in Japan with no children can expect to pay an average rate of 20.3 percent, according to 2008 statistics from the OCED. While that’s comparable with U.S. taxes, traders be warned: capital gains taxes range from 20 percent to a whopping 39 percent for short-term gains. (The U.S. rate, in case, you’re wondering is currently at 15 percent.) Japan’s corporate tax rate at 39.54 percent also bests our own rate.
HONG KONG
Hong Kong’s low tax environment and China’s booming economy may already be enough to woo members of the banking class. The region’s 16 percent corporate tax rate is certainly much lower than the OECD average of of 27.8%, according to KPMG. In addition, expats who visit Hong Kong for 60 days or less in a year are not subject to an employment tax, says Deloitte. Still, Chinese authorities have been increasing bank capital requirements and are placing restrictions on property speculation
Next steps for Wall Street reform from David Waldman:
Republicans could agree not to object to an unanimous consent request to proceed either:
immediately to the consideration of the Wall Street reform bill itself, or;
at some later date and time certain (perhaps next Monday) to consideration of the bill.
Republicans could continue to insist on votes on cloture and/or on the motion to proceed, but either:
agree by unanimous consent to have a vote (either immediately or at some specific time) on the motion to proceed, which motion would require just a simple majority to pass or;
some number of them will agree to change their vote such that cloture can be invoked, after which:
1)everyone could agree to yield back all post-cloture time (30 hours) and proceed immediately to yet another vote, this time on the motion to proceed itself, which presumably would, as part of the deal, either pass by a majority vote or by unanimous consent, and put us at that time on debate of the bill, or; 2) Republicans could insist on using some or all of the 30 post-cloture hours before deciding to either demand a vote on the motion to proceed (which would require a simple majority) or agree by unanimous consent to pass the motion to proceed.
The Washington Post recently released the results of a survey that it conducted concerning Wall Street reform. The public has spoken and really wants to reign in the financial industry. Yet the GOP, and Ben Nelson (D-NE), through the filibuster mechanism has blocked the Wall Street reform bill from even going to the floor of the Senate for an up or down vote. The two points of contention for the GOP appears to be the Consumer Financial Protection Agency and regulation of the derivatives market. The CFPA is one of the more popular aspects of the Wall Street reform bill yet the GOP wants to kill it even though it would provide oversight and stricter guidelines for banks making loans to the public. Thereby preventing borrowers from being duped into applying for and receiving loans that they cannot afford.
About two-thirds of Americans support stricter regulations on the way banks and other financial institutions conduct their business, according to a new Washington Post-ABC News poll.
Majorities also back two main components of legislation congressional Democrats plan to bring to a vote in the Senate this week: greater federal oversight of consumer loans and a company-paid fund that would cover the costs of dismantling failed firms that put the broader economy at risk.
A third pillar of the reform effort draws a more even split: 43 percent support federal regulation of the derivatives market; 41 percent are opposed. Nearly one in five – 17 percent – express no opinion on this complicated topic…..
The area with the highest levels of cross-party support is on more robust federal oversight of the way banks and other financial companies make consumer loans, such as auto loans, credit cards and mortgages. Here, 44 percent of Republicans approve of stricter guidelines, joining 75 percent of Democrats and 57 percent of independents on the issue.
THE PRESIDENT: Thank you very much. Everybody, please have a seat. Thank you very much. Well, thank you. It is good to be back. (Applause.) It is good to be back in New York, it is good to be back in the Great Hall at Cooper Union. (Applause.)
We’ve got some special guests here that I want to acknowledge. Congresswoman Carolyn Maloney is here in the house. (Applause.) Governor David Paterson is here. (Applause.) Attorney General Andrew Cuomo. (Applause.) State Comptroller Thomas DiNapoli is here. (Applause.) The Mayor of New York City, Michael Bloomberg. (Applause.) Dr. George Campbell, Jr., president of Cooper Union. (Applause.) And all the citywide elected officials who are here. Thank you very much for your attendance.
It is wonderful to be back in Cooper Union, where generations of leaders and citizens have come to defend their ideas and contest their differences. It’s also good to be back in Lower Manhattan, a few blocks from Wall Street. (Laughter.) It really is good to be back, because Wall Street is the heart of our nation’s financial sector.
