Category Archives: financial regulation

Under The Radar: Deregulation and Setting Up the Next Big Bank Debacle

If a person were thinking that the current administration, and those politicians in Nevada who espouse Trumpism, are dangerous in terms of health care insurance affordability, women’s’ health issues, and environmental sustainability — let me offer one more thing to worry about:  Financial deregulation.

Let’s start with the nomination of Brett Kavanaugh for a position on the US Supreme Court, this would be the self-same Kavanaugh who once ruled that the Consumer Financial Protection Bureau was “structurally unconstitutional.” [Politifact]  Please recall for a moment that one of the reasons for the CFPB’s creation was the propensity in some  retail banking circles to generate consumer indebtedness (which could in turn be used as the basis for derivatives) in ways that were definitely not beneficial to both the borrower and the lender.   We know one man’s debt is another man’s asset, but when the debt level becomes impossible and default becomes probable the derivatives become unstable.  This, as the saying goes, “ain’t rocket science.”  But wait! How do we know when things are likely to become unstable?  There’s supposed to be an agency for that, the Office of Financial Research.  However, the Trump nominee to head this agency would really rather eliminate it.

But the fact that this nomination is flying under the radar is not surprising. The OFR is arguably the most important piece of the Dodd-Frank Wall Street Reform and Consumer Protection Act that is never discussed. Despite its lack of public attention, the OFR’s crucial financial stability role demands a leader willing to aggressively execute its lofty mission. Unfortunately, President Trump’s nominee to lead the OFR is more likely to defang and defund the agency than to strengthen it. [AmBanker]

The American Banker explains further:

In the lead-up to the 2007-2008 crisis, financial regulatory agencies did not have a good grasp of how risks that were building across and outside of their specific jurisdictions could threaten financial stability. Regulators were not sharing sufficient data with one another and there were significant pockets of the financial sector where data was not available to any regulator. The Dodd-Frank Act sought to address this issue, in part, by creating the Office of Financial Research.

So, the budget was cut by 25% and the staffing levels by 38%.  This really isn’t conducive to sharing sufficient data and making data available to regulators.   If this is beginning to sound like telling the CDC it can’t investigate and collect data on gun violence in this country because then we might have more relevant statistics in order to understand the problems, that’s because it is.  So, let’s not collect data because then we’d find out things some folks would be happier if we didn’t know.

Then there are the more blatant attempts to roll back the Dodd Frank provisions, for example, see Investment News from last March.  On compliance teams from last May.  And, the JOBS Act 3.0 is just about a death knell for consumer protections, as of August 7 2018.

But wait yet again! There’s more.  There’s that matter of $1.4 trillion — that would be trillion with a T — in student debts in this country a larger portion of which Wells Fargo would really like to access. [Bloomberg] And, yes, this would be the same Wells Fargo which agreed on August 2, 2018 to pay out $2.09 billion in fines for a decade old mortgage loan scheme. [HuffPo]  This, while Secretary of Education, our Yacht Collecting Betsy DeVos, is proposing a rule which would cut student loan debt relief by some $13 billion. [LATimes]  [NYTimes]  So, if a person were scammed by, say, Corinthian, [WSJ] or The Fly By Night School of Urban Hang Gliding, or … Trump University [NBC] … good luck with that?

Did we take our eyes off the major players from the 2007-08 debacle?  Kindly review the “Malaysian Problem” re-emerging at Goldman Sachs.  Or, are we paying attention to what’s happening with a Goldman Sachs whistleblower case of possible wrongful termination which bubbles to the surface every so often? Stick a pin in the name Lars Windhorst for future reference? Why is Goldman Sachs moving jobs out of New York and into Utah? [BusinessInsider]  Cut costs? Yes, but why move back office compliance jobs to “remote” areas?

Then there’s the CFPB’s inexplicable turn to weakening the rules made with regard to loans made to members of the American Armed Forces. [NYT]  This reporting from NPR is pretty chilling:

“NPR has obtained documents that show the White House is proposing changes that critics say would leave service members vulnerable to getting ripped off when they buy cars. Separately, the administration is taking broader steps to roll back enforcement of the Military Lending Act.

The MLA is supposed to protect service members from predatory loans and financial products. But the White House appears willing to change the rules in a way that critics say would take away some of those protections.

