legislation

CBO: Boehner’s Math Is Wrong, Budget Deal Will Cut Less Than Half Of What Was Promised

by AP on May 17, 2011

Huffington Post…

WASHINGTON — The big spending bill passed into law with much fanfare last month will cut the deficit by $122 billion over the next decade – less than half of what top lawmakers promised at the time – the government reported Monday. Speaker John Boehner, R-Ohio, had touted the legislation as reducing the deficit by more than $300 billion over a ten-year span. His prediction was based on an analysis by a Senate aide that the $38 billion in cuts this year would translate into $315 billion over a decade. But the Congressional Budget Office, the closest thing to an official referee, said Monday the cuts add up to much less. Released the same day the Treasury Department announced that the government has reached the $14.3 trillion legal limit on its ability to borrow money, the CBO study illustrates the difficulty in cutting the deficit, especially for the immediate future. Treasury has the ability to juggle the books to avoid a default for now, but legislation to lift the so-called debt limit is going to have to include significantly greater cuts than the spending bill last month. The budget office also said the compromise negotiated between Boehner and President Barack Obama actually increases the deficit this year by $3.2 billion, because of military spending. At issue is a $1.2 trillion spending measure enacted after weeks of difficult talks. Republicans had initially rammed through the House a tougher version that cut more than $60 billion this year, when compared to 2010 spending levels. But the immediate budget-cutting punch turns out to be far less, partly because the government’s fiscal year is more than half over. The final version included $25 billion in cuts to domestic agency budgets. It also contained a host of curbs to programs like federal highway funding and health care for children of lower-income families that will hardly generate any deficit savings, CBO said. A previous CBO study had predicted that the $38 billion in cuts to non-war accounts would generate just $352 million in savings through the Sept. 30 end of the 2011 budget year. That caused consternation in GOP ranks. At one point passage of the measure appeared imperiled because of disillusionment among tea party-backed lawmakers, already disappointed the cuts weren’t bigger. That prompted Boehner to highlight a study by a Senate Budget Committee GOP staff aide, which used earlier CBO data to predict the spending bill would cut outlays by $252 billion over the decade and that the actual deficit savings would grow to $315 billion once reduced interest costs were added on. The budget office doesn’t say how much the measure would reduce interest costs.

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CBO: Boehner’s Math Is Wrong, Budget Deal Will Cut Less Than Half Of What Was Promised

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Health Care For All Nears Reality In One State

by AP on May 11, 2011

Huffington Post…

MONTPELIER, Vt. — Accustomed to being the first to dip its toe into hot-button issues, Vermont is preparing to provide public health care to all residents regardless of income, moving toward a government-run system that will take it as close to Canada philosophically as it is geographically. Gov. Peter Shumlin is expected to sign legislation this month marking the first step on the path to phasing out most private insurance. The effort puts Vermont well in front of last year’s federal health care overhaul. The ultimate goal, Shumlin said recently, is a Canadian-style system “where health care is a right and not a privilege.” But it’s not clear yet how Vermont – the first state to ban slavery in its constitution and to give marriage-like rights to same-sex couples – will achieve universal health care. The legislation places responsibility for the details of the new system, including how to pay for it, in the hands of a powerful new state board. Vermont’s turn toward universal care comes as more than two dozen states have gone in the opposite direction, suing to overturn the federal law. The U.S. House last week voted to strip federal funding from key parts of it, though that move is expected to die in the Senate. While the federal law requires people to have health insurance and offers subsidies to help low- and moderate-income people buy it, Vermont would go further. It would change the way doctors and hospitals are paid and streamline the processing of insurance claims. The federal law was modeled in part on Massachusetts’ groundbreaking 2006 system that required all residents to have health insurance; unlike the Vermont plan, the Massachusetts program does not provide health care to all but does offer subsidized insurance to those can’t otherwise afford it. The Vermont bill sets up a five-member board which, in consultation with the executive branch and Legislature, is to answer the big unanswered questions in this year’s bill. Those include how the system will be paid for – some have suggested a payroll tax on employers and workers; what benefits will be covered; what copays and deductibles it would include; and other details. “Vermont is leading the way in having an authentic discussion about what a universal health care system would look like in the state,” said Katie Robbins of Healthcare NOW. The Philadelphia-based group supports single-payer health care, under which everyone gets coverage from the same government-run system, similar to what military personnel have now. Despite the growing opposition to the federal law, Vermont, where liberal Democrats control the governor’s office and both houses of the Legislature, is undaunted in moving in the direction of Canada, which pays for its health care system through taxes. And supporters say the state has built-in advantages. Vermont, with a small population of about 620,000, is often ranked as one of the healthiest states. It is well below the national average for infant mortality, childhood obesity, AIDS diagnoses and a range of other indicators of poor health, according to figures kept by the Kaiser Family Foundation. The Census Bureau reported that, in 2007, Vermont ranked sixth in the country in physicians per capita, with 374 per 100,000, versus a national average of 271 per 100,000. And about 90 percent of Vermonters have some form of health insurance already. But some of those with insurance say it falls far short of what they need. Heather Loughlin, 42, was working as a vice president at the Sugarbush ski resort when she was diagnosed 2 1/2 years ago with multiple sclerosis. Before long, she found herself no longer able to work and buying insurance with a subsidy from the state under a current program, but with a private insurer. A thick stack of coverage denial letters later, Loughlin said, she was back living with her parents in Ludlow, who were going into debt in their retirement to help her meet her medical costs. “It doesn’t matter if you’re paying $300 or $400 a month for insurance,” Loughlin said. “It’s a mirage.” She called the repeated coverage denial letters “mind-boggling and enraging. They just try to wear you down.” Advocates for changing the system brought hundreds of people with stories like that to hearings and rallies at the Statehouse last year and again this spring. James Haslam of the Vermont Workers Center, which spearheaded a campaign under the banner “Health Care Is A Human Right,” said the legislation wouldn’t have passed without the grass-roots support. “If other people want this in their states, they have to start organizing their neighbors,” he said. The bill indicates that the state would “maximize the receipt of federal funds” to help pay for the new health care system. But Vermont’s prospects of receiving federal money are uncertain amid efforts by Republicans in Congress to chip away at the federal overhaul. “The big hole in Vermont’s plan has always been its failure to specify a funding source,” said Shawn Shouldice of the National Federation of Independent Business, which opposes the legislation. “The only clearly defined funding element was the federal grant money … and now that could vanish, as well.” William Hsiao, a Harvard health care economist and consultant to the drafters of Vermont’s legislation, has called for a payroll tax shared by employers and workers. But lawmakers put off a decision on that, some saying they wanted a way to tax non-wage income to support the program as well. There are also doubts the bill really will move Vermont toward a genuine single-payer system. It leaves room for people to buy supplemental insurance, and among the big questions is whether workers at IBM and some of the major employers in the state, whose self-insurance systems are regulated under federal law, will be allowed to be absorbed into Vermont’s system. In a move crucial to the project’s success, backers say, the board will design and administer new cost-control measures, including “global budgeting” for hospitals and other health care providers. Instead of the traditional “fee-for-service” system in which doctors are paid by the patient visit or procedure performed, the new system will be designed to pay for providing necessary health care to a given population. A senior health researcher at the conservative Heritage Foundation in Washington warned, though, that Vermont may want to be careful in playing with the financial incentives that can influence how health care systems develop over time. In some other countries, Ed Haislmaier of Heritage said, the sort of “global budgeting” Vermont envisions ends up with less acutely ill patients with longer hospital stays. “Hospitals turn into nursing homes,” he said. The bill calls for maintaining and expanding the state’s Blueprint for Health program, which is designed to streamline and provide better preventive care to people with chronic conditions like heart disease and diabetes. Rep. Mark Larson, chairman of the Health Care Committee in the Vermont House and a key architect of the legislation, acknowledged that the bill is really a planning document and that its supporters have much left to prove. After the House gave the bill final approval 94-49 Thursday, he said, “I think today’s vote reflects people saying, ‘OK, you’ve made your case. Now show me.’”

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Health Care For All Nears Reality In One State

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Paul Ryan, AARP Battle In Spat Over His Medicare Plan

May 10, 2011

WASHINGTON — AARP is firing back at Republican budget maven Rep. Paul Ryan (R-Wis.) for accusing it of putting business interests before the needs of older Americans. Ryan sent an email to supporters of his Prosperity PAC Tuesday, slamming AARP over its new multi-million dollar ad campaign that accuses Washington of trying to pay its bills by shorting the Medicare benefits Americans have earned. The spot doesn’t mention Ryan or any party, but it is clearly a shot at Ryan’s budget, which would shift Medicare from its current from, a government-run plan, to a voucher-like private system in which the government subsidizes people to buy their own insurance. Ryan did not appreciate the ad, and in the email, an adviser to his PAC trashed it. “Last week, [AARP], a left-leaning pressure group with significant business interests in the insurance industry , launched a national ad campaign that intentionally misleads seniors about the Medicare debate,” the email read. Republicans in the House have taken aim at AARP recently, charging, like Ryan, that AARP is prioritizing its business interests over its advocacy. A lengthy report using much of AARP’s own data suggested the income AARP gets from endorsing certain insurance plans was clouding its vision. But AARP found Ryan’s latest accusation nonsensical, because Ryan’s plan would actually be better for AARP’s business interests than the current Medicare system AARP is defending. It would shift tens of millions of Americans into the private market, and in theory offer a massive boon to AARP’s business side, giving the influential lobby group little financial incentive to oppose the idea. “We make decisions on policy based on what we believe will be in the best interests of Americans over age 50. A recent attack on AARP from a political action committee erroneously suggests otherwise,” said AARP spokesman Jim Dau in a statement. “The truth is that the budget plan passed by the House probably would present more opportunities for AARP to strengthen its finances, since every older American would be forced into private Medicare plans, including those that AARP brands,” Dau noted. “We opposed the legislation nonetheless because we believe the goal should be to strengthen Medicare, not upend it,” he said. One Capitol Hill operative who works on medical issues — and who requested anonymity because he works with both sides of the aisle — laughed outright at Ryan’s complaint, instead seeing the logic of AARP’s position. “Paul Ryan hasn’t been tagged with the stupid label before, but that’s stupid. It’s too obviously partisan,” the operative said, suggesting AARP would do far better financially with the larger private insurance market envisioned by Ryan. Ryan’s email also accuses AARP of partisan maneuvering. “Unfortunately, Washington’s special interest groups, like the AARP, have decided to play politics,” the message concluded. “We either need them to have a serious conversation or get out of the way.” But Dau countered that AARP has been consistent, for instance opposing commissions such as those envisioned by the White House that would set Medicare rates. Ryan, the Budget Committee chairman, is not averse to listening to special interests in the insurance industry himself. According to the Center for Responsive Politics, Ryan’s Prosperity PAC got $83,250 in contributions from the insurance industry in the 2010 election cycle. The industry also donated $234,352 to Ryan’s 2010 reelection campaign

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State Lawmakers Revisit Expired Unemployment Benefits