Now, since I last spoke here two years ago, our country has been through a terrible trial. More than 8 million people have lost their jobs. Countless small businesses have had to shut their doors. Trillions of dollars in savings have been lost — forcing seniors to put off retirement, young people to postpone college, entrepreneurs to give up on the dream of starting a company. And as a nation we were forced to take unprecedented steps to rescue the financial system and the broader economy.
And as a result of the decisions we made — some of which, let’s face it, were very unpopular — we are seeing hopeful signs. A little more than one year ago we were losing an average of 750,000 jobs each month. Today, America is adding jobs again. One year ago the economy was shrinking rapidly. Today the economy is growing. In fact, we’ve seen the fastest turnaround in growth in nearly three decades.
But you’re here and I’m here because we’ve got more work to do. Until this progress is felt not just on Wall Street but on Main Street we cannot be satisfied. Until the millions of our neighbors who are looking for work can find a job, and wages are growing at a meaningful pace, we may be able to claim a technical recovery — but we will not have truly recovered. And even as we seek to revive this economy, it’s also incumbent on us to rebuild it stronger than before. We don’t want an economy that has the same weaknesses that led to this crisis. And that means addressing some of the underlying problems that led to this turmoil and devastation in the first place.
Now, one of the most significant contributors to this recession was a financial crisis as dire as any we’ve known in generations — at least since the ’30s. And that crisis was born of a failure of responsibility — from Wall Street all the way to Washington — that brought down many of the world’s largest financial firms and nearly dragged our economy into a second Great Depression.
It was that failure of responsibility that I spoke about when I came to New York more than two years ago — before the worst of the crisis had unfolded. It was back in 2007. And I take no satisfaction in noting that my comments then have largely been borne out by the events that followed. But I repeat what I said then because it is essential that we learn the lessons from this crisis so we don’t doom ourselves to repeat it. And make no mistake, that is exactly what will happen if we allow this moment to pass — and that’s an outcome that is unacceptable to me and it’s unacceptable to you, the American people. (Applause.)
As I said on this stage two years ago, I believe in the power of the free market. I believe in a strong financial sector that helps people to raise capital and get loans and invest their savings. That’s part of what has made America what it is. But a free market was never meant to be a free license to take whatever you can get, however you can get it. That’s what happened too often in the years leading up to this crisis. Some — and let me be clear, not all — but some on Wall Street forgot that behind every dollar traded or leveraged there’s family looking to buy a house, or pay for an education, open a business, save for retirement. What happens on Wall Street has real consequences across the country, across our economy.
I’ve spoken before about the need to build a new foundation for economic growth in the 21st century. And given the importance of the financial sector, Wall Street reform is an absolutely essential part of that foundation. Without it, our house will continue to sit on shifting sands, and our families, businesses, and the global economy will be vulnerable to future crises. That’s why I feel so strongly that we need to enact a set of updated, commonsense rules to ensure accountability on Wall Street and to protect consumers in our financial system. (Applause.)
Now, here’s the good news: A comprehensive plan to achieve these reforms has already passed the House of Representatives. (Applause.) A Senate version is currently being debated, drawing on ideas from Democrats and Republicans. Both bills represent significant improvement on the flawed rules that we have in place today, despite the furious effort of industry lobbyists to shape this legislation to their special interests.
And for those of you in the financial sector I’m sure that some of these lobbyists work for you and they’re doing what they are being paid to do. But I’m here today specifically — when I speak to the titans of industry here — because I want to urge you to join us, instead of fighting us in this effort. (Applause.) I’m here because I believe that these reforms are, in the end, not only in the best interest of our country, but in the best interest of the financial sector. And I’m here to explain what reform will look like, and why it matters.
Now, first, the bill being considered in the Senate would create what we did not have before, and that is a way to protect the financial system and the broader economy and American taxpayers in the event that a large financial firm begins to fail. If there’s a Lehmans or an AIG, how can we respond in a way that doesn’t force taxpayers to pick up the tab or, alternatively, could bring down the whole system.
In an ordinary local bank when it approaches insolvency, we’ve got a process, an orderly process through the FDIC, that ensures that depositors are protected, maintains confidence in the banking system, and it works. Customers and taxpayers are protected and owners and management lose their equity. But we don’t have that kind of process designed to contain the failure of a Lehman Brothers or any of the largest and most interconnected financial firms in our country.