“If the White House does this, it will be manipulating the Military Lending Act regulations at the behest of auto dealers and banks to try and make it easier to sell overpriced rip-off products to military service members,” says Christopher Peterson, a law professor at the University of Utah, who reviewed the documents.”

Bank deregulation didn’t work.  It didn’t work in the 1920s; it didn’t work in the 2000s; and, it’s not going to work now.  Notice, please, how when Republicans like Senator Dean Heller refer to Dodd Frank and other financial reform legislation they get vague and highly general. They speak of “onerous” regulator burdens, which are “job killing,” and don’t promote “free enterprise.”   These politicians need to be nailed down with specific questions, such as:

(1) Should the Federal Government collect data about banking trends and risk management and share this with relevant regulators?

(2) Should the Federal Government promote safe lending practices including the regulation of payday loans and similar loans made to members of the US Armed Forces?

(3) Should the Federal Government be taking a more critical look at the levels of student indebtedness, and at the accountability of the institutions offering student loans?

It’s hard to focus on some of the important news involving financial regulation, consumer protection, and other topics whilst we’re being fire-hosed with a daily inundation of surreptitious tapes, the latest cabinet level scandal du jour, and the musing of the misogynist in chief.  However, these are topics on which we should hold candidates accountable in November.

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Filed under banking, Economy, financial regulation, Politics

I Just Can’t But I Will

When I started this little blog yea these many years ago it was in no small part because there didn’t seem to be (1) all that many liberal blogs in northern Nevada, and (2) a way to force myself to wander around the Internet LEARNING things to fill gaps in my understanding of important issues.  Oh, and by the way, in a former life I was a history and political science major so I liked the opportunity to dig back into these subjects and treat myself to historical references and such.   Until 2017 this was fun.  There have been a paucity of posts lately, because of the Trump Administration’s propensity for taking the fun out of just about every topic imaginable.

For example, it’s no fun anymore to peruse the economic data, seek trends, and find interesting analyses — because in Trumpland data, analysis, and rationality don’t matter.  In Trumpland our allies are peppered with trade threats which make absolutely no sense whatsoever, while our adversaries and competitors are left guessing what “policy” the administration might be advocating from one day to the next.  There is no plan.  There are only petulant, provocative, reactions — predicated, it appears, on an understanding of world trade premised upon the situation of at the very least 38 years ago.

For example, it’s no fun anymore to watch the development of social policy, and social progress.  Yes, there’s been Hate Radio since the 1980’s, but terms like “Femi-Nazis” and “Half-Ricans” were the language of the exterior, marginalized away from polite conversation and civic discourse. We did not refer to “sh*thole nations,” nor did we speak of people “infesting” us, or “invading” us. We did not refer to human beings as “vermin.”  We did not classify entire populations of adherents to a particular religion as “terrorists.” We did not deem people unfit for service because of the color of their skin or their sexual orientation.  Now, we have a President who says there were “good people” on both sides in Charlottesville — where one side chanted ‘Blood and Soil,” and “You Will Not Replace Us,” outside a synagogue. We have a President conflating asylum seekers with drug traffickers, with human traffickers, with ordinary families seeking a better life for their children.  And we ripped their children away from those asylum seekers and ordinary families.  We reclassified (?) the children as “unaccompanied minors” when we deported their parents. We lost track of where we hid those children in the dark of night. There was no plan. There never seems to be a plan.  It’s always more like the petulant provocative reactions to momentary political expediency.

For example, it’s no fun anymore to follow governmental approaches to common issues in American life.  The Consumer Financial Protection Bureau?  Repurposed to serve the interests of the bankers who caused the problems in the first instance?  The EPA, corrupt leadership included, catering to the industries which find polluting and exploiting more profitable in the short term than caring for the viability of the planet they leave for their children.

So, the blog posts were few and far between of late.  The other notion which informed the initiation of this blog was that it would be “family friendly.”  The comments section would be monitored.  I would avoid invective and profanity in the posts.  Last week the only terms I could find to apply to the Trumpian policy of deliberate, incompetent, incomprehensible, family separation were invective and profoundly profane.

I’ve vented, alone and among friends, and I’ve calmed a bit.  So, the blog posts will continue and I will do so with the comments monitored and a curb on my tongue.  However, I will not be silenced.  I should have taken the words of one of my heroes in youth, the late great Ronnie Gilbert, to heart when someone ask her how the current situation compared to the bleak days of the McCarthy Era Black Lists — she said it was now worse.