May 9, 2011

State lawmakers in Tennessee and North Carolina want a legislative do-over after their states became ineligible for 20 weeks of federally-funded unemployment insurance last month. Democrats in the Tennessee, where the unemployment rate is 9.5 percent, are trying to revive the Extended Benefits program. They didn’t learn of the program’s untimely death until constituents reported that their checks had stopped after April 16. The U.S. Congress had previously reauthorized the EB program through the end of the year for states with persistent high unemployment. “We were pretty surprised to learn it had happened and there weren’t other efforts to get it remedied,” said Sen. Lowe Finney (D), who introduced legislation last Thursday to restore the federal EB program. “I’ve been hearing from constituents for a few weeks.” Rep. Craig Fitzhugh (D), who introduced the same bill in the state House of Representatives, also said constituents brought the lapsed benefits to his attention. “It’s certainly something, in my opinion, we should move forward on,” Fitzhugh said. In North Carolina, Democratic Gov. Bev Perdue vetoed a bill saving the benefits because Republican lawmakers attached big budget cuts to the legislation. But now Democrats and Republicans in the North Carolina General Assembly have said they want to cut a new deal to reinstate the benefits, according to the Charlotte Observer . The federal Extended Benefits program provides the final 20 weeks of checks for the long-term jobless who have exhausted up to 73 weeks of state and federal benefits without finding work. (That full complement of 99 weeks of benefits is available in only 25 states .) States are eligible for the EB program if they’ve got unemployment above 8 percent and if the rate is 110 percent of what it was two years ago. Since unemployment rates have been flat since then, Congress told states in December that they could amend their EB laws to look back three years instead of two. But several states haven’t bothered , and others have done so only after coupling the benefits with cuts . Some 28,000 Tennesseans missed out on checks last month as EB expired with little or no public debate , even though the federal government put states on notice about how the program might lapse and what lawmakers could do about it. Sen. Finney said that the bill, if passed, would pay benefits retroactively for anyone who has missed checks since April. Republican leaders in the Tennessee General Assembly did not immediately respond to requests for comment. A potential obstacle to the bill’s passage is its cost: While the federal government would pay $57.7 million, the state would be on the hook for $396,000, according to the legislature’s fiscal review committee. That’s because states cover the cost of layoff claims from state, local and tribal governments, which the National Employment Law Project estimates amount to 2 percent of all claims. Finney said he didn’t know if the legislation will be taken up by the assembly before it adjourns for the year this month. “When we’re this late in the legislative session it’s difficult to get bills heard, and some committees have already shut down for the year,” Finney said.

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Sen. Sheldon Whitehouse: One Year Later: Making Big Oil Pay For Its Mess

April 20, 2011

One year ago today, an explosion ripped through the Deepwater Horizon oil platform in the Gulf of Mexico — devastating countless lives and an entire ecosystem. Today, big oil companies involved in the disaster are exploiting legal loopholes in an effort to get off the hook for the worst environmental disaster in U.S. history. I’ve introduced legislation to make these companies pay for their mess. But to get it passed, we have to make sure it’s part of the national conversation today, during the intense media coverage we’re sure to see on the Gulf oil spill anniversary. That’s why I’m asking Huffington Post readers to co-sponsor my legislation TODAY — while the nation and the press reflect on the Gulf oil spill anniversary. We know that the companies who owned and constructed the sunken Deepwater Horizon rig, including Transocean and Halliburton, cut corners. They bear responsibility for last year’s tragedy. But they argue that current law doesn’t obligate anyone but BP to compensate victims — and sadly, the Supreme Court has severely limited any financial penalties they must pay. The Oil Spill Victims Redress Act I’ve introduced in the Senate will ensure that all companies implicated in an oil spill — not just the company operating the well — are on the hook to compensate victims and their families. And my Maritime Liability Fairness Act will reverse the Supreme Court’s decision on the Exxon Valdez spill, which severely limits BP’s liability. In fact, the Supreme Court decision slashed Exxon’s punitive damages by 90%…making it cost-effective to play fast and loose with safety. Sign on as a Citizen Co-Sponsor of my two-part legislation TODAY , and make sure Big Oil does not get away with the worst environmental disaster in American history. In the big picture, this isn’t just about getting justice for the people these oil companies harmed in 2010. This is about our energy future. This is about our economy. We’ll never move beyond oil until we stop rewarding oil companies with ridiculous taxpayer subsidies, and start making them pay for the harm they cause our families and our planet. We’ll never move beyond outrageous gas prices. And as I saw in Rhode Island, during not one but two oil spills, we let oil companies jeopardize the livelihoods of thousands of Americans who depend on the ocean for their income. So today, as we mark the one-year anniversary of the Deepwater Horizon rig disaster, let’s take a stand — and fix the law to finally hold Big Oil accountable. Thanks for signing on as a Citizen Co-Sponsor of my legislation.

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Ex-TARP Inspector General: Bailout ‘Failed’ To Meet Goals

March 30, 2011

TWO and a half years ago, Congress passed the legislation that bailed out the country’s banks. The government has declared its mission accomplished, calling the program remarkably effective “by any objective measure.” On my last day as the special inspector general of the bailout program, I regret to say that I strongly disagree. The bank bailout, more formally called the Troubled Asset Relief Program, failed to meet some of its most important goals.

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Bill Cheney: Debit Interchange: Those Who Can Least Afford It Will Be Hurt Most

March 29, 2011

It’s easy and popular to demonize the big banks of Wall Street. In many cases, they deserve it. But the attempt by retailers, big and small, to cast the current political battle over debit card interchange as a fight between Wall Street and Main Street (with merchants, of course, claiming the Main Street mantle), is grossly inaccurate and misleading. When smaller card issuers — like the credit unions my association represents — express their deep concern about the impact of interchange, we are painted by proponents of the new law restricting interchange fees as fronting for the big Wall Street banks that they say are the true targets of the legislation and related rules proposed by the Federal Reserve Board. Credit unions are cooperatives, locally based and owned by their 93 million members — the people who do the saving and borrowing. Many are teachers, firefighters, police officers, members of the military. That’s as Main Street as you can get. Our industry has no allegiance to the banks, which have a history of opposing pretty much everything credit unions try to do. We are only aligned with the banks on interchange because in this case our members will be harmed by the effects of the legislation and pending Fed proposal. What’s the concern? Well, you’ve heard the old line about the businessman who is selling a product for less than it cost him to produce it, and when asked what he plans to do, responds: “Don’t worry, we’ll make it up on volume.” That encapsulates what’s going to happen if the Fed’s interchange proposal is allowed to take effect. Credit unions receive on average about 44 cents per debit card transaction as interchange revenue. The Fed proposal would chop that to 12 cents, a figure that doesn’t begin to account for the actual debit card service costs, such as those related to fraud and systems support. The 12-cent rate puts us in the same boat as that businessman trying to make up his losses on volume. We estimate that up to two out of every three credit unions would lose money on their debit card programs if the interchange regulations reduced interchange-related revenue by 40 percent. Remember, credit unions are member-owned cooperatives. Their business model is all about passing savings onto their consumer-members. Last year, for example, consumers saved $6.5 billion using credit unions rather than banks. In this case, however, credit unions will have absolutely no choice but to pass the higher interchange costs on to their members, most likely by adding fees to debit cards or other services. And the people who can afford it least are the ones likely to be hurt most. “No worries!” say the merchants and their supporter on Capitol Hill. “The interchange law exempts most community banks and credit unions” (those with assets under $10 billion). But the exemption is fatally flawed. Larger institutions account for the majority of debit transactions. Over time, smaller institutions will lose out, too. Market pressures will force the interchange price that smaller institutions receive toward the lower, 12-cent rate. Influential regulators like Fed Chairman Ben Bernanke and FDIC Chairman Sheila Bair have voiced doubts about the efficacy of the small institution exemption. The need to address the inherent flaws in the exemption is why Sen. Jon Tester (D-MT) and Rep. Shelley Moore Capito (R-WV) have introduced legislation to delay and further study the Fed’s implementation of interchange. And the call for delay, further study or both is coming from other quarters, too: The National Community Reinvestment Coalition, the Hispanic Chamber of Commerce, the NAACP, and most recently, the National Education Association. All share a concern that the ones who can least afford it — low- and moderate-income consumers — will be hurt the most by added fees. Those of us working to help Sen. Tester and Rep. Capito to delay and study this troubling issue are admittedly, as the Wall Street Journal terms us , a “collection of strange bedfellows.” But it is a grouping brought together by shared concern about the unintended yet potentially harmful consequences of the interchange restrictions. And this unlikely conglomeration demonstrates that attempting to narrowly cast interchange as some type of deserved comeuppance for Wall Street banks misses a much broader and consumer-oriented picture. Put another way: In the zeal to reform interchange, don’t hurt consumers and the financial institutions that they own in the process.

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Ohio Panel Approves Public Worker Union Bill

March 29, 2011

COLUMBUS, Ohio — A legislative committee in Ohio approved a measure Tuesday that would limit collective bargaining rights for 350,000 public workers and delivering a blow to unions in how they collect certain fees. The Republican-controlled House Commerce and Labor Committee voted 9-6 along party lines to recommend the bill after making more than a dozen substantive changes to the legislation that was approved by the Senate. The changes include removing jail time as a possible penalty for workers who participate in strikes and making clear that public safety workers could negotiate over equipment. A vote on the bill in the GOP-controlled House could come Wednesday. The Senate, also led by Republicans, passed the bill earlier this month on a 17-16 vote and would have to agree to any House changes before Gov. John Kasich could sign it into law. Similar limits to collective bargaining have cropped up in statehouses across the country, most notably in Wisconsin, where the governor earlier this month signed a measure into law eliminating most of state workers’ collective bargaining rights. The Ohio measure would apply to public workers across the state, such as police, firefighters, teachers and state employees. They could negotiate wages and certain work conditions but not health care, sick time or pension benefits. The measure would do away with automatic pay raises and would base future wage increases on merit. Opponents have vowed a ballot repeal if the Ohio measure passes. Democrats have offered no amendments. Instead, they delivered boxes containing more than 65,000 opponent signatures to the committee’s chairman. The legislation was met with demonstrations and packed hearing rooms in the weeks before the Senate passed the measure. On Tuesday, several hundred protesters listened to the committee’s amendments over the loudspeakers positioned around the Statehouse before they headed outside to chants of “Kill the bill!” Other changes the committee made would prevent nonunion employees affected by contracts from paying fees to union organizations and would ban automatic deductions from employee paychecks that would go the unions’ political arm. All GOP members on the House panel voted in favor of the changes, while Democrats voted against them. ___ Associated Press writer Julie Carr Smyth contributed to this report.