That’s why, when this crisis began, crucial decisions about what would happen to some of the world’s biggest companies — companies employing tens of thousands of people and holding hundreds of billions of dollars in assets — had to take place in hurried discussions in the middle of the night. And that’s why, to save the entire economy from an even worse catastrophe, we had to deploy taxpayer dollars. Now, much of that money has now been paid back and my administration has proposed a fee to be paid by large financial firms to recover all the money, every dime, because the American people should never have been put in that position in the first place. (Applause.)
But this is why we need a system to shut these firms down with the least amount of collateral damage to innocent people and innocent businesses. And from the start, I’ve insisted that the financial industry, not taxpayers, shoulder the costs in the event that a large financial company should falter. The goal is to make certain that taxpayers are never again on the hook because a firm is deemed “too big to fail.”
Now, there’s a legitimate debate taking place about how best to ensure taxpayers are held harmless in this process. And that’s a legitimate debate, and I encourage that debate. But what’s not legitimate is to suggest that somehow the legislation being proposed is going to encourage future taxpayer bailouts, as some have claimed. That makes for a good sound bite, but it’s not factually accurate. It is not true. (Applause.) In fact, the system as it stands — the system as it stands is what led to a series of massive, costly taxpayer bailouts. And it’s only with reform that we can avoid a similar outcome in the future. In other words, a vote for reform is a vote to put a stop to taxpayer-funded bailouts. That’s the truth. End of story. And nobody should be fooled in this debate. (Applause.)
By the way, these changes have the added benefit of creating incentives within the industry to ensure that no one company can ever threaten to bring down the whole economy.
To that end, the bill would also enact what’s known as the Volcker Rule — and there’s a tall guy sitting in the front row here, Paul Volcker — (applause) — who we named it after. And it does something very simple: It places some limits on the size of banks and the kinds of risks that banking institutions can take. This will not only safeguard our system against crises, this will also make our system stronger and more competitive by instilling confidence here at home and across the globe. Markets depend on that confidence. Part of what led to the turmoil of the past two years was that in the absence of clear rules and sound practices, people didn’t trust that our system was one in which it was safe to invest or lend. As we’ve seen, that harms all of us.
So by enacting these reforms, we’ll help ensure that our financial system — and our economy — continues to be the envy of the world. That’s the first thing, making sure that we can wind down one firm if it gets into trouble without bringing the whole system down or forcing taxpayers to fund a bailout.
Number two, reform would bring new transparency to many financial markets. As you know, part of what led to this crisis was firms like AIG and others who were making huge and risky bets, using derivatives and other complicated financial instruments, in ways that defied accountability, or even common sense. In fact, many practices were so opaque, so confusing, so complex that the people inside the firms didn’t understand them, much less those who were charged with overseeing them. They weren’t fully aware of the massive bets that were being placed. That’s what led Warren Buffett to describe derivatives that were bought and sold with little oversight as “financial weapons of mass destruction.” That’s what he called them. And that’s why reform will rein in excess and help ensure that these kinds of transactions take place in the light of day.
Now, there’s been a great deal of concern about these changes. So I want to reiterate: There is a legitimate role for these financial instruments in our economy. They can help allay risk and spur investment. And there are a lot of companies that use these instruments to that legitimate end — they are managing exposure to fluctuating prices or currencies, fluctuating markets. For example, a business might hedge against rising oil prices by buying a financial product to secure stable fuel costs, so an airlines might have an interest in locking in a decent price. That’s how markets are supposed to work. The problem is these markets operated in the shadows of our economy, invisible to regulators, invisible to the public. So reckless practices were rampant. Risks accrued until they threatened our entire financial system.
And that’s why these reforms are designed to respect legitimate activities but prevent reckless risk taking. That’s why we want to ensure that financial products like standardized derivatives are traded out in the open, in the full view of businesses, investors, and those charged with oversight.
And I was encouraged to see a Republican senator join with Democrats this week in moving forward on this issue. That’s a good sign. (Applause.) That’s a good sign. For without action, we’ll continue to see what amounts to highly-leveraged, loosely-monitored gambling in our financial system, putting taxpayers and the economy in jeopardy. And the only people who ought to fear the kind of oversight and transparency that we’re proposing are those whose conduct will fail this scrutiny.