So, I’ll pull myself together — pound out some more pixels, more often, and with as much enthusiasm as I can muster without breaking my two main rules — no unfiltered comments, no profanity.  But, I will applaud flight attendants with the courage to tell us that immigration officials lied to get migrant children on board the flight; cheer the owner of the Red Hen restaurant who would not serve a member of the Trump Administration as a measure of her conscience, and smile at the those ordinary Americans who, when they see migrant children being moved in the wee hours will call a local reporter — who will share the information with a national reporter — who will stick another pin the the map — who will try to answer the question: Where are the children and girls?

And, I’ll keep doing this until the Trump Administration hears Ronnie Gilbert’s bold contralto singing out the lyrics of “So Long, It’s Been Good To Know You.” (Not)

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Filed under banking, blogs, financial regulation, Human Rights, Immigration, Politics

Dear Congressman, Why Are You

From the Department of Thanks A Bunch But Don’t Do Me Any More Favors

“Nevada’s premiums on the health-care exchange are likely to increase by about $843 next year as a result of Congress’s repeal of the Affordable Care Act’s individual mandate and a new Trump administration rule on short-term health insurance plans, according to a new report from the liberal-leaning Center for American Progress.

The report, released Friday, found that annual premiums nationwide will increase from an average of about $6,176 to $7,189 for the average 40-year-old, which is about a 16.4 percent increase. In Nevada, average premiums using the same benchmark are projected to rise from about $5,547 to $6,390, or an increase of about 15 percent.” [NVIndy]

All right, I’m not 40 years old and haven’t been for quite some time, but I can empathize with younger people trying to run households, raise kids, pay the bills, and keep it together.  What they don’t need is a 15% increase in their health insurance premiums.  And who does this help?  It doesn’t help promote the best practices of established health insurance corporations.  It doesn’t help those families who are facing rising costs for groceries and transportation.  It doesn’t help young people to sell them junk insurance that won’t actually cover expenses for major medical expenses for illness or injury.  It seems to primarily help the fly by night scam artists who want to sell insurance policies which barely deserve the name.  You can read the full report ?here.

From the Department of Questions to Ask Congress Critters which Don’t Include Why Are You An A–hole?

Dear Congressman ____ why is it impossible for you to vote in favor of a bill to require universal background checks for gun sales and transfers?  (It’s not like this doesn’t have massive support from the American people.  It’s not like this wouldn’t help to keep firearms out of the hands of individuals who shouldn’t have them in the first place.   And while we’re about it, what’s so impossible about limiting the size of magazines, or keeping guns out of the hands of domestic abusers?)

Dear Congressman ____ why, when banks had their most profitable quarter EVER, would you think it important to roll back the consumer protections of the Dodd Frank Act? [MoneyCNN] [Vox] [WaPo]

Dear Congressman ____ in what perverted universe is it considered acceptable to bait bears with donuts and bacon in order to kill them? To kill hibernating bears? To kill wolf pups? [NYMag]

Dear Congressman ____ Just what purpose is served by vilifying a Central American street gang and conflating its members with ALL immigrants to this great nation?  Criticizing a violent gang is laudable, conflating these people with ALL immigrants is inexcusable.  Since I’m not 40 years old and haven’t been for some time, I recall a time when this nation was recovering from a major war against a state which called Jews “vermin,” dehumanized them, and then used the appellation as an excuse to exterminate them.  Perhaps it’s time to have people, especially politicians, read (or re-read) Elie Wiesel’s Night.

Where does this lead?

“Wiesel’s prose is quietly measured and economical, for florid exaggeration would not befit this subject. Yet, at times, his descriptions are so striking as to be breathtaking in their pungent precision. He writes through the eyes of an adolescent plunged into an unprecedented moral hinterland, and his loss of innocence is felt keenly by the reader. His identity was strained under such conditions: “The student of Talmud, the child I was, had been consumed by the flames. All that was left was a shape that resembled me. My soul had been invaded – and devoured – by a black flame.” Night.

When bad things are done by bad people, bad things happen to innocent people.

Or maybe it would simply be easier to ask, Dear Congressman ____ why are you an A-hole?

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Filed under ecology, financial regulation, Gun Issues, Health Care, health insurance, Immigration, Politics

Guess What The Senate Thinks Is More Important Than Children Killed By Semiautomatic Weapons?