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Bernanke: Dodd-Frank Should ‘Level Playing Field’ For Small Banks

March 23, 2011

SAN DIEGO – New financial regulatory reforms should help reduce the edge that large banks have over smaller ones because of their implicit support from government, Federal Reserve Chairman Ben Bernanke said on Wednesday. Bernanke argued the Dodd-Frank reform legislation will address the issue of firms perceived as too big to fail by restricting their activities, raising their capital requirements and enhancing regulators’ ability to wind them down. “A financial system dominated by too-big-to-fail firms cannot be a healthy financial system,” Bernanke told a group of community bankers in a speech that did not touch on the broader economic outlook. “One benefit of the reforms should be the creation of a more level playing field for financial institutions of all sizes,” he said. A number of other top Fed officials, including Richard Fisher, president of the Dallas Fed bank and Thomas Hoenig, president of the Kansas City Fed, have argued the legislation does not go far enough. They have called for very large banks to be broken up. WATSON NO CREDIT OFFICER Bernanke said part of the reason the new laws governing the financial sector would support community banks was that regulators are cognizant of their concerns and challenges. With that in mind, the Fed is aware that many community banks need time to recover from the financial crisis. “We recognize the importance of striking the right balance between promoting safety and soundness throughout the banking system and keeping the compliance costs for smaller banking firms as small as possible,” he said. He said the crisis suggested fancy computer models are no substitute for on-the-ground intelligence on lending, joking the IBM computer that had recently won the U.S. game show “Jeopardy!” was not well equipped to make credit decisions. “This advantage for community banks is fundamental to their effectiveness and cannot be matched by models or algorithms,” Bernanke said. “Watson may play a mean game of Jeopardy, but I would not trust it to judge the creditworthiness of a fledgling local business or to build longstanding personal relationships with customers and borrowers.” Copyright 2011 Thomson Reuters. Click for Restrictions

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Scott Walker Releases E-Mails About Union Rights

March 18, 2011

MADISON, Wis. — Wisconsin Gov. Scott Walker released to The Associated Press on Friday tens of thousands of e-mails he received in the days after introducing his plan to strip public workers of nearly all their collective bargaining rights. The e-mails provide a first glimpse of the extent of public support that Walker said he was receiving from Wisconsin residents via e-mail for the proposal, as well as extensive opposition that he generally downplayed. Signed into law a week ago, but halted Friday by a judge after a challenge from Democrats, the contentious plan drew tens of thousands of pro-labor protesters to the Capitol and has galvanized union supporters across the country. Walker first mentioned the e-mails on Feb. 17, the same day 14 Democratic state senators fled to Illinois in an effort to keep the legislation from passing. As thousands of protesters banged on drums and blew whistles outside his office door, Walker told reporters he had received 8,000 e-mails – the bulk of which he said supported his efforts. “The majority are telling us to stay firm, to stay strong, to stand with the taxpayers,” Walker said at the time. “While the protesters have every right to be heard, I’m going to make sure the taxpayers of the state are heard and their voices are not drowned out by those circling the Capitol.” The following day as an estimated 40,000 protesters flooded the Capitol, Walker said he received more than 19,000 e-mails and believed they were indicative of a “quiet majority” that backed his proposal. An initial review by the AP of the e-mails found that a mass e-mail Walker sent to state workers on Feb. 11, the day he introduced his proposal, thanking them for their service was met with a deluge of responses, many of them angry. “Please, keep your backhanded ‘thank you’s and empty compliments to yourself,” one person who identified himself as a state corrections worker wrote to Walker. “Actions speak louder than words, and every one of your actions speaks quite clearly to your irrational hatred of the very people that have dedicated their lives and careers to keeping the state running safely and efficiently.” Another woman who identified herself as a state prisons sergeant wrote in capital letters: “WHY ARE YOU TRYING TO TAKE WHAT WE HAVE WORKED SO HARD FOR? WE ALL HAVE FAMILIES AND HAVE CHILDREN OF OUR OWN TO FEED! TIMES ARE HARD ENOUGH WITH THE ECONOMY THE WAY IT IS!” One woman who identified herself as a Milwaukee Public Schools employee wrote in to support Walker’s plan. “I voted for you in November, and today I am thankful that I did so,” she wrote. “This legislation is more than fair to us in the public sector and will bring a measure of financial relief to the people of our state. Keep up the good work, Governor. I’m glad to see us moving in a conservative, constitutionally sound direction.” Other e-mails reviewed by the AP came from Wisconsin residents working in the private sector. “I urge you to protect collective bargaining rights for public employees. Making collective bargaining illegal would be devastating to Wisconsin’s working families and economy,” wrote a resident from Oak Creek, Wis. A couple from Genesee, Wis., encouraged Walker to “stay firm” and not give in to the opposition. “We support what you are doing. It’s the right thing to do for Wisconsin,” they wrote. AP and Isthmus, a weekly Madison newspaper, both filed open record requests with Walker’s office on Feb. 18 seeking the 8,000 messages the governor referenced at his news conference. The AP amended the request a week later, seeking all e-mails Walker had received through that day. After receiving no response from the governor’s office, the AP and Isthmus filed a joint lawsuit on March 4 seeking the e-mails. A settlement reached March 16 called for Walker to release the messages and pay the organizations’ attorney fees, which came to $7,000. The agreement specified that Walker did not acknowledge violating the state’s open records law. The public outcry over Walker’s collective bargaining proposal turned the state and its Capitol into a national flashpoint as lawmakers struggled to balance state budgets crippled by the Great Recession. The law requires all public workers, except most police and firefighters, to pay more for their benefits. It also limits most public workers’ collective bargaining rights to wages only, and caps those potential increase to the rate of inflation. The law means they can no longer negotiate issues such as work conditions, vacation time or grievance processes. Walker says the law is needed and will help the state fill its current $137 million budget deficit and a projected two-year shortfall of $3.6 billion. He said the plan gives local governments the flexibility to absorb more than $1 billion in cuts to state aid that he’s proposed as part of his budget plan. Opponents, including teachers, union leaders and the Senate Democrats who fled the state, have argued Walker’s true goal was to bust the powerful public-sector unions that have traditionally served as a strong source of support for Democrats. On Friday, a Wisconsin judge issued a temporary restraining order blocking the law from taking effect. The law had been challenged by Dane County District Attorney Ismael Ozanne, a Democrat who argued a legislative committee that broke a stalemate that had kept the law in limbo for weeks met without the 24-hour notice required by Wisconsin’s open meetings law. The order keeps Secretary of State Doug La Follette from formally publishing the law, which is required for it to take effect. ___ Associated Press writer Scott Bauer contributed to this report.

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Vivek Wadhwa: New Hope For Immigrant Entrepreneurs

March 14, 2011

In my last post about the Startup Visa, I was very critical of the Kerry-Lugar legislation . That’s because it required immigrant entrepreneurs to raise at least $250,000 in financing for their startups, of which $100,000 had to come from American VCs or Super Angels. Few startups raise this kind of seed money — even in Silicon Valley. I couldn’t foresee this bill generating more than a few dozen jobs. Yet our political leaders would have claimed “Mission Accomplished,” and we would have lost a valuable opportunity to stem the brain drain. I was delighted to receive an e-mail, last week, from Garrett Johnson, who works for Senator Richard Lugar (R-Ind.). Garrett said that the Senator had read my articles and asked his staff to consider my comments. After consulting with Bob Litan, of Kauffman Foundation; Brad Feld, of Foundry Group; Eric Ries, of the lean-startup movement; and other champions of the visa, Garrett had revised the legislation. He sent me a draft of the bill that was introduced today. This new legislation is even better than I had hoped for. If it gets through both houses — and doesn’t have bureaucratic constraints — I expect it to unleash a flood of entrepreneurship. The new legislation provides visas to the following groups under certain conditions: Entrepreneurs living outside the U.S. — if a U.S. investor agrees to financially sponsor their entrepreneurial venture with a minimum investment of100,000. Two years later, the startup must have created five new American jobs and either have raised over500,000 in financing or be generating more than500,000 in yearly revenue. Workers on an H-1B visa, or graduates from U.S. universities in science, technology, engineering, mathematics, or computer science — if they have an annual income of at least30,000 or assets of at least60,000 and have had a U.S. investor commit investment of at least20,000 in their venture. Two years later, the startup must have created three new American jobs and either have raised over100,000 in financing or be generating more than100,000 in yearly revenue. Foreign entrepreneurs whose business has generated at least100,000 in sales from the U.S. Two years later, the startup must have created three new American jobs and either have raised over100,000 in financing or be generating more than100,000 in yearly revenue. The investor must be a qualified venture capitalist, a “super angel” (U.S. citizen who has made at least two equity investments of at least $50,000 every year for the previous three years), or a qualified government entity. The really good news is that this enables foreign students and workers who are already in the U.S. to qualify for a visa. The requirements for them are very reasonable — they must show that they have enough in savings not to be a burden to American taxpayers, and get a qualified investor or a government entity such as the Small Business Administration to validate their ideas by making a modest investment. Yes, there is a risk for holders of this visa that, if their venture fails or doesn’t go anywhere, they must start again or leave the U.S. But that’s entrepreneurship — there are no guarantees. This won’t appeal to everyone, and it is not meant to. The Startup Visa is for risk takers. This version of the bill will, I expect, encourage tens of thousands of workers trapped in ” immigration limbo ,” and foreign students who would otherwise return home after graduation, to try their hands at entrepreneurship. Many of these people would not otherwise have considered entrepreneurship; they will now have the incentive to take the risk. Even though the bill doesn’t allow visa holders to work for any company other than their own, I have no doubt that the anti-immigrants will rally against it . They always do, regardless of what is good for the country and of what is good for them. They fear competition and will make claims that these startups will, somehow, take their jobs away. But the fact is that skilled immigrants create jobs; and recipients of the startup visa will not be allowed to stay in the U.S. permanently unless they do. Right now, these job creators have no choice but to take their ideas and savings home with them and become our competitors. This legislation allows them to create the jobs here. A lot of hard work has gone into this bill, over the last two years, by tech notables Brad Feld, Eric Ries, Dave McClure, Manu Kumar, Shervin Pishevar, Fred Wilson, and Paul Kedrosky. This group is launching a campaign to gain the bill political support. It is using social-lobbying tools powered by Votizen to take tweets, Facebook posts, and SMS messages and hand-deliver them to Congress. The Startup Visa website details how you can get involved and help the bill to succeed. Now it is your turn to speak up and help us revitalize the economy. This post originally appeared on TechCrunch .