Third, this plan would enact the strongest consumer financial protections ever. (Applause.) And that’s absolutely necessary because this financial crisis wasn’t just the result of decisions made in the executive suites on Wall Street; it was also the result of decisions made around kitchen tables across America, by folks who took on mortgages and credit cards and auto loans. And while it’s true that many Americans took on financial obligations that they knew or should have known they could not have afforded, millions of others were, frankly, duped. They were misled by deceptive terms and conditions, buried deep in the fine print.
And while a few companies made out like bandits by exploiting their customers, our entire economy was made more vulnerable. Millions of people have now lost their homes. Tens of millions more have lost value in their homes. Just about every sector of our economy has felt the pain, whether you’re paving driveways in Arizona, or selling houses in Ohio, or you’re doing home repairs in California, or you’re using your home equity to start a small business in Florida. Read the rest of this entry »
Similar to the astroturf group created to kill health care reform, Wall street has rented a artificial grassroots group to block financial regulatory reform. TPM is reporting that the fake grassroots group has spent $1.6 million in ads fighting against Wall Street reform. Financial industry corporations have paid the group a great deal of money to advocate against reform on its behalf under the guise of “consumer advocacy.” The group uses the tagline of “stop too big to fail” so as to intentionally give the false impression that it is working on behalf of consumers when in actuality it is working furiously on behalf of Wall Street banks and investment companies.
The group went so far as to deceive a top economist from MIT, Simon Johnson, a fierce advocate of breaking up large banks, into participating in media conference call that it claimed concerned “protecting small investors.” The ad campaign currently being run by the front group goes something like this:
Stop Too Big To Fail’s $1.6 million ad campaign, which is targeting Majority Leader Harry Reid, Sen. Claire McCaskill (D-MO), and Sen. Mark Warner (D-VA), asks viewers to tell their senators, “vote against this phony ‘financial reform.’ Support real reform, stop ‘too big to fail.’”
So the astroturf roots shilling for Wall Street is claiming that it wants “real” or stronger reform when in fact it wants to kill the Wall Street reform bill altogether. Fifteen years ago the six largest banks assetts totaled 17 percent of the gross domestic product now the assetts of the six largest banks total a whopping 63 percent of the GDP. When such banks make up such a large portion of our economy and engage in irresponsible and riskier behavior it puts the American economy at risk, e.g., Main Street. We need a strong bill.
Fillibustering not necessarily available to Mitch McConnell on financial regulatory reform as he fails to secure the 41 signatures needed for the blocking tactic.
McConnell has fallen short of the 41 signatures he needs to send Senate Majority Leader Harry Reid (D-Nev.) a clear signal.
So far, Sen. Susan Collins (R-Maine), a crucial swing vote, has declined to sign the letter, according to a Republican source.
Collins said that she supports some of the provisions in the bill but has concerns about the way Democrats have handled it, specifically their decision to cut off talks with Republican negotiators before a bipartisan deal was reached.
But Collins has declined to pledge in a public letter that she would vote to filibuster the reform bill unless Democrats make amends.
In case there was any doubt that citizens of this nation want Wall Street to be held accountable and the rights of consumers more vigorously enforced, the Consumer Federation of America polling shows that the financial regulatory reform bill needs to be toughened up in terms of consumer protection.
The poll found that 62% of Americans support the creation of a “new federal agency to protect consumers who purchase banking and other financial services.” Only 34% opposed such a plan.
Additionally, CFA found that a whopping 85% believe “consumers need more effective protections against unfair and deceptive practices by banks and other financial institutions.”
The Chamber of Commerce has spent $3 million dollars to fight the creation of the CFPA and elisted Repub;ican leader Mitch McConnell to do its bidding on the Senate floor. It appears the GOP strategy for November is to side with Wall Street and protect it at all costs.
In 2006 the American Bankers Association argued vociferously in favor of separating consumer protection function from the “safety and soundness of banks” function. However, now that it is about to happen the banks have had a change of heart in light of the fact that separating the two would no longer allow them to fleece consumers for profit. TARP watchdog, and my hero, Elizabeth Warren recently penned an op-edabout the necessity for a Consumer Financial Protection Agency and calling the ABA on its hypocrisy.
ABA lobbyists now aggressively insist that separating consumer protection and safety and soundness functions would unravel bank stability. Yet just a few years ago, they heatedly argued the opposite — that the functions should be distinct.
In 2006, the ABA claimedto act on principle as it railed against an interagency guidance designed to exercise some modest control over subprime mortgages. It criticized the proposal for “combin[ing] safety and soundness guidance with consumer protection guidance, creating confusion that is best addressed by separating them.”