And the answer is …. <drumroll please> … S. 2155, for March 5, 2018 on the Senate Calendar. (pdf)  By the way, the title of the bill sponsored by Senator Mike Crapo (R-ID) is the Economic Growth, Regulatory Relief, and Consumer Protection Act.  Put the emphasis on the “regulatory relief” part of that title, because it certainly isn’t on the consumer protection phrase in that title.  So, what is the Senate doing instead of taking on issues related to gun violence and weapons of war on our streets?

The bill amends the Bank Holding Company Act of 1956 to exempt banks with assets valued at less than $10 billion from the “Volcker Rule,” which prohibits banking agencies from engaging in proprietary trading or entering into certain relationships with hedge funds and private-equity funds. Certain banks are also exempted by the bill from specified capital and leverage ratios, with federal banking agencies directed to promulgate new requirements.

The bill amends the United States Housing Act of 1937 to reduce inspection requirements and environmental-review requirements for certain smaller, rural public-housing agencies.

Provisions relating to enhanced prudential regulation for financial institutions are modified, including those related to stress testing, leverage requirements, and the use of municipal bonds for purposes of meeting liquidity requirements.

The bill requires credit reporting agencies to provide credit-freeze alerts and includes consumer-credit provisions related to senior citizens, minors, and veterans. [Congress]

It’s hard enough to understand a Senate in which the answer to assault weapon violence is to require states and localities to enter information into the national database — information they are already required to submit — but it’s more important to them to let some banks get out of complying with the Volcker Rule (the bank can’t play investment games with depositors’ money.)

Instead of taking up bills to require universal background checks for the purchase of firearms in this bullet riddled country, it’s more important to the US Senate to discuss allow banks to get out from under capital and leverage ratios.

Instead of taking up bills to raise the age for firearm purchases the US Senate deems it of more importance to let some banks reduce inspection requirements and environmental-review requirements in rural areas — raising the question: Why should rural areas be less protected than urban ones?

Instead of debating bills to ban the sale of bump stocks to enhance the lethality of AR-15 and similar weapons of war, the US Senate thinks it is more important to allow some banks to skirt the demands of stress testing.

Instead of discussing how to stop the sale of weapons of war to civilians the US Senate believes it to be of more urgency to take a vote on easing the restrictions on proprietary trading….

Instead of taking action on bills to reduce the likelihood of additional carnage in our public spaces, or in the privacy of our homes, the United States Senate would far rather roll back consumer protections enacted in the wake of the Housing Bubble Debacle.

This is nothing less than the absence of national leadership and the abdication of morality.

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Filed under Economy, financial regulation, Gun Issues, Politics

Rep. Amodei’s Wonderful Record: January De-Regulation Edition

Representative Mark Amodei’s (R-NV2) record in the 115th Congress is as dubious as the institution itself.  For a group touting their “accomplishments” the actual record doesn’t quite hit that level.  Post Office namings, and other minutiae are not included in this list.

Roll Call 8, January 4, 2017:  Midnight Rules Relief Act — “This bill amends the Congressional Review Act to allow Congress to consider a joint resolution to disapprove multiple regulations that federal agencies have submitted for congressional review within the last 60 legislative days of a session of Congress during the final year of a President’s term. Congress may disapprove a group of such regulations together (i.e., “en bloc”) instead of the current procedure of considering only one regulation at a time.” Representative Amodei voted in favor of this bill (238-184).   But, wait, there’s more:

“According to the CRA, resolutions of disapproval not only nullify the regulation in question; they also prohibit a federal agency from issuing any other regulation that is “substantially the same” in the future, unless specifically authorized to do so by a future act of Congress. As a result, these mass-disapproval resolutions would permanently block agencies from addressing threats to public health and safety.”  (emphasis added)

Those who believe that things like corporate accountability, safe working conditions, clean air, and clean drinking water are important wouldn’t find this very appealing.  However, that didn’t stop Rep. Mark Amodei from supporting this bill, which was essentially a solution in search of a problem.