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Wisconsin Union Bill Passes State Assembly

March 10, 2011

MADISON, Wis. — Wisconsin lawmakers voted Thursday to strip nearly all collective bargaining rights from the state’s public workers, ending a heated standoff over labor rights and delivering a key victory to Republicans who have targeted unions in efforts to slash government spending nationwide. The state’s Assembly passed Gov. Scott Walker’s explosive proposal 53-42 without any Democratic support and four no votes from the GOP. Protesters in the gallery erupted into screams of “Shame! Shame! Shame!” as Republican lawmakers filed out of the chamber and into the speaker’s office. The state’s Senate used a procedural move to bypass missing Democrats and move the measure forward Wednesday night, meaning the plan that delivers one of the strongest blows to union power in years now requires only Walker’s signature to take effect. He says he’ll sign the measure, which he introduced to plug a $137 million budget shortfall, as quickly as possible – which could be as early as Thursday. “We were willing to talk, we were willing to work, but in the end at some point the public wants us to move forward,” Walker said before the Assembly’s vote. Walker’s plan has touched off a national debate over labor rights for public employees and its implementation would be a key victory for Republicans, many of whom have targeted unions amid efforts to slash government spending. Similar bargaining restrictions are making their way through Ohio’s Legislature and several other states are debating measures to curb union rights in smaller doses. In Wisconsin, the proposal has drawn tens of thousands of protesters to the state Capitol for weeks of demonstrations and led 14 Senate Democrats to flee to Illinois to prevent that chamber from having enough members present to pass a plan containing spending provisions. But a special committee of lawmakers from the Senate and Assembly voted Wednesday to take all spending measures out of the legislation and the full Senate approved it minutes later, setting up Thursday’s vote in the Assembly. Walker has repeatedly argued that collective bargaining is a budget issue, because his proposed changes would give local governments the flexibility to confront the budget cuts needed to close the state’s $3.6 billion deficit. He has said without the changes, he may have needed to lay off 1,500 state workers and make other cuts to balance the budget. The measure forbids most government workers from collectively bargaining for wage increases beyond the rate of inflation unless approved by referendum. It also requires public workers to pay more toward their pensions and double their health insurance contribution, a combination equivalent to an 8 percent pay cut for the average worker. Police and firefighters are exempt. ___ Associated Press writers Todd Richmond and Jason Smathers contributed to this report.

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Credit CARD Act, One Year Later

March 4, 2011

During the battle over Credit CARD Act, much talk focused on what the legislation would — and wouldn’t — do. A year after the two-phase law was rolled out, what’s the word now?

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Kristie Arslan: Economic Recovery Starts with Small Business

January 26, 2011

Getting our economy back on track depends on the success of our nation’s small businesses. Critical measures enacted last year like the Small Business Jobs and Credit Act and the extension of the Bush-era tax cuts delivered much needed tax relief to small businesses, especially the self-employed and micro-businesses, helping business owners keep their doors open and even expand their operations. The latest messaging from the White House signals that President Obama is serious about continuing to support the small business community. During his State of the Union address, the President stated that he is open to fixing an element of the health care reform law that unwittingly created a significant regulatory burden for small business owners: Now, I’ve heard rumors that a few of you have some concerns about the new health care law. So let me be the first to say that anything can be improved. If you have ideas about how to improve this law by making care better or more affordable, I am eager to work with you. We can start right now by correcting a flaw in the legislation that has placed an unnecessary bookkeeping burden on small businesses. The President is referring to a small, but incredibly onerous provision buried in the health care reform bill requiring small business owners to submit IRS Form 1099 for every purchase of goods and services over $600, which will increase the time and money spent on tax preparation for three out of four business owners. This is the type of burdensome regulation that prevents small businesses from thriving. It is also the type of burden that the President seems eager to eliminate with his vision for a 21st century regulatory system. This goal was recently promoted by the President in the pages of the Wall Street Journal . In the lead up to the State of the Union, the President issued an executive order addressing the overwhelming regulatory burden on small businesses, especially our nation’s smallest businesses — the self-employed. A key component directs federal agencies to consider the cost/benefit analysis of proposed regulations and choose the least burdensome path for small business. The executive order is a step in the right direction as agencies have all too often issued regulations without considering their impact on small business, creating onerous compliance costs and difficulties. There is, however, a glaring problem with the E.O. and the Regulatory Flexibility Act: the agency with the single largest impact on small business — the IRS — is exempt from this law. The IRS is not required to perform any sort of analysis regarding the impact of their regulations on small business. Without addressing the elephant in the room, there is only so much benefit this E.O. will deliver to the majority of small businesses. Enhancing competitiveness and expanding employment are solid economic goals. But policies to get us there have to take into account the demographics of our nation’s businesses. Policymakers need to continue legislating to the majority of small businesses , not just to the corporate giants.

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Video: Pardes Says Health-Care Law May Cause Hospital Closings

December 30, 2010

Dec. 30 (Bloomberg) — Herbert Pardes, chief executive officer of New York Presbyterian Hospital, talks about the impact of President Barack Obama’s health-care law on the industry and the possibility the legislation will be repealed. Pardes, speaking with Carol Massar and Shannon Pettypiece on Bloomberg Television’s “Street Smart,” also discusses the need for more medical professionals. (Source: Bloomberg)

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Zach Carter: Obama Must Reject The Foreclosure Fraud Bailout

October 7, 2010

Unbelievably, the U.S. Senate has approved legislation making it easier for banks to get away with foreclosure fraud. The bill would make it much harder for consumer advocates to show that banks are engaging in fraud, bailing out megabanks who cut corners in order to boost bonuses and slap borrowers with massive, illegal fees. The political fight between big banks and troubled homeowners is on, and President Barack Obama must take a side . If President Obama signs this legislation into law, he’s sending a clear signal that his administration stands ready to bailout the banks again, whatever the consequences for American homeowners. The new legislation is a clear attempt to provide legal cover to GMAC’s robo-signing scandal, and should be firmly opposed by Obama. Banks are running into big trouble in foreclosure courts right now because they have kept shoddy mortgage records for years in order to cut costs and boost bonuses. Those records are so bad that banks routinely cannot prove that they have the legal right to foreclose on the homes they attempt to foreclose on. That’s a major problem, because banks have repeatedly demonstrated that they cannot be trusted to figure out their own foreclosures for themselves. They’ve foreclosed on people who haven’t missed any mortgage payments, and even on borrowers who have fully paid off their loans. So banks and their lawyers have been fabricating documents, forging signatures, and lying to judges in order to go through with foreclosures. All of this is fraud– especially when committed systematically, en masse by large corporations and their clients. It gets even worse when banks try to use fraudulent documents to slap borrowers with thousands of dollars in illegal fees . The legislation currently awaiting President Obama’s signature tries to bailout banks on one aspect of this documentation problem. Banks push through a lot of bogus documents with the help of corrupt notaries. Notaries are people who witness some legal event, like the signing of a contract, and then testify in print that they saw the contract being signed. It’s one way for courts and lawyers to show that documents have not been forged. But the major foreclosure fraud scandal at bailout behemoth GMAC that ignited the current furor involved what appear to be totally bogus notaries. One GMAC employee, Jeffrey Stephan, signed thousands of affidavits and had them all notarized in Pennsylvania, even though they were being used in foreclosure cases in many different states. Since different states have different standards for notary approval, these documents should have been unacceptable in the vast majority of state courts. That made the GMAC scandal illegal in most states. But the GMAC scandal got much worse once Stephan acknowledged that he had never actually examined the affidavits before approving them. All of Pennsylvania’s notaries who signed off on the Stephans Documents were totally unreliable. They were approving fraudulent documents en masse. So for the Stephens Documents, there are two levels of impropriety–the notaries who didn’t do their homework, and Stephens, who illegally robo-signed hundreds of thousands of documents. The bill approved by the Senate on September 30 addresses the notary side of things. It says that all states must accept a notary from any other state, and even allows notaries to sign-off on electronic documents. That means notaries don’t have to be present at the signing of documents–somebody can forge a document, scan it into a computer, and ship it off to a notary for approval, replicating the GMAC scam online. The good news is that the GMAC documents were still illegal even without the false notarizations. The fact that Stephans robo-signed these without examining them was itself an act of fraud (barring other extenuating circumstances). So even if this bill is signed by Obama, wronged homeowners have some hope for redress. But the legislation would still create a major new hurdle for borrowers seeking relief. If a bogus notarization is deemed legal, it’s much harder to prove that the document itself is just a big fat fraud. Most states only accept notarizations from their own state–this makes perfect sense for mortgages. Nobody from Pennsylvania needs to fly-in to witness my mortgage closing in Virginia–a Virginian notary will do just fine. By requiring any state’s notarizations to be acceptable nationwide, the bill establishes a new race-to-the-bottom in standards: Whichever state has the weakest notary rules gets all the business. It means all of the crap Pennsylvania notaries on the GMAC robo-signings would be deemed acceptable in any state. Borrowers could still challenge the GMAC robo-signings, but it would be much harder to win the challenge, since an official, authorized notary had stated that the fraudulent robo-signings were in fact legitimate. The bill is an obvious attempt to bailout banks from the consequences of their own bonus-fueled shortcuts–shortcuts which are being used to slap individual American families with tens of thousands of dollars in illegal fees . President Obama has no business bailing out our biggest banks again–especially on the backs of troubled borrowers those banks are attempting to defraud. And the future political ramifications are dire. If this bill proves insufficient to bailout GMAC, JPMorgan, Bank of America, and the other major banks implicated in the foreclosure fraud scandal, there will be future legislative efforts to help them. If this bill becomes law, then politicians will have created political cover for the next round of bailouts, which will be characterized as a mere “technical fix” to this attempt. President Obama must veto this bill. American homeowners deserve to be protected from fraud. The American government shouldn’t be bailing out fraud.

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Video: Lardy Calls U.S.’s China Currency Policy `A Risky Road’: Video

September 29, 2010

Sept. 29 (Bloomberg) — Nicholas Lardy, a senior fellow at the Peterson Institute for International Economics, discusses China currency legislation being considered by Congress. The House of Representatives may vote on the legislation, which would let U.S. companies bring trade complaints against importers of products that benefit from a weak Chinese currency, as soon as today. Lardy speaks from Washington with Betty Liu on Bloomberg Television’s “In the Loop.” (Source: Bloomberg)

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Senate Republicans Block Debate On Campaign Finance Bill

September 23, 2010

WASHINGTON — Senate Republicans on Thursday stood fast in blocking legislation requiring special interest groups running campaign ads to identify their donors. Mirroring a Senate vote on the bill last July, all 39 Republicans who voted stopped Democrats from bringing the campaign disclosure bill to the Senate floor. The 59-39 vote fell one short of the 60 needed to advance the legislation. Two Republicans didn’t vote. Republicans dismissed Democratic efforts to revive the bill as an attempt to win political points before the midterm elections. The White House-backed measure is a response to a 5-4 Supreme Court decision last January overturning a decades-old law that barred corporations, unions and other organizations from spending on advertising, mass mailings and other forms of political activity. Democrats warned that the ruling would lead to a deluge of ads from shadowy special interest groups financed by corporate millions. “It’s no longer a premonition, it’s a reality,” said Sen. Charles Schumer, D-N.Y., a main sponsor of the legislation, pointing to special interest ads already running in states such as Ohio and California with hotly contested political races. “We have these nameless, faceless individuals spending huge amounts of money, corporate money and other money. There is certainly no transparency whatsoever,” Democratic Majority Leader Harry Reid, D-Nev., said. President Barack Obama said in a statement that he was “deeply disappointed by the unanimous Republican blockade.” He said the vote was a “victory for special interests and U.S. corporations including foreign-controlled ones who are now allowed to spend unlimited money to fill our airwaves, mailboxes and phone lines right up until Election Day.” But Senate Republican leader Mitch McConnell, R-Ky., said Democrats were playing “pure politics” in trying to stop opponents from criticizing Democratic policies. “They’re trying to rig the system to their advantage. That’s it. It’s quite simple.” Schumer said Democrats were prepared to move the effective date of the bill to next January so it would not influence the November elections, but that offer failed to win any Republican support. Republicans also accused Democrats of playing pre-election politics earlier this week when they united to block action on a defense policy bill that would have allowed votes on opening a path to legal status for the children of illegal immigrants and on ending the military’s don’t ask-don’t tell policy for gays. The campaign finance bill, which narrowly passed the House on a largely partisan vote, would have required nearly all organizations airing political ads independently of candidates or the political parties to disclose their top donors and the amounts they paid. It would have banned a variety of political activity by entities holding a government contract worth more than $10 million and corporations where foreigners own more than a majority of voting shares. The rejection of the disclosure bill came as the the House Administration Committee approved legislation that would make candidates for federal office eligible for public funding if they rely solely on private contributions of $100 or less. Sponsors of the bill that passed in committee, led by Reps. John Larson, D-Conn., and Walter Jones, R-N.C., said it would reduce the role of special interest money in campaigns. ___ The disclosure bill is S. 3628. Online: Congress: http://thomas.loc.gov

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Senate Republicans Block Debate On Campaign Finance Bill

September 23, 2010

WASHINGTON — Senate Republicans on Thursday stood fast in blocking legislation requiring special interest groups running campaign ads to identify their donors. Mirroring a Senate vote on the bill last July, all 39 Republicans who voted stopped Democrats from bringing the campaign disclosure bill to the Senate floor. The 59-39 vote fell one short of the 60 needed to advance the legislation. Two Republicans didn’t vote. Republicans dismissed Democratic efforts to revive the bill as an attempt to win political points before the midterm elections. The White House-backed measure is a response to a 5-4 Supreme Court decision last January overturning a decades-old law that barred corporations, unions and other organizations from spending on advertising, mass mailings and other forms of political activity. Democrats warned that the ruling would lead to a deluge of ads from shadowy special interest groups financed by corporate millions. “It’s no longer a premonition, it’s a reality,” said Sen. Charles Schumer, D-N.Y., a main sponsor of the legislation, pointing to special interest ads already running in states such as Ohio and California with hotly contested political races. “We have these nameless, faceless individuals spending huge amounts of money, corporate money and other money. There is certainly no transparency whatsoever,” Democratic Majority Leader Harry Reid, D-Nev., said. President Barack Obama said in a statement that he was “deeply disappointed by the unanimous Republican blockade.” He said the vote was a “victory for special interests and U.S. corporations including foreign-controlled ones who are now allowed to spend unlimited money to fill our airwaves, mailboxes and phone lines right up until Election Day.” But Senate Republican leader Mitch McConnell, R-Ky., said Democrats were playing “pure politics” in trying to stop opponents from criticizing Democratic policies. “They’re trying to rig the system to their advantage. That’s it. It’s quite simple.” Schumer said Democrats were prepared to move the effective date of the bill to next January so it would not influence the November elections, but that offer failed to win any Republican support. Republicans also accused Democrats of playing pre-election politics earlier this week when they united to block action on a defense policy bill that would have allowed votes on opening a path to legal status for the children of illegal immigrants and on ending the military’s don’t ask-don’t tell policy for gays. The campaign finance bill, which narrowly passed the House on a largely partisan vote, would have required nearly all organizations airing political ads independently of candidates or the political parties to disclose their top donors and the amounts they paid. It would have banned a variety of political activity by entities holding a government contract worth more than $10 million and corporations where foreigners own more than a majority of voting shares. The rejection of the disclosure bill came as the the House Administration Committee approved legislation that would make candidates for federal office eligible for public funding if they rely solely on private contributions of $100 or less. Sponsors of the bill that passed in committee, led by Reps. John Larson, D-Conn., and Walter Jones, R-N.C., said it would reduce the role of special interest money in campaigns. ___ The disclosure bill is S. 3628. Online: Congress: http://thomas.loc.gov

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Senate Republicans Block Debate On Campaign Finance Bill

September 23, 2010

WASHINGTON — Senate Republicans on Thursday stood fast in blocking legislation requiring special interest groups running campaign ads to identify their donors. Mirroring a Senate vote on the bill last July, all 39 Republicans who voted stopped Democrats from bringing the campaign disclosure bill to the Senate floor. The 59-39 vote fell one short of the 60 needed to advance the legislation. Two Republicans didn’t vote. Republicans dismissed Democratic efforts to revive the bill as an attempt to win political points before the midterm elections. The White House-backed measure is a response to a 5-4 Supreme Court decision last January overturning a decades-old law that barred corporations, unions and other organizations from spending on advertising, mass mailings and other forms of political activity. Democrats warned that the ruling would lead to a deluge of ads from shadowy special interest groups financed by corporate millions. “It’s no longer a premonition, it’s a reality,” said Sen. Charles Schumer, D-N.Y., a main sponsor of the legislation, pointing to special interest ads already running in states such as Ohio and California with hotly contested political races. “We have these nameless, faceless individuals spending huge amounts of money, corporate money and other money. There is certainly no transparency whatsoever,” Democratic Majority Leader Harry Reid, D-Nev., said. President Barack Obama said in a statement that he was “deeply disappointed by the unanimous Republican blockade.” He said the vote was a “victory for special interests and U.S. corporations including foreign-controlled ones who are now allowed to spend unlimited money to fill our airwaves, mailboxes and phone lines right up until Election Day.” But Senate Republican leader Mitch McConnell, R-Ky., said Democrats were playing “pure politics” in trying to stop opponents from criticizing Democratic policies. “They’re trying to rig the system to their advantage. That’s it. It’s quite simple.” Schumer said Democrats were prepared to move the effective date of the bill to next January so it would not influence the November elections, but that offer failed to win any Republican support. Republicans also accused Democrats of playing pre-election politics earlier this week when they united to block action on a defense policy bill that would have allowed votes on opening a path to legal status for the children of illegal immigrants and on ending the military’s don’t ask-don’t tell policy for gays. The campaign finance bill, which narrowly passed the House on a largely partisan vote, would have required nearly all organizations airing political ads independently of candidates or the political parties to disclose their top donors and the amounts they paid. It would have banned a variety of political activity by entities holding a government contract worth more than $10 million and corporations where foreigners own more than a majority of voting shares. The rejection of the disclosure bill came as the the House Administration Committee approved legislation that would make candidates for federal office eligible for public funding if they rely solely on private contributions of $100 or less. Sponsors of the bill that passed in committee, led by Reps. John Larson, D-Conn., and Walter Jones, R-N.C., said it would reduce the role of special interest money in campaigns. ___ The disclosure bill is S. 3628. Online: Congress: http://thomas.loc.gov

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The 14th Banker: The Challenge Elizabeth Faces

September 20, 2010

The appointment of Elizabeth Warren has raised the hopes of many and the ire of some .  According to Simon Johnson, she is the perfect person for the job. The president finally has an adviser who understands the financial sector and who has healthy skepticism about its intentions and actions.  As we documented at length in  13 Bankers , too many top policy people — both in this administration and all its recent predecessors — have been overly inclined to accommodate the interests of finance, particularly the big banks.  In this regard, putting Ms. Warren directly into the White House with the highest possible level of access is exactly the right thing to do — much better, for example, than making her purely a Treasury appointment. So now the question is, what will she actually be doing? Some Senators don’t know .  A lot of folks though, like HuffPost blogger Richard Eskow, seem to know how she will be doing it : Warren herself also became enormously popular, thanks to her own directness, intellect, ability to communicate, and most of all because of her apparent passion for protecting consumers. People are hungry for that kind of voice. So let’s move into the meat of this. Over the last 24 hours I perused the actual Dodd-Frank bill, skimming through 1,300 pages, and found this helpful White Paper by Vincent DiLorenzo of St. John’s University School of Law, a mere 115 pages. I will return to that in a minute. Dodd-Frank establishes that the purpose of the Bureau is to implement and enforce federal consumer financial law to ensure that markets for consumer financial products are fair, transparent, and competitive. Which raises the question, if all it is to do is enforce existing law, what has been going on all this time?  DiLorenzo addresses that in great depth. A lot of the problem is that the enforcement of the existing law was not a priority of the various regulators that are currently extant. Consumer protections were always secondary. In many cases, consumer protection was viewed as being in conflict with the primary legislative purposes. Two of those legislative purposes have been to keep financial institutions safe and sound and to make home ownership cheap and easy. To accomplish these purposes, a regulator may have determined that banks should have nice fat profits and that credit should be liberal and easily obtained. Well, for a long time the regulators accomplished both of those purposes. However, it was at great expense. DiLorenzo identifies in his paper what some of that expense was. It can be summed up as lasting harm to vulnerable populations who have had their wealth and credit ravaged, predatory profits by many unscrupulous lenders, and of course the damage to financial institution safety and soundness that required the bailout of the entire system, at great taxpayer expense. Then you can add to those the large numbers of unemployed and the damage to general business conditions and the security of all citizens. So that should be easy to fix, no? Well, the jury is still out on that. You see, there is a little complication written into the bill. From Dilorenzo: As discussed in Part One of this article [DiLorenzo's], Congress has embraced three goals for the mortgage markets: safety and soundness, access to credit, and fairness. In the past Congress consistently sought to harmonize these goals and allowed regulatory bodies discretion to act in a manner that served, as nearly as possible, all three of these goals. As consequence, when Congress debated the imposition of statutory protections for consumers in the past, costs and benefits of prohibiting particular practices that unfairly disadvantaged consumers were considered but decisions were not determined by the net societal benefits standard. As result, consumer protections were enacted even when they might impair access to credit or might adversely affect banking industry profits, as fairness was at times accepted as the paramount goal. Title 10 of the Dodd-Frank Act changes this legislative landscape. Congress has, for the first time in recent memory, subordinated the goal of fairness in consumer credit transactions to a new goal of economic efficiency. Congress has embraced what Arrow, Sunstein and others have cautioned against. As a result, if the Bureau does not enact a detailed rule prohibiting particular “unfair” conduct, the industry is faced only with a principles-based prohibition against “unfair” products and practices. The legislative signal that no product or practice is intended to be prohibited if it serves the goal of economic efficiency then serves as a further justification for the industry to continue such activity unrestrained by the legislative principle. So let me explain that a bit more. In the past, Congress put consumer protection on an equal footing in the legislation. It was implementation of the legislation that allowed consumer protection to be secondary to safety and soundness and liberal credit. Now, the rule-making powers of the Bureau are limited (prohibited) if the proposed rules conflict with the goal of economic efficiency. In other words, if the people in power determine that the consumer protections will restrict the flow of credit, jobs in construction, or whatever their priorities are, they may restrict the ability of the CFPB to make rules. So there is an element of subjectivity. The door to political influence is wide open. In a Bush administration, there is little doubt that the error would be on the side of the banking lobby and the rules would be prohibited unless it could be proven that they will not interfere with economic efficiency. In an Obama administration, the subjective judgments will likely fall more to the protection of the individual consumer. This is why the qualities that Simon Johnson and Richard Eskow describe are so critical. The director must be articulate and persuasive in order to win these debates. Now that is not to say there are no teeth in this bill. There is another section that provides greater power to the CFPB in the event an act or practice is considered “abusive.”  An act can be considered abusive if it takes “unreasonable advantage” of: Lack of understanding Inability of the consumer to protect their interest, or The reasonable reliance by the consumer on a covered person (employee) to act in the interests of the consumer. Elizabeth needs to drive a truck through door number three. Banks have taken an adversarial posture relative to their customers in many instances. Number three provides an opportunity to change that. Finally, there are additional enforcement measures that, if they are used, can change the cost-benefit scenarios the banks and other firms operate under. Often in the past, the downside to an aggressive interpretation of the rules by a business was that their hands would be slapped and they would be required to cease predatory practices. In the meantime they may have made huge amounts of profit and the employees and executives may have personally banked big incentives. Dodd-Frank does provide new forms of relief including disgorgement (the giving back) of compensation for unjust enrichment, public notifications of violations, banning persons from the functions they abused, and civil money penalties. The imposition of such remedies will require a strong hand. The prosecutor, so to speak, will need to ask for a tough sentence. So welcome, Elizabeth, and godspeed.

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Richard Shelby, GOP Leader, Wants To Overhaul Consumer Agency

September 20, 2010

WASHINGTON (Reuters) — Republicans will reopen the broad Wall Street reform law and overhaul the newly created consumer protection bureau if they regain control of Congress after the November elections, a leading lawmaker said on Monday. Richard Shelby, the top Republican on the powerful Senate Banking Committee, said lawmakers must revisit the legislation enacted this summer, which is the broadest overhaul of financial rules since the Great Depression.

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Small-Business Aid Bill Advances In Senate, Dems Praise Voinovich

September 14, 2010

A bill to help support lending to small businesses advanced in the Senate on Tuesday, clearing a critical Republican hurdle. The vote was 61-37. The legislation would establish a $30 billion lending fund and provide $12 billion in tax cuts for small businesses. Senate Democrats estimate the legislation would create 500,000 small business jobs. Democrats succeeded in securing the support of Sen. George Voinovich (R-Ohio), and his stated reasons for backing the measure says a lot about the state of the U.S. Senate: “We don’t have time for messaging,” Voinovich told the Washington Post . “We don’t have time anymore. This country is really hurting.” Democrats, for their part, were quick to lavish him with praise. “I just wanted to say publicly, I so admire [Voinovich] for saying he was going to do this,” Sen. Barbara Boxer (D-Calif.) told reporters Tuesday before the vote. “If this all happens today I just want to say to Senator Voinovich, ‘Thank you for putting your country first, ahead of politics, and for putting small businesses and workers of our country first’.” Under the new legislation small business can write off 50 percent of the cost for new equipment and as much as $500,000 in capital investments. Tuesday’s vote ends legislative debate on the measure, which is expected to proceed to a final vote by the end of the week.

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Miguel D. Lausell: Tax Subsidies for Wealthy Foreign Corporations? How Congress Has Already Broken its Most Important Promise

September 9, 2010

In 2008, the Democratic Party Platform criticized the previous eight years of Republican failures: “These are not just policy failures. They are failures of a broken politics — a politics that rewards self-interest over the common interest and the short-term over the long-term, that puts our government at the service of the powerful. A politics that creates a state-of-the-art system for doling out favors and shuts out the voice of the American people.” Sadly, a mere two years later, we Democrats are already guilty of the same failures. Despite numerous appeals to Senate Majority Leader Harry Reid, House Speaker Nancy Pelosi and then-Chairman of the Ways and Means Committee, Charlie Rangel, lawmakers allowed a British liquor conglomerate to abscond with $6 billion of tax revenue that was intended for the general welfare of the U.S. Virgin Islands. The party leadership’s failure on this issue is epic. Rather than protect about 350 union jobs, Democratic lawmakers have allowed British-owned Diageo to move to the U.S. Virgin Islands where they will take about half of the Federal tax subsidy on rum, in order to provide the U.S. Virgin Islands 40 jobs in exchange for a $6 billion gift from US taxpayers. Not only are these jobs non-union, Diageo is guaranteeing that only 32 of the jobs will be filled with locals from the U.S. Virgin Islands. American taxpayers are paying more than $3 million per year for each of these non-union jobs for locals. Government is in the service of Diageo — it appears to be actively promoting the company with tax dollars that were intended to support the general welfare of our citizens in the U.S. territories. Diageo is receiving an average of $100 million per year in corporate tax breaks, sugar subsidies and direct payments. That is enough money for every child in the U.S. Virgin Islands to receive over $3,000 per year for their current or future educational expenses. This money could more than double what the territory currently spends for its combined Health and Human Services and Department of Health budgets. Instead, these funds will be lining the pockets of British corporate executives and their shareholders. While this may sound like a Republican corporate welfare scheme, this happened on Democrats’ watch — and with our complicity. Legislation (HR 2122) was introduced before Congress to set a ten percent cap on the amount of Cover Over revenue that can be paid directly to a rum producing company. As then-Chairman of the U.S. House Ways and Means Committee, Charlie Rangel was able to block this legislation imposing corporate kickback limits from leaving his Committee. By keeping the legislation from seeing the light of day, Rangel denied American taxpayers the opportunity to learn about and publicly debate the appropriate use of federal tax revenues and financial support for our nation’s territories. As a result, lawmakers shut out the voice of the American people before we had a chance to speak. For example, Puerto Rico uses 94 percent of this federal tax rebate to support investments in infrastructure, health, education, and environmental preservation. The additional six percent is being spent to promote the territory’s rum industry. Local law limits to ten percent the amount that can be used for this purpose. Why should we allow a highly profitable, union-busting British company take a $6 billion gift from the US treasury at a time when our local economy needs that money reinvested in our soil. Another result of Congress’ stalling the bill in committee is that Diageo will now receive subsidies worth more than twice their production costs. Basically, they will make substantial profit — while workers receive less than a pittance in return. Any which way you look at this sweetheart deal, you realize it was designed only to benefit the British company. From the initial gifts of the state-of-the-art distillery, to the $50 million “start-up” funding, to the 50% of the tax subsidy, to all additional local tax incentives, to the unbelievable subsidy on molasses, this deal is a major gift to a very wealthy foreign company at the expense of U.S. taxpayers. Should we be worried about another corruption scandal here? It is very strange that with so much money at stake here there has been absolutely no debate in Congress over this deal. When Republicans controlled government, Democrats promised a new era of ethics and responsibility. Handing $6 billion to a profitable British liquor conglomerate is exactly the kind of unethical policy that Democrats promised to end. Allowing funds intended for the general welfare to be diverted to corporate pockets sounds like an exaggeration from the pen of Charles Dickens. The union workers who lost their jobs and the American people who put us in control of government in the last election are owed — at a minimum — an apology. Instead of putting a stop to this outrageous corporate thievery, lawmakers were complicit in this betrayal of workers. Lawmakers should immediately allow this legislation to move forward — allowing the public to debate the appropriate use of tax dollars in supporting corporations. In fact, they should go a step further and oppose any attempt to directly pay corporations a dime. After all, if this program is going to be used to allocate $6 billion for just 40 jobs, we should strongly consider eliminating this tax subsidy altogether. If this is the kind of “change” that we Democrats are willing to deliver to the American people, then we do not deserve to lead.

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Rep. Luis Gutierrez: Credit Reports Only Where Credit Is Due

September 1, 2010

Almost every day I hear from constituents who are struggling to find work, keep a roof over their heads or pay their medical bills. These daily struggles are commonplace across the country. Now there’s another phenomenon that adds insult to injury: in the midst of an economic crisis, employers are increasingly using credit reports to deny jobs to applicants. In this economy, using someone’s financial struggles to deny them a job isn’t just unfair to individual job seekers; it hurts the economy and our ability to recover. On August 10, the Chicago Tribune argued in an editorial against a new Illinois law preventing companies from using credit reports in hiring by stating that, “experts say there is evidence that workplace theft and fraud correlates with the financial distress indicated by bad credit” and that there is no downside to using credit reports to determine whom to hire. I couldn’t disagree more. I’m willing to bet that Bernie Madoff had a sterling credit report, right before he was arrested for perpetrating one of the largest financial frauds in American history. I am proud to be the lead co-sponsor of the Equal Employment for All Act (H.R. 3149), introduced by Congressman Steve Cohen (D-TN), which will ensure that unfair credit checks not hurt job-seekers and the economy by keeping qualified people out of work. A recent survey by the Society for Human Resource Management found sixty percent of employers are using credit reports on at least some applicants, up from just thirty-five percent in 2003. Employers justify using them because they supposedly measure one’s character . But here’s the fundamental problem: for a majority of people, poor credit doesn’t stem from irresponsibility or bad decisions, but rather from life circumstances and bad luck. And the problem is getting worse; 43.4 million people — 1 in 4 Americans — have credit scores that mark them as poor credit risks for lenders and now this may affect their job prospects, too. According to the Federal Reserve Bank of New York, the percentage of consumers with collections on their credit reports has doubled in the past decade. Let’s take the case of Debra Banks, a woman from Hawthorne, California who has been looking for a job for over a year. Debra has years of experience, stellar references, and a certificate in accounting. However, she has been rejected from several jobs due to her credit report that lists a series of medical bills that are in dispute. She was even denied a temporary job she had previously held — and performed with distinction — because the employer had since adopted a credit check policy. Debra is not alone: 60 percent of personal bankruptcies are linked to medical debt. Are these people really less likely to do their jobs well? Credit checks in employment also reinforce patterns of discrimination in American society. According to one Texas study, African Americans and Latinos have credit scores that are 5% to 35% lower than those of whites, due in part to predatory lending, foreclosures, unequal educational opportunities, and the historical wealth divide. This means that when employers check credit, Latinos and African Americans are usually starting with a deficit and are put at a disadvantage, raising serious civil rights concerns. Even TransUnion, the credit reporting company that has fought hardest against regulation of credit checks, has admitted that, “At this point we don’t have any research to show any statistical correlation between what’s in somebody’s credit report and their job performance or their likelihood to commit fraud.” So if credit checks reinforce discrimination, don’t accurately measure financial responsibility, and don’t dependably predict job performance, why are so many employers using them? The answer is not altogether clear, but we do know that the multi-billion dollar companies that create and sell credit reports are heavily invested in marketing them to wider and wider audiences. This includes insurance companies, hospitals, landlords, and now, employers. I fully expect credit reporting companies to lobby against our federal bill as they have against bills at the state level. However, as more Americans find out about how unfair it is to others and how unfair it could be to them, the chorus of voices opposed to using credit reports in hiring will grow. Already, organizations that have led the fight against employment discrimination — UNITE HERE!, the Lawyers Committee on Civil Rights, the NAACP, National Council of La Raza and the National Organization for Women, among others — support our bill. On Monday, I held a town hall in Chicago that was attended by hundreds who came from as far away as Detroit, Boston and L.A. to express their concerns about this insidious employment practice. We heard time after time stories of discrimination in employment that only reinforced the necessity of passing this legislation. It renewed my resolve and commitment to working with Rep. Cohen and the supporters of this legislation to get this legislation passed this fall. Our bill is an important step in ensuring that a widely used and unfair measure of creditworthiness plays no part in the hiring process or in preventing industrious Americans from contributing to our economic recovery. Luis V. Gutiérrez represents the Fourth Congressional District of Illinois and is the Chairman of the House Financial Services Subcommittee on Financial Institutions and Consumer Credit.

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Beverly Blair Harzog: Think You Understand the New Credit Card Laws? Think Again

August 18, 2010

Sure, the Credit CARD Act was a step in the right direction. We all have a little more consumer protections than we did before. But as we’ve seen too often, when Washington tries to fix our problems, the legislation gets watered down to the point where the language is, well, wishy-washy at best. Here are just a few of the areas where the vague wording of the CARD Act gives credit card issuers a little too much wiggle room. Regular Interest Rate Hikes Many consumers think that the law protects them against rate hikes. This is true, but only to a point. You’re only protected during the first year of a new account (with a few exceptions, such as variable rates that are tied to an index). But what about that $2,000 balance you have on the card you’ve had for three years? The CARD Act prohibits retroactive rate increases on existing balances. But your rate on that card can increase “significantly” on your future purchases as long as you’re given 45 days’ notice. Penalty APRs If you’re more than 60 days late on a payment, the penalty rate kicks in. According to a recent study by The Pew Health Group, the median penalty interest rate for credit cards is 29.99%. Interest expense will rack up pretty quickly at that rate. Starting on August 22, issuers are supposed to review a cardholder’s rate increase after 6 months of timely payments. The law states that the card issuer’s review must involve factors such as market conditions and creditworthiness of the cardholder. The issuer is supposed to reduce the rate if you’ve made six consecutive payments “on time.” Keep records to show the exact dates you’re making payments. This language leaves a little room for issuers’ shenanigans, so expect to see some creative maneuvering when it comes to backing off penalty rates. Student Credit Cards The legislation requires that students under the age of 21 can’t qualify for a card without a co-signer unless they show they have enough income to cover debts. When we asked card issuers to clarify what “adequate income” means, they declined to get specific. But if you can’t show show steady income (not just from summer employment), you most likely will need a co-signer to get a credit card. Discontinued Credit Cards The good news is that you probably won’t be standing at the cash register when you find out your card has been discontinued. You’ll get notified in the mail. How much notice? No one is totally sure. It’s not clear that this falls under the 45 days’ notice requirement of the CARD Act. When we asked card issuers this question, answers were mixed. A few issuers said, “Yes, this is covered under the CARD Act so the cardholder will get 45 days’ notice.” But others suggested that the law isn’t clear about this specific circumstance. They all seemed to agree that consumers should get as much warning as possible, so that’s one positive thing to take from their responses. Universal Default The CARD Act states that issuers can’t apply universal default. This means that your card issuer can’t raise your interest rate on a specific account just because you were late on an unrelated account. But there’s some universal default-type language that’s still suspiciously present in a few card offers’ “Terms & Conditions.” When considering on offer, be sure you read the section that states what triggers the penalty APR. The usual suspects are late payments, exceeding your credit line, or making a payment that’s returned unpaid. But look for something extra that includes the afore-mentioned situations plus stipulations similar to this: based on information in your credit report, market conditions, or at any time for any reason. Allocation of Payments The CARD Act requires issuers to apply payments that exceed the minimum payment to the higher balances first. But here’s a catch: Creditors can still put the minimum payment towards the balances with lower interest rates. So you might think you’re paying down that $3,000 balance with the 19.95% APR, but the minimum payment you made is actually being applied to the $1,000 balance you have with the 9.99% APR. Added Fees The card issuers have lost revenue due the legislation, so it was predictable that added fees would be part of the “unintended consequences” that accompanies this kind of law. You’ve already probably seen some of these: annual fees, over-the-limit fees, and foreign transaction fees . One of the more egregious fees has been the inactivity fee. But the next phase, starting on August 22, will ban these fees. What Can You Do? For starters, pay your bills on time. Even though some of these tactics are probably illegal at this point, it’s always better to be proactive and prevent the penalty APRs from being an issue in the first place. Be your own consumer advocate by making sure you read every piece of mail you receive from your issuers. If you feel you’ve been unfairly treated–either due to interest rate changes or any other type of fee that looks out of line–contact your issuer immediately and stand up for your rights.

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Glenn Beck On 99ers: ‘Some Of These People, I Bet You’d Be Ashamed To Call Them Americans’ (VIDEO)

August 17, 2010

Unemployed activists have clamored for news attention to the plight of the “99ers,” people who have exhausted the unprecedented 99 weeks of unemployment benefits made available in some states to fight the worst recession since the Great Depression. They got some attention they might not have wanted on Monday, when Fox News host Glenn Beck introduced them to his viewers. “Have you heard of the 99ers?” said Beck, showing video from a New York rally last Thursday. “Some of these people, I bet you’d be ashamed to call them Americans.” Beck had free advice for the jobless activists at the protest: “Don’t spend your remaining money on travel to get to a protest. Go out and get a job. You may not want the job. Work at McDonald’s. Work two jobs. There has been plenty of times in my life I’ve done jobs I hated, but I had no choice. Two years is plenty of time to have lived off your neighbor’s wallet.” It’s an argument that resonates with many members of Congress , especially Republicans. Some long-term jobless, however, might counter that they’ve been turned down for jobs for which they were overqualified because of age discrimination, or because managers don’t want to hire someone who will bolt for a better job as soon as the economy improves. For every story about a business owner complaining that potential workers would rather live on unemployment insurance, there’s another about businesses flat-out refusing to hire the unemployed. After all, there are nearly 15 million unemployed competing for three million jobs. Beck asked an important question: “How many weeks of unemployment are enough? Really. If 99 weeks is not enough, how much is? 100, 200? A lifetime? Or is a job a right?” The government has provided additional weeks of unemployment benefits as a matter of routine during every recession since the great depression, but before the current one, the most help provided was 55 weeks during the early 1980s. Democrats in Congress have proposed giving the unemployed in the hardest-hit states an additional 20 weeks of benefits , but the legislation is not incredibly likely to pass the Senate. Sen. Max Baucus (D-Mont.), chairman of the Senate Finance Committee, which has jurisdiction over unemployment insurance, had an answer for Beck’s question back in April: “I think 99 weeks is sufficient.” WATCH Beck’s segment on 99ers:

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GOPers Line Up To Repeal Wall Street Reform

August 13, 2010

Last month Dino Rossi became the first Senate candidate in the country to call for the repeal of Wall Street reform. Now it’s clear he has plenty of conservative company on Capitol Hill. With Washington state’s primary Tuesday just a few days away, HuffPost asked around at the Capitol to see how Rossi, the Republican challenger expected to face Democratic incumbent Patty Murray in the general election, stacks up with sitting Republican Senators on financial reform. The verdict? When it comes to Wall Street reform, Rossi’s views fall in line with many top GOP leaders, though his views notably put him to the right of Sen. Jeff Sessions (R-Ala.). Rossi made headlines when he said on ABC/Washington Post’s “Top Line” program, “I think it should be [repealed]“, charging the Wall Street reform bill has “created six super banks and left Fannie [Mae] and Freddie [Mac], which were at the epicenter of the problem, out of the deal.” Democrats pounced on Rossi’s words, saying he is much too conservative for a state that leans left and arguing Rossi shows more loyalty to big banks than to Washington taxpayers. “Rossi seems to want to go back to the days when Wall Street ran roughshod over families resulting in the worst economic recession since the Great Depression,” DNC spokesman Frank Benenati said. And Democratic Senatorial Campaign Committee spokeswoman Deirdre Murphy said Rossi “is out of step with Washington values and not on the side of consumers in his state.” While Rossi may be out of touch with moderate constituents, he finds company on Capitol Hill in Sessions and Sens. George LeMieux (R-Fla.), and James Inhofe (R-Okla.) all of whom told HuffPost they would repeal the legislation or at least parts of it if given the opportunity. “Well yeah,” Inhofe told HuffPost when asked point-blank if he would repeal the legislation. “I’m not saying I can, but the answer is yes [I would].” LeMieux and Sessions both said they would repeal parts of it, though they offered few details. “Well, it has some things in it of value but overall I think it’s bad legislation,” Sessions told Huffpost. “So I guess I would favor legislation that would be on balance better than bad. I would repeal parts of it.” The new legislation regulates derivatives trading, and puts restrictions on proprietary trading and private equity investments through the Volcker Rule, and creates a Consumer Financial Protection Bureau. Senator Bob Corker of Tennessee, a top Republican player in the financial reform debate, denounced the Democrat-backed bill almost immediately telling reporters “at the end of the day this bill is going to limit credit availability and cause that credit availability to be more expensive.” And House Minority Leader John Boehner (R-Ohio) called for the repeal of the Wall Street reform legislation just minutes after it passed, saying the bill penalizes Main Street bankers for the crimes of a few on Wall Street. “I think it ought to be repealed,” Boehner told reporters at his weekly press conference. “I think the financial reform bill is ill-conceived. I think it’s going to make credit harder for the American people to get — clearly harder for businesses to get. And the fact that it’s going to punish every banker in America for the sins of a few on Wall Street, I think is unwise. On top of that, I think that it institutionalizes ‘Too Big To Fail’ and gives far too much authority to federal bureaucrats to bail out any company in America they decide ought be bailed out.” South Carolina Republican Lindsey Graham has long referred to the bill a “missed opportunity” to control spending and set priorities. And Sen. John McCain (R-Ariz.) was similarly underwhelmed, calling it “business as usual.” “No one can make a convincing argument that this legislation indeed prevents any institution from being “Too Big To Fail” — you can’t make that argument,” McCain told reporters shortly after the bill passed. Rossi is the preferred candidate of the National Republican Senatorial Committee. This year’s race is his third time running for higher office; his two previous bids against Gov. Christine Gregoire (D) in 2004 and 2008 were unsuccessful. Rossi is widely expected to be the Republican nominee, though Ron Paul and former Alaska Gov. Sarah Palin (R) have endorsed Rossi’s Republican rival, former Washington Redskins tight end Clint Didier. Rossi shrugged it off, saying: “We haven’t been seeking endorsements,” and adding that Palin endorsed Didier “three weeks before [he] even got in the race.” The real challenge however, will come from Murray, the state’s three-term incumbent. Watch Murray’s campaign ad slamming Rossi’s ties to Wall Street:

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Harry Moroz: The Urbanity of Financial Reform

August 3, 2010

The financial reform bill is like a gigantic, half-completed connect-the-dots puzzle. The image is visible if you squint and make a few assumptions — those must be Elizabeth Warren’s spectacles — but much remains unclear. Regulators, some of whom remain to be created by other regulators, will determine the ultimate clarity of the financial framework that results from the Dodd-Frank bill. The lesson that implementation often involves legislating is important and one that health care reform has demonstrated, as well. This is a long way of saying, as many others have, that the financial reform bill is at once significant and indefinite. It is dangerous, then, to speculate about the ultimate impact of the legislation. However, it is clear that the Dodd-Frank bill holds great potential for reversing some of the damage done to metropolitan areas by the mortgage crisis and for protecting cities from the predatory lending and other shady financial practices that weakened neighborhoods throughout the country. First, the legislation will make it more difficult for Wall Street banks to defraud municipalities and other local governments. By strengthening oversight of the municipal securities industry and registering the advisers that push “innovative” financial products on local governments, the legislation will curb – though certainly not eliminate – the type of abuse that occurred in Birmingham, Alabama where financial innovators nearly bankrupted the city by selling it a “synthetic interest rate swap” to fund a new sewer system. Matt Taibbi describes the bankers at the center of these municipal securities schemes as: [M]odern barbarians…These guys aren’t number-crunching whizzes making smart investments; what they do is find suckers in some municipal-finance department, corner them in complex lose-lose deals and flay them alive. The Economist , describing a similar occurrence in Milan, was more staid: “One of the greatest advantages of financial innovation, it was often said, was that risk would end up going to those best qualified to hold it. In fact, much of it seems to have ended up in the hands of those least able to understand it.” The Dodd-Frank bill also includes additional funds for the Neighborhood Stabilization Program, a Bush-era policy that links neighborhood rehabilitation and redevelopment to the provision of affordable housing while ending the negative feedback loop that results when foreclosed homes are abandoned and property values fall, putting additional homes at risk of foreclosure. The funds are targeted to cities and metro areas most affected by the foreclosure crisis. The elephant in the room, of course, is the Consumer Financial Protection Bureau which, if staffed with diligent regulators and imbued with a culture protective of consumer interests, could greatly influence the geography of metropolitan areas for years to come. By cracking down on unfair and abusive lending practices and expanding the information available to consumers taking out mortgages, the Bureau could become a force for smarter and more cost-effective development, a role reversal for a federal government that has always supported the cheap mortgages that make suburban sprawl possible. More positively, the Bureau could even improve and promote innovative (!) loan products like energy – and location -efficient mortgages that reward sustainable and affordable development. There is much uncertainty surrounding the Dodd-Frank financial reform bill and its impact on cities suffers from the same ambiguity. New York’s financial services sector, for example, will survive intact but its composition will likely evolve. However, the bill provides an opportunity for the federal government to reverse course and support the cities and metro areas that were made weaker by the housing crisis and an overgrown financial sector.

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Oil Spill Legislation Passes House

July 30, 2010

WASHINGTON — The House approved a bill Friday to boost safety standards for offshore drilling, remove a federal cap on economic liability for oil spills and impose new fees on oil and gas production. Democratic leaders hailed the bill as a comprehensive response to the Gulf of Mexico oil spill and said it would increase drilling safety and crack down on oil companies such as BP. Companies with significant workplace safety or environmental violations over the preceding seven years would be banned from new offshore drilling permits. Republicans and some-oil state Democrats opposed the measure, calling it a federal power grab that would raise energy prices and kill thousands of American jobs because of the new fees and liability provision. Rep. Nick Rahall, D-W.Va., the bill’s main sponsor, said the legislation would be a tribute to the 11 oil rig workers who were killed when the BP well exploded in April by creating strong new safety standards for offshore drilling, ending the revolving door between government regulators and industry and holding BP and other oil companies accountable for accidents. “While we may not know the exact cause of the incident, we clearly know what contributed to it. A culture of cozy relationships that had regulators interviewing for jobs on the same rigs they were supposed to be inspecting,” said Rahall, who is chairman of the House Natural Resources Committee. The legislation, which passed 209-193, has yet to be taken up in the Senate, where partisan disagreements will likely delay final consideration of a joint House-Senate bill until after the August congressional recess. The House bill includes a provision sponsored by Rep. Charlie Melancon, D-La., that would modify a six-month moratorium on deepwater drilling, so that some drilling permits could be approved on a rig-by-rig basis if the Interior Department determines a rig meets new safety requirements. The drilling moratorium imposed by Interior Secretary Ken Salazar would remain in effect, and Salazar would retain power over whether to approve a permit. The bill also would remove the current $75 million cap on economic damages to be paid by oil companies after major spills and increases to $300 million the financial responsibility offshore operators must demonstrate in most cases. And it would create new “conservation” fees on oil and natural gas extracted from land or water controlled by the federal government. Those provisions prompted sharp criticism from Republicans. “In typical Democrat fashion, this bill overtaxes, over-regulates, and costs American jobs,” said Rep. John Mica, R-Fla. Rep. Doc Hastings of Washington state, the top Republican on the House Natural Resources Committee, said removing the liability cap could devastate small and medium-sized drillers. Hastings called the new fees on oil and gas production a “$22 billion energy tax” that would cost jobs and raise energy prices. The Congressional Budget Office estimates that the $2 per barrel fee on oil and a similar fee on natural gas could bring in $22.5 billion over the next decade. Earlier Friday, the House approved a separate bill to extend whistleblower protections to oil and gas workers who report hazardous conditions or other problems. The whistleblower bill will be added to the oil spill legislation when it is sent to the Senate. “A whistleblower may be the only thing standing between a safe workplace and a catastrophe,” said Rep. George Miller, D-Calif., the bill’s sponsor. “No worker should ever have to choose between his life and his livelihood.” Rep. Jay Inslee, D-Wash., said the bill setting new drilling standards and removing the liability cap was the least Congress could do to respond to such a major catastrophe. Rahall said the legislation would end a “trust-but-don’t-verify” attitude about safety where drilling plans were rubber stamped by federal regulators and industry often wrote its own rules. The bill would put into law actions already taken by the Obama administration to break Interior’s former Minerals Management Service into three parts, separating safety enforcement and regulation from economic activities such as issuing oil leases and collecting royalties. Since the BP spill the agency has been renamed the Bureau of Ocean Energy Management, Enforcement and Regulation, and a new director, Michael Bromwich, has been appointed. Associated Press writer Frederic J. Frommer contributed to this story.

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Small Business Lending Bill Still Foundering In Senate

July 29, 2010

WASHINGTON — A bill to increase small business lending is in jeopardy in the Senate as lawmakers struggle to reach agreement on a series of Republican amendments. Democratic leaders have scheduled a key test vote Thursday on the legislation. But the bill won’t advance unless Democrats can attract Republican votes. The bill would create a $30 billion government fund to help community banks increase lending to small businesses, combining it with about $12 billion in tax breaks aimed at small businesses. Democrats say banks should be able to use the lending fund to leverage up to $300 billion in loans to small businesses, helping to loosen tight credit markets. While the fund would be available only to banks with less than $10 billion in assets, some Republicans likened it to the unpopular bailout of the financial industry. Democratic and Republican leaders tried to negotiate a handful of amendments Wednesday with the goal of scheduling a vote on the bill. Both party leaders, however, said they reached an impasse. Senate Republican leader Mitch McConnell of Kentucky said Democrats were blocking GOP amendments to the bill. Senate Majority Leader Harry Reid, D-Nev., said Republican demands kept changing. “We all know this is an effort to stall and not do this bill,” Reid said. “This is the proverbial stall that we’ve had all year.” McConnell sounded more optimistic, saying, “This is a discussion worth continuing because somewhere in all of this, there is a bipartisan bill.” The lending fund overcame a Republican filibuster in the Senate last week, but Republicans wanted to vote on a handful of amendments before voting on the final bill. GOP amendments included measures to beef up border security, impose a government spending cap and lower the estate tax, which is scheduled to return next year with a top rate of 55 percent on estates larger than $1 million. One Republican amendment would repeal a new tax reporting requirement for businesses that was included in the massive health care overhaul enacted last spring. Democrats, meanwhile, have added about $1.5 billion in disaster relief for farmers who lost crops in 2009, a measure sponsored by Sen. Blanche Lincoln, D-Ark. Democrats also want to add an amendment to settle long-running class-action lawsuits brought by black farmers and American Indians. One lawsuit concerned the government’s management and accounting of more than 300,000 trust accounts of American Indians. The other is a discrimination lawsuit brought by black farmers against the Agriculture Department. The cost of settling them both: about $4.6 billion. The small business tax cuts in the bill include breaks for restaurant owners and retailers who remodel their stores or build new ones. Other businesses could more quickly recover the costs of capital improvements through depreciation. Long-term investors in some small businesses would be exempt from paying capital gains taxes. Much of the bill would be paid for by allowing taxpayers to convert 401(k) and government retirement accounts into Roth accounts, in which they pay taxes up front on the money they contribute, enabling them to withdraw it tax-free after they retire. Taxpayers who convert accounts this year would pay the taxes in 2011 and 2012, generating an estimated $5.1 billion.

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Prop Traders Being Reassigned In Wake Of Volcker Rule

July 28, 2010

A Fox Business report on Tuesday evening made backers of the Volcker Rule nervous that big banks had already found a way to trade taxpayer-backed money for their own profit in opposition to the intention of the new law. A closer look, however, at recent moves by major banks shows that they appear to be complying with the law for now. From Fox Business: Goldman Sachs (GS: 147.93 ,+0.84 ,+0.57%) has figured out a novel approach to getting around the Volcker Rule’s restrictions on trading: it’s remaking its risk-taking traders into asset managers, and the rest of Wall Street may soon follow, FOX Business Network has learned. The big Wall Street firm has moved about half of its “proprietary” stock-trading operations — which had made market bets using the firm’s own capital — into its asset management division, where these traders can talk to Goldman clients and then place their market bets. The move is designed to exploit a loophole in the Volcker Rule, part of the recently signed financial-reform legislation named after presidential economic adviser and former Federal Reserve chief Paul Volcker. Business Insider then picked up the story: It seems like Goldman isn’t just circumventing the rule, but actually changing the role of prop traders. You’d assume that instead of trading with the firm’s money on prop trading desks, the traders will be trading with the firm’s clients’ money on the asset management team. But proprietary trading can easily become related to client operations and very closely resemble the prop trading done on strictly defined “prop trading” desks. Thanks to a line in the Volcker Rule which specifies trading “operations unrelated to customer operations,” as long as the “prop trading” is done for client-related purposes, it’s OK. While the original legislation allowed banks to do prop trading “in facilitation of customer relations,” that language has since been removed to address concerns about the very kind of loophole now being explored. Removing that line stripped banks of a key weapon against the Volcker Rule. “We are in fact pleased with the development because it shows how strong the Volcker Rule is,” said a Senate Democratic aide who’d been involved in drafting the legislation. “These firms are moving their traders into their asset management division because they recognize that these traders can no longer engage in prop trading but rather must trade on behalf of customers — who can exercise real market discipline on those traders. That should lead to a significant reduction in risk to the financial system.” Indeed, now that prop trading has largely been banned, banks which intend to follow the law would either reassign these traders to other desks or lay them off. The law does allow firms to trade a small amount of taxpayer-backed capital for their own profit, fueling fears that banks would use the leeway to continue to trade large positions. But, noted the aide, “the mere fact that the firms are putting people in asset management is a good sign, not a bad one. The talk about loopholes and weak Volcker Rule is really just uninformed.” Bank of America, too, looks to be following the law, at least for now. From Fox: “There are some indications that BofA is following Goldman