The ABA went on to argue that the “marriage of inconvenience between supervision and consumer protection appears to blur long-established jurisdictional lines.” And then: “ABA recommends that the safety and soundness provisions relating to underwriting and portfolio management be separated from the consumer protection provisions.”
Read that again: The ABA in 2006 said that policymakers should separate safety-and-soundness and consumer protection — exactly the opposite of its position today.
This 2006 memo illustrates the ABA’s real consistency — consistent opposition to meaningful reform.
If there is a smoking gun in the battle over financial regulatory reform, the 2006 ABA memo is it….
In the weeks ahead, the Senate does not need to decide between safety and soundness and consumer protection.
But the ABA is right about one thing: The Senate does need to decide between banks and families.
Attorney barred in the District of Columbia and California currently looking for opportunities in the private and government sectors. Specializes in ediscovery/litigation efficiency project management but can do straight litigation or litigation management. Feel free to contact me with opportunities at progress@progresspolitics.com
Below is a list of the benefits and drawbacks of the plans for a Consumer Financial Protection Agency/Bureau proposed by the White House, the Senate, and the House as compiled by ThinkProgress. According to CFPA guru Elizabeth Warren there are four prongs for an effective Consumer Financial Protection Agency: 1) an independent director appointed by the President and confirmed by the Senate; 2) independent budget authority so it is not prone to the whims of the appropriation process; 3) independent rule-making authority; and 4) independent enforcement powers. What is troubling is the fact that the Senate version does not give the CFPA full rulemaking authority. Not sure who would make up this “council of bank regulators” who would have veto power over rulemaking. We assume it will be folks from the Federal Reserve, FDIC, etc.. Yea that worked so well the last time such regulators were responsible for consumer protection. This agency would also be housed in the Federal Reserve….also troubling given that proximity can easily lead to co-option.
We should also say that Warren issued a statement today regarding Dodd’s version of the bill that sounded more like a journalist description of an accident then any type endorsement.
WARREN: Since bringing our economy to the brink of collapse, Wall Street has spent more than a year and hundreds of millions of dollars in an all-out effort to block financial reform. Despite the banks’ ferocious lobbying for business as usual, Chairman Dodd took an important step today by advancing new laws to prevent the next crisis. We’re now heading toward a series of votes in which the choice will be clear: families or banks.
Sen. Chris Dodd (D) broke off negotiations with Sen. Bob Corker(R) yesterday because we would like to think that he came to his senses when seeing Corker’s deal breakers, received a refreshed memory stemming from the HCR fiasco, and due to an outcry from folks like the readers of this website. Corker was intent on excluding nonbank lenders like finance companies, payday lenders and pawnbrokers from the legislation’s reach. Not to mention quashing the idea of an independent and stand alone Consumer Financial Protection Agency. In other words, Corker wanted reform in name only excluding from such regulations all his pet special interests and flipping the bird to the American people. For a second it looked as if Dodd was going along with it until progressives found out about it and stormed his offices, telephone lines, and email. He ultimately dropped the negotiations in a statement he made yesterday. Having said and done all that Sen. Dodd’s statement yesterday is troubling to say the least:
“The proposal that I’ll offer on Monday does reflect a lot of the ideas that Bob Corker and others have brought to the table. It was important to put a proposal on the table, short of a proposal that reflects some broad bipartisan agreement.”
“None of this is a matter of demanding perfection[.]” “The advocates are just demanding some meaningful, sensible, and desperately needed changes and aren’t interested in letting politicians build false confidence and have big press conferences while ignoring the central issues.”
Such comments hint of a watered down, lax, and ineffective proposal instead of REAL financial regulatory reform.. Call Sen. Dodd and demand REAL financial regulatory reform with a standalone and independent Consumer Financial Protection Agency.
U.S. Senator Chris Dodd
448 Russell Building Washington D.C., 20510
Tel: (202) 224-2823 or email him here
Why is Sen. Chris Dodd, Democrat, allowing Sen. Bob Corker, Republican, to run the ship of financial regulatory reform???
Corker cannot support a standalone Consumer Financial Protection Agency
Corker unwilling to back mandatory limits on size of banks
Corker against out-of-court resolution process for banks
Corker bragging about exempting payday loans from the reform bill by pushing to remove provision that cracks down on payday lenders…a significant contributor to Sen. Corker’s campaign. You know…the loan sharks who charge low income client as much as 300 percent interest on short term loans. Did we mention that Corker received a significant amount of his campaign contributions this year from payday lenders?
Seriously Sen. Dodd why are you allowing the banks and payday lender controlled Corker to weaken the financial regulatory reform bill to the point of complete ineffectiveness? We already know the Republican party is not negotiating in good faith it is simply trying to water down the bill. What is really crazy is that you are actually considering putting the Consumer Financial Protection Agency under the Federal Reserve? The Fed controlled consumer protection when the financial crisis happened and protection of the consumer fell by the wayside when it came to the health and safety of the banking industry. Consumer protection law enforcement toward the banking industry has always been under the jurisdiction of the Federal Reserve and it is REDICULOUS that there is actually a discussion taking place about leaving it there given the circumstances prompting financial regulatory reform in the first place.
Elizabeth Warren, TARP watchdog, gives a few words of wisdom regarding the Consumer Financial Protection Agency so-called “compromise” currently being discussed in the Senate. In an recent interview Warren said the following: “[m]y first choice is a strong consumer agency,” the Harvard Law professor and federal bailout watchdog said “[m]y second choice is no agency at all and plenty of blood and teeth left on the floor…….’[m]y 99th choice is some mouthful of mush that doesn’t get the job done,” Warren said.
Warren listed the four things that the Consumer Finance Protection Agency MUST have to be effective:
A chief appointed by the president, confirmed by the Senate;
Independent budget authority, so it won’t be subject to the whims of Congress or an anti-consumer administration;
Independent rule-making authority, without interference by bank regulators or others who may focus on bank profitability before focusing on consumers;
And independent enforcement powers, so the agency’s investigators can go after abusive lenders.
“Those are the basic elements of an independent agency,” Warren said. “It’s not as if there’s some fifth thing that was left off that list — that is the list.” Warren also spoke about the CFPA that was included in the financial regulatory bill passed by the House last December: “It’s a muscular agency, and that’s what really matters,” Warren said. ”It’s not perfect — there’s no excuse for excluding used car dealers — but it’s strong,” she said. “The agency that passed the House will get the job done.”
The TARP watchdog believes that it does not matter where the new agency is located but that it has real independence. Some have disagreed with Warren and argued that housing such an agency in somewhere like the Treasury Department or the Federal Reserve would make a difference in terms of its effectiveness. We agree. There is a reason that the bank lobbyists are pushing for a CFPA room rental instead of a house of its own…..proximity matters.
Take a look at the other argument being made by the banks and Sens. Bob Corker (R) and Richard Shelby(R) and a response to it by Rep. Brad Miller (D-NC):
The banks and Dodd’s chief negotiating partners, Sens. Richard Shelby (R-Ala.) and Bob Corker (R-Tenn.) argue that banking regulators must have veto power over consumer protections, because restricting some bank activities could harm the institutions and put at risk their “safety and soundness.”
But Rep. Brad Miller (D-N.C.) wondered aloud how banks could argue that preventing them from ripping off consumers puts them in jeopardy.
“It would be one thing if they were saying, ‘They’re making us do things that will cause us to lose money.’ But they’re saying, ‘If you don’t let us do these things because they’re abusive to consumers, we won’t make enough money to survive,’” Miller said.
“The legislation doesn’t require the banks to offer anything. It would prohibit certain practices. So their argument is, they have to be able to cheat consumers to stay solvent. I’m not sure I’m persuaded by that argument, or that a bank that has to cheat consumers to stay solvent is one we should keep afloat. Maybe it’s time to send in the FDIC.”
Take a look at some other specs:
How do the banks fend off needed reform? Follow the money. A recent report by Paul Blumenthal of the Sunlight Foundation shows that the 27 members of the House Financial Services Committee have received over one-fourth of their contributions from the FIRE (Finance, insurance and real estate sector). Ranking Republican Spencer Baucus from Alabama opposes the CFPA, arguing that we don’t need “more regulation,” we just need “smart regulation.” He received a staggering 71% of his contributions from the finance sector over the first six months of this year (and 45% of his total contributions over his career). Democrat Melissa Bean who leads the effort to gut state regulatory authority over the banks has received fully 42% of her contributions for the first six months from the banking sector. Not surprisingly, the champions of reform like Rep. Alan Grayson, Maxine Waters, Keith Ellison, Adam Putman, and Carolyn McCarthy all pull in the lowest percentage from the sector.
Attorney barred in the District of Columbia and California currently looking for opportunities in the private and government sectors. Specializes in ediscovery/litigation efficiency project management but can do straight litigation or litigation management. Feel free to contact me with opportunities at progress@progresspolitics.com.
New credit cardholder rules as affecting the consumer summarized by the Associated Press :
INTEREST RATES
THEN: Banks could raise the interest rate on an account at any time, including the rate on an existing balances, even if you weren’t late on payments.
NOW: The rate cannot be raised in the first year after an account is opened unless an introductory rate has come to an end. After that, cardholders must be notified 45 days in advance of any rate change.
For existing balances, rates can’t be raised unless the account is at least 60 days past due. If payments are made on time for six consecutive months, the original rate must be restored.
There’s still no cap on rates.
DISCLOSURES
THEN: The fine print on cardholder agreements was often difficult to understand. Rates, fees and penalties for other services such as cash advances, for example, could be hard to find. The impact of the interest rate on paying down a balance was hard to compute.
NOW: Cardholders will see how many months it will take to pay off a balance if only minimum payments are made. Statements will also indicate how much needs to be paid each month to pay off a balance within three years.
SERVICE FEES
THEN: Banks could charge as much as they wanted. They could assess annual fees, activation fees and other fees. This was mostly a problem for subprime cards marketed to those with poor credit scores. One popular card, for example, the Premier Bankcard, charged $256 in first-year fees for a $250 credit line.
NOW: Service fees, such as activation and annual fees, will be capped at 25 percent of the credit limit during the first year of use. After that, there is no cap.
GRACE PERIODS
THEN: Some card companies sent out statements not long before payments were due, and sometimes shifted payment due dates from month to month, meaning that payments would not always have enough time to arrive and get processed before being deemed late. As a result, some cardholders ended up getting charged interest or late fees even when they thought they were sending in payments on time.
NOW: The law requires that due dates remain consistent. Statements must be sent out 21 days before the payment due date, and finance charges and fees cannot be applied before that period is up. In practice, about half of card issuers have extended grace periods to as long as 25 days.
OVER-THE-LIMIT FEES
THEN: Banks set credit limits, then routinely allowed charges to exceed those limits. When that happened, though, the customer was charged an over-the-limit fee as high as $39. These fees were often triggered by interest charges or late-payment fees that pushed a balance over the credit limit. What’s more, multiple over-the-limit fees could get charged in a single billing cycle if the balance was paid down and another charge pushed the balance back over the limit.
NOW: The cardholder must specifically agree to permit transactions that exceed the credit limit. Only then can over-the-limit fees be charged. But the fees can’t be triggered by other fees or interest charges. Only one over-the-limit fee may be imposed during a billing cycle. No over-the-limit fees may be charged unless the cardholder has specifically agreed to permit transactions exceeding their authorized credit limit. These fees can no longer be triggered by other fees or interest charges imposed by the card issuer, and only one such fee may be imposed during a billing cycle.
In practice, several of the largest card companies have dropped these fees. Some banks are using pop-up boxes on their Web sites or other methods to obtain consumer authorization.
UNIVERSAL DEFAULT
THEN: If you made a late payment on one credit card or loan, or even late payments for obligations like utility bills, that could trigger interest rate hikes on other credit card accounts.
NOW: Card companies cannot raise interest rates on existing credit card balances. Interest rates can’t rise during the first year an account is open, unless the original agreement spelled out a promotional rate for a limited time.
Consumers with older accounts must be informed of any interest rate increase on new charges at least 45 days in advance. They must also be given a chance to opt out of the hike by canceling the account and paying down the balance at the old interest rate. If an interest rate is increased, the card company must review the account once every six months to assess whether the rate should be dropped.
STUDENTS
THEN: Students arriving on college campuses often confronted a gantlet of credit card marketers handing out T-shirts, pizza and other gifts in exchange for filling out card applications. Credit cards were frequently handed out without checking the applicant’s income sources. In 2008, 84 percent of undergraduates had at least one credit card. Average balances topped $3,100.
NOW: Credit cards may no longer be issued to anyone under age 21, unless the applicant has a co-signer, or can show independent means to repay the debt. Colleges must disclose any marketing deals they make with credit card companies. Banks are not allowed to hand out gifts on or near campuses or at college-related events.
A remorseful John S. Reed, former Chairman and CEO of CitiCorp, appeared before the Senate Banking Committee yesterday as he called for full financial regulatory reform including a dedicated consumer-focused financial protection agency. ”There seems to have been a key failure that none of us anticipated,” Reed said in a prepared statement at a Senate Banking Committee hearing, “namely, individual institutions which are thought to take steps and exercise judgments to insure their self-preservation turned out ‘not to have’ or been incapable of so doing.
The former Chairman and CEO went further:
In response to a question from Senator Bob Corker (R-Tenn.), who called Reed’s testimony “fascinating” given that he presided over Citigroup at a time when it was expanding in all these areas, Reed said it was exactly that experience that informs his view now.
“I learned a lot,” Reed said, joking that this may be the first time he has ever agreed with former Federal Reserve chairman Paul Volcker on anything. “There’s no question that when we put Travelers and Citi together we created a monster.”
“My honest belief having experienced it…is that the system would be stronger if we could provide for some separation where major depositories are not major actors in the capital markets,” Reed said.
“This clearly means that in designing a robust system, we cannot count on that capacity.” Mr. Reed decribed what the essential elements of financial regulatory reform must be below.
The capital held by financial firms to protect against potential losses “should be significantly increased, maybe doubled.” He added that he thinks the concept of “risk adjusted capital,” a complex system used by regulators to judge whether a bank has adequate cash, “is flawed.”
The industry should be “compartmentalized” to limit the spread of failures and to preserve “cultural boundaries.”
Traded products (to the extent possible) should flow through exchanges. Much of the derivatives market is currently in the dark, traded over the phone rather than through a centralized exchange where regulators could know what’s going on.
A consumer-focused financial protection agency with a “clear and separate mandate” should be created.
Just because our Congress allows the banks to control our government does not mean that Europe will be doing the same. Italy seized Bank of America assets for alleged derivatives fraud. You know, the thing that was a major contributor to the financial meltdown in this country. So instead of exhibiting alleged “outrage” at the fraud and corruption perpetrated by our banks Italy is doing something about it.
Feb. 3 (Bloomberg) — Italy’s financial police are seizing 73.3 million euros ($102 million) of assets from Bank of America Corp. and a unit of Dexia SA as part of a probe into an alleged derivatives fraud in the region of Apulia.
The police are sequestering a further 30 million euros that the municipality was set to place in a fund managed by the banks on Feb. 6, according to an e-mail from the prosecutor’s office in Bari today. The prosecutor also asked that Charlotte, North Carolina-based Bank of America be banned from doing business with Italian municipalities for two years. A hearing is slated for next month. Prosecutors allege that when the banks arranged swaps and created a fund that invests money the region set aside to repay 870 million euros of borrowings due in 2023, they misled the region about the economic advantage of the package. Banks skewed the swaps to their advantage to hide fees, the prosecutor said.
Apulia, located in the heel of Italy, joins more than 519 municipalities that face 990 million euros in derivatives losses, according to data compiled by the Bank of Italy. In Milan, prosecutors seized assets from four banks including JPMorgan Chase & Co. and UBS AG and requested they stand trial for alleged fraud. Hearings started in Milan this month…
Bank of America also just announced that it will be paying investment-banking employees $400,000, on average, per employee. So instead of lending the TARP money to small businesses they are using it pay bonuses. The blogger below captured the situation exactly.
Crime does pay in the short term. Especially if you can buy off the government and co-op the regulators of a major developed nation…..
People argue that if a nation sets rules for banks, they will just move offshore and keep doing business in any way that they please. This is intended to undermine any reforms and the rule of law. It is possible to ban a company from doing business in your nation if it engages in unlawful practices. As noted here previously, Citi was engaging in trading practices in Europe and Japan that put them on the receiving end of bans for fraud. Globalization is used as a rationale for stripping nations of their sovereign rights, and the people from their ability to rule and protect themselves in accord with their own beliefs and preferences.
Sen. Chris Dodd mentioned yesterday that the President was too ambitious with his financial regulatory reform plans. But our guess is that in light of Dodd’s pending and imminent departure from Congress he is currently setting up a lucrative retirement for himself post-Senate. Ticking off his future employers by passing sweeping and effective financial regulatory form does not bode well for his future plans. Just saying.