Roll Call 23, January 5, 2017:  “Regulations from the Executive in Need of Scrutiny Act of 2017”  Representative Amodei voted in favor of this bill.  “(Sec. 3) The bill revises provisions relating to congressional review of agency rulemaking to require federal agencies promulgating rules to: (1) identify and repeal or amend existing rules to completely offset any annual costs of new rules to the U.S. economy.” [Cong]  This is vague to the point of ridiculousness.  There are several ways to do a cost analysis, and we can bet that the GOP has in mind only the most stringent, even if there is an obvious benefit to public health, safety, or general well being.  Frankly, there are some rules we have put in place which are expensive in terms of commercial and industrial calculations, but necessary in terms of public health and safety — we do not allow, for example, the unlimited release of arsenic into supplies of drinking water.   It’s hard to imagine this as a “major piece of legislation” without considering the potential hazards it creates for local governments and citizens who have to live with the pollution, work rules, and other regulations which place them at risk.

Roll Call 45, January 11, 2017: “(Sec. 103) This bill revises federal rulemaking procedures under the Administrative Procedure Act (APA) to require a federal agency to make all preliminary and final factual determinations based on evidence and to consider: (1) the legal authority under which a rule may be proposed; (2) the specific nature and significance of the problem the agency may address with a rule; (3) whether existing rules have created or contributed to the problem the agency may address with a rule and whether such rules may be amended or rescinded; (4) any reasonable alternatives for a new rule; and (5) the potential costs and benefits associated with potential alternative rules, including impacts on low-income populations.”  Here we go again!  Yet another way to tie the hands of executive branch departments and agencies, and a GOP tenet for some time now.  Remember, the rules don’t have to be in one category (for example, environmental regulation) they can also cover such things as SEC rules and regulations, banking, and other financial regulations.   Representative Amodei, voted in favor of this bill and perhaps needs to explain if he meant this to handcuff the financial regulators who are responsible for seeing that Wall Street doesn’t replicate its performance in the run up to the Housing Crash of 2007-2008.

Roll Call 51, January 12, 2017:  SEC Regulatory Accountability Act, and yet another House attempt to slap a “cost-benefit” analysis on SEC regulations on financial market transactions.  Representative Amodei voted in favor of this bill.    There were objections to this bill at the time, and this is one of the more cogent:

“The most prominent new requirement would mandate that the SEC identify every “available alternative” to a proposed regulation or agency action and quantitatively measure the costs and benefits of each such alternative prior to taking action.  Since there are always numerous possible alternatives to any course of action, this requirement alone could force the agency to complete dozens of additional analyses before passing a rule or guidance. Placing this mandate in statute will also provide near-infinite opportunities for Wall Street lawsuits aimed at halting or reversing SEC actions, and would be a gift to litigators who work on such anti-government lawsuits. No matter how much effort the SEC devotes to justifying its actions, the question of whether the agency has identified all possible alternatives to a chosen action, and has properly measured the costs and benefits of each such alternative, will always remain open to debate.”

Speaking of a “Lawyers Full Employment Bill,” this is it.  Imagine voting in favor of allowing an infinite and interminable number of lawsuits demanding that the SEC consider ALL available options before promulgating a rule.  That didn’t stop Representative Amodei from voting in favor of it.

If you’re seeing a pattern, you’re right.  “De-regulation” has been a Republican talking point for the last 40 years.  However, while the term sounds positive when it’s generalized the devil, as they say, is in the details.  The January flood of deregulation bills in the 115th Congress wasn’t designed to tamp regulations on ordinary citizens, but on the corporations (especially in terms of environmental issues) and Wall Street players who want more “flexibility” in their transactions.

What the Republicans have yet to provide are instances of jobs lost because of environmental regulations.  Since this evidence is scarce, the next ploy is to argue that the costs outweigh the benefits.  By emphasizing the short term monetary costs the GOP minimizes the importance of long term economic or environmental costs, and the impact deregulation has on residents in our states and communities.

We can point to jobs lost after financial deregulation — Nevada was one of the poster children for financial sector deregulation impact.  Eight months later, Representative Amodei has yet to offer more than the usual highly generalized platitudes about the significance of the deregulation fervor during the first month of the 115th Congress.

We’ll be taking a look at some other “important” votes taken by our 115th Congress.  In the mean time, it’s depressing but productive to watch what this current Mis-administration is doing in regard to North Korea, Iran, women’s issues, common sense gun control legislation, and the various and sundry scams and grifts associated with the Cabinet.

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Filed under Amodei, Economy, financial regulation, Nevada politics, Politics

Heads Up Nevada, We Could Once More Join The Sand States

Heads up, Nevada!  There’s another storm on the horizon, and it’s not meteorological, nor is it related to the proliferation of high powered rifles and stockpiles of ammunition.  It has to do with a crisis we thought we’d withstood and overcome.

We were one of the Sand States eight years ago, those with massive development projects in which homes were constructed, mortgages were offered, and then sold into secondary markets to be sliced, diced, tranched, and manipulated into financial products in the Wall Street Casino.  We know what happened next.  The investment banking sector collapsed, the financial markets were in ruins, and Nevadans felt the aftermath with unconscionable unemployment levels and lost income.

The response was the Dodd Frank Act, a set of regulations to control the excesses of the Wall Street Casino and investment banking practices.  The first major assault came from the House of Representatives last June:

“The House legislation, called the Financial Choice Act, would undo or scale back much of Dodd-Frank. The bill was approved 233 to 186. All but one Republican — Walter Jones of North Carolina — voted for the bill. No Democrats supported it.

Its major changes include repealing the trading restrictions, known as the Volcker Rule, and scrapping the liquidation authority in favor of enhanced bankruptcy provisions designed to eliminate any chance taxpayers would be on the hook if a major financial firm collapsed.

The bill also would repeal a new Labor Department regulation, largely still pending, that requires investment brokers who handle retirement funds to put their clients’ interests ahead of their own compensation, company profits or other factors.”

Representative Mark Amodei voted in favor of this bill, HR 10, on June 8, 2017.   What Representative Amodei voted for was to allow banks to play in the stock market with depositors money (remember deposits are guaranteed up to $250,000) and to allow financial advisers to recommend products to their customers which are not necessarily to the advantage of their retired clients, but which may happily enhance the financial advisers’ bottom lines.   In light of what happened to this Sand State in 2007-2008 Nevadans should be especially concerned about this.  But, wait, there’s more

Remember that one of the major problems for working Americans, Nevadans included, was the burden of pay-day lending?  The Consumer Financial Protection Bureau, created by the Dodd Frank Act, is seeking to limit the negative impact of some of the more egregious practices in this sector of the banking industry.  Now the Comptroller of the Currency has another idea, publicized on October 5th:

“…the Office of the Comptroller of the Currency surprised the financial services world by making its own move—rescinding guidance that made it more difficult for banks to offer a payday-like product called deposit advance.”

Lovely, so now banks can “offer” those insidious high rate pay-day loans, only changing the name to “deposit advance,” and consumer will be right back on the hook.  At almost the same time as the CFPB issued a rule preventing pay day lenders from handing out loans without reviewing a customer’s capacity to repay the loans, the bankers get the green light to hand out “deposit advances.”

There is one bill in the US Senate which does offer some improvements on Dodd Frank, Senator Claire McCaskill (D-MO) and Senator David Perdue (R-GA) have introduced a bill to address some of the problems for community banks.  There are more reasons to support this legislation than to oppose it, but beware of the rationalizations and gamesmanship.

Those who want to eliminate the CFPB, gut its authority, or toss the Dodd Frank Act altogether may wish to convince us that (1) the entire act needs to be repealed to “enhance the free market,” or some other euphemism for re-opening the Wall Street Casino, (2) the CFPB places “burdensome” regulations on those pay day lenders who (bless their hearts) are only trying to provide more “options” for consumers.   This isn’t the most interesting or engaging story of the moment, but it is an issue Nevadans would do well to follow very closely.

We don’t need to be ground into the sand again.

 

 

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Filed under Amodei, Economy, financial regulation, Nevada, Nevada economy, Politics

Amodei, Your Banker’s Best Friend

House Roll Call Vote 412 wasn’t one of those votes likely to draw much general media attention, even its title seemed designed to induce yawns: “Providing for congressional disapproval under chapter 8 of title 5, United States Code, of the rule submitted by Bureau of Consumer Financial Protection relating to “Arbitration Agreements.”  Representative Mark Amodei (R-NV2) voted in favor of this measure on July 25th, and few noticed, much less commented.  It’s a small thing, but indicative of a mindset that favors the Big Banks over the interests of American consumers.

Background

 “In May 2016, the CFPB issued a proposed rule prohibiting predispute arbitration agreements in providing consumer financial services products. This rule would prohibit mandatory predispute arbitration agreements in consumer agreements for items such as checking or savings accounts, credit cards, student loans, payday loans, automobile leases, debt management services, some payment processing services, other types of consumer loans, prepaid cards, and consumer debt collection. The rule would also prohibit predispute arbitration agreements in connection with providing a consumer report or credit score to a consumer or referring applicants to creditors to whom requests for credit may be made.” [ABA]

Translation:  For “predispute” read Day in Court, as in the rule prevents a financial corporation from requiring arbitration before a person can take his or her case to court as a member of a group of consumers who have been hurt by the financial institution’s action or actions.   The Consumer Financial Protection Bureau explained:

“Many consumer financial products like credit cards and bank accounts have contract gotchas that generally prevent consumers from joining together to sue their bank or financial company for wrongdoing. These widely used clauses leave consumers with no choice but to seek relief on their own – usually over small amounts. With this contract gotcha, companies can sidestep the legal system, avoid accountability, and continue to pursue profitable practices that may violate the law and harm countless consumers.”  (emphasis added)

And, Representative Amodei supported the legislation to disapprove of this rule which was an attempt to protect consumers from actions like the following:

The poster child of bank malfeasance, Wells Fargo’s  —  “admitted its employees systematically created millions of sham bank accounts in its customers’ names, and then in many cases fraudulently billed those same customers for fees and services they never agreed to. Executives of the megabank knew this was happening but did nothing. Then, they decided to blame 5,300 “rogue” employees, who were summarily fired. Now, to ward off thousands of lawsuits, the company is hiding behind binding arbitration clauses in its victims’ contracts.” [USNWR]

And, there’s this —

“Military readiness has been negatively affected by unscrupulous payday lenders who prey on military servicemembers and veterans. The victims become overly indebted thanks to exorbitant interest rates and hidden fees they don’t understand, and then find themselves unable to obtain relief thanks to forced-arbitration clauses. Because of this, the Military Coalition, which represents nearly 6 million uniformed service members, veterans and their families, has formally petitioned Congress to ban the clauses.”  [USNWR]

It’s hard to imagine siding with unscrupulous bankers against the interests of enlisted personnel who are in the E6 to E9 ranks  in which pay runs from $2,486.99 to $4,186.09 for a person with more than eight years service, however Representative Amodei found a way to do it.  The problem became such a persistent issue for the military that in 2007 the Department of Defense started enforcing the Military Lending Act to protect its service personnel. However, pay day lenders found loopholes such that they could re-introduce their ‘products’ to members of the military. [MrktPlc] Who would support legislation designed to force members of the Armed Services to accept arbitration before they could have their day in court?  Representative Mark Amodei (R-NV2) and his Republican cohorts in the 115th Congress.

What makes this vote particularly noticeable regarding the protection of bankers is that there are ways — at least two — to ‘prevent’ that bete noir of all Republicans, the consumer lawsuit, without pitching the baby out with the bath water.

The first way would be to make all arbitration voluntary.  Companies could save time and money, and avoid publicity IF the consumer agrees.  If there is no agreement then the case goes to court.

The second possible solution would be to put the arbitration on a “business pays” status.  The American Bar Association offers this common sense proposal:

“The CFPB should require any consumer arbitration to be fully business-funded at no cost to the consumer. When a business faces transaction costs of nearly $2,000 per arbitration filed, repeat consumer filings will attract its attention. In addition, the CFPB could consider requiring that any consumer arbitration which results in a favorable consumer award on the merits should be awarded treble damages and attorneys’ fees. This provision would include a sort of “built in” incentivizing provision. The goal of this provision is to encourage organically what we already see occurring, increased settlement of consumer disputes. Still further, the CFPB should require that any consumer arbitration award must result in a written statement of decision, which permits other consumers to know how the arbitrator applied the law to the facts of that case. This will facilitate consumer knowledge of potential corporate overreach (and encourage more recovery), and will also help aid the consumer in arbitrator selection.”

In short, it is not necessary to go full-bore all-out in support of the banksters among us in order to prevent the unscrupulous from skinning the unwary or uninformed, but that’s what Representative Mark Amodei did on July 25, 2017.

Perhaps this may be explained by the fact that as of May 2017 Representative Amodei received $8,000 in donations from commercial banks for this election cycle, another $7,000 from credit unions, and $1,000 from finance and credit companies.  Or maybe it relates to the $25,000 he’s collected from the American Bankers Association over his political career?  Whatever the motivation, it’s clear that Representative Mark Amodei is placing the interests of the bankers above those of American consumers.   This situation could be rectified in 2018.

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Filed under Amodei, consumers, Economy, financial regulation, Nevada economy, Nevada politics, Politics