These are some of the most dangerous words ever spoken – with regard to your bank account:
“After eight years of the Obama economy, Americans are struggling with stagnant wages, reduced hours, and decreased economic opportunity. The policies of this Administration, from the Affordable Care Act to the Dodd Frank financial reform legislation, have hurt economic growth and make it more costly and burdensome for businesses to expand and add workers.” [Heck]
Heck tries to waffle a bit in the last segment: “I will continue to support reasonable regulations that protect the consumer, employees, and the environment while working to reduce burdensome federal regulations so that businesses can thrive and create good-paying jobs.”
First, it’s fact check time. As the chart above indicates the ACA and the Dodd Frank Act have not “decreased economic opportunity,” (whatever that might mean) and in light of what’s been happening with Wells Fargo Bank we need to talk about the “burdens of regulation.” We also need to talk about a piece of legislation that just passed the House Financial Services Committee.
The “Financial Choice Act” —
“The Financial Choice Act split the banking panel with a vote of 30 to 26, with just one Republican, Representative Bruce Poliquin of Maine, siding with the committee’s Democrats against it.
Mr. Hensarling has been a prominent critic of Dodd-Frank and other changes after the 2008 financial crisis, including the creation of the Consumer Financial Protection Bureau to regulate the consumer finance industry.
“It has been six years since the passage of Dodd-Frank. We were told it would lift our economy, but instead we are stuck in the slowest, weakest, most tepid recovery in the history of the Republic,” said Mr. Hensarling at Tuesday’s session. “The economy does not work for working people.”
The legislation, which was unveiled in June, calls for numerous changes to Dodd-Frank. One provision would allow some of the largest banks to exempt themselves from some regulatory standards if they maintained an important ratio of capital to total assets at 10 percent or more.” [NYT]
There’s more. The Financial Choice Act (comprehensive summary pdf) reads like the American Bankers Association Christmas Wish List and Birthday Party requests combined with everything a banker would want from a Financialist Santa Claus.
However, let’s start with the Consumer Financial Protection Bureau about which the House Republicans have several complaints:
“The Consumer Financial Protection Bureau is not accountable to Congress or the American people. The Bureau’s policies often harm consumers or exceed its legal authority because the Bureau is not subject to checks and balances that apply to other regulatory agencies.” [House pdf]
This is another iteration of the initial whine the GOP wheezed out when the idea of a Consumer Financial Protection Bureau was suggested which would not be subject to the corporate/financialist tastes of Republican Congressional representatives. The ones who want government so small it can be drowned in a bathtub – and the CFPB along with it. At this point it might be instructive to ask: What harm has been done to consumers of, say, Wells Fargo Bank, by the CFPB?
“When news first broke that Wells Fargo would pay the largest fine in Consumer Financial Protection Bureau history for routinely opening unauthorized accounts that clients didn’t want or need, CEO John Stumpf put blame squarely on his worst-paid workers.
He’s changed his tune since, as political pressure over the years-long scandal mounted and evidence depicting the high-pressure sales culture at the bank got more attention.
And now, the bank’s board is reaching into Stumpf’s own pocket to discipline him. The CEO will forfeit $41 million in past compensation — all of it in the form of investment holdings that hadn’t vested yet — and the woman who ran his firm’s retail banking unit will give back $19 million of her own.” [TP]
What harm was done by this agency in fining Wells Fargo for its “cross selling scam” that created phony accounts to boost sales figures? And, what is wrong with this result?
“By clawing back a large chunk of Stumpf’s roughly $100 million in compensation over the past decade, though, the board is hoping to signal that it’s taking the scandal seriously. The day news of the $185 million fine broke, Stumpf portrayed it as an issue of some bad apples at junior positions and said responsibility started and stopped with the 5,300 people fired in response.
That holier-than-thou response first started to crack in front of the Senate Banking Committee last week, when senators including Elizabeth Warren (D-MA) bounced the bank head off the walls of a hearing room for hours.
Wednesday’s announcement of clawbacks comes a day before Stumpf returns to Capitol Hill to face the House’s version of the same inquisition.
Clawbacks are a hot-button concept for finance watchdogs and Wall Street critics. Many of the industry’s sins stem from compensation policies that incentivize executives to break whatever rules they have to keep the company stock rising, knowing they’ll walk away rich even if the company gets caught. Clawbacks, observers and policymakers say, are an important tool in reversing that deviant cycle.” [TP]
So, how do the House Republicans mean to “improve” the CFPB? The CFPB that caught Wells Fargo? Made the Bank pay fines and restitution? Made the Board of Directors claw back the ill-gotten gains of the bank executives and not lay the whole scam on the lower level employees?
The House Republicans want to (1) replace the head of the CFPB with an awkward “bipartisan” board; that should facilitate logjams and obstructionism. (2) Make the CFPB budget subject to specific Congressional control – meaning the Congress can cut the budget until there is no way the agency can do its job. (3) Require a cost benefit analysis of every rule promulgated by the agency – which means if the regulation “costs too much” for the preservation of bank profits the rule dies. (4) Prohibit the CFPB from cutting off “access” to fraudulent or abusive bank practices and products. In other words, the bankers have the CHOICE to offer any product they wish and if you buy in and get scammed that was your choice as a consumer.
Now it’s time to return to Representative Heck’s own words: “…Dodd Frank financial reform legislation, have hurt economic growth and make it more costly and burdensome for businesses to expand and add workers.”
Does Representative Heck believe that they current structure of the CFPB as an independent agency is a weakness? Does he believe that it should be subject to Congressional pressure to weaken its enforcement activities? Is CFPB protection from fraudulent practices and products really denying Americans “choices” in financial products?
If the “Financial Choice Act” (essentially a repeal of Dodd Frank) came up for a vote in the House today would Representative Heck vote in favor of it?
And how does he feel about the House GOP charges that the CFPB was late to the game and didn’t handle the Wells Fargo case adequately?
“Where was the CFPB? Why did they come in so late to the game?” he continued. “They have immense powers and this is their job to enforce these basic consumer laws and it appears they were asleep at the switch.”
Hensarling also has criticized regulators for the $185-million settlement with the bank, which allowed Wells Fargo to avoid admitting any wrongdoing.
The controversy over the San Francisco-based financial institution has become the latest flash point in a bitter battle between Republicans and Democrats over the fate of the CFPB, which was created by the 2010 Dodd-Frank overhaul of financial regulations.
The legislation passed with almost no GOP support. Ever since, House and Senate Republicans have been trying unsuccessfully to reduce the power of the bureau, arguing it was designed to avoid congressional oversight and has limited consumer’s access to credit through over-regulation.” [LATimes]
Interesting that the very Republicans who were trying to reduce the power and capacity of the CFPB to regulate lending practices are now trying to blame the agency for not doing enough, fast enough.
“Ed Mierzwinski, consumer program director at the U.S. Public Interest Research Group, said Republicans are pushing “a false narrative” about the CFPB’s role in the Wells Fargo case in order to discredit the agency.
“The fact is the CFPB and OCC were investigating before the L.A. Times story came out,” he said. “But that does not mean that the leading congressional opponent of the CFPB won’t try to pitch that narrative again at this hearing because it plays to his base. But it’s simply false.” [LATimes]
Nice try, Rep. Hensarling, but there’s an ample record of Republican opposition to the creation, organization, and implementation of the CFPB to make any contention that the 1,600 man/woman agency wasn’t trying to do its job in regard to the egregious practices of Wells Fargo. As the old saw goes: That dog won’t hunt.
So, the next question to Representative Heck (and Hardy and Amodei too) is: In light of the Wells Fargo scandalous behavior and the bilking of its own customers, what are you advocating to increase the power of the Consumer Financial Protection Bureau to actually protect PEOPLE and not the bankers who have been scamming them? No one chooses to get bilked, and no one should have to tolerate banks who chose to bilk their customers. Period.
** On the other hand Nevadans who want adequate protection from illegal, illicit, and otherwise unethical banking practices have an advocate running for the U.S. Senate – Catherine Cortez Masto, who has a track record of taking on the big banking interests on behalf of us “little people who pay taxes.” A candidate with an endorsement from the woman who fought for the CRPB, Elizabeth Warren:
“I’m so grateful to have Senator Warren’s support,” said Cortez Masto. “Senator Warren and I are both committed to taking on the big banks, protecting consumers, homeowners and helping to grow the middle class – issues I championed as Attorney General and hope continue doing in the U.S. Senate with her. Unlike my opponent Joe Heck who has voted to keep tax breaks for big corporations and billionaires like the Koch brothers, I will fight for policies that help hard working Nevadans, not hurt them.”
“Catherine’s race is critical to restoring our Democratic majority,” said Senator Warren. “During her two terms as Nevada’s Attorney General, Catherine held big banks accountable and fought predatory lending, cracked down on sex trafficking and got tough on elderly, child, and domestic abusers. Catherine knows who she’s fighting for and I need her fighting alongside me in the Senate.” [Link]
And there’s the choice – let the banks make the choices? Or, protect people from the banks’ bad choices.
Desert Beacon 