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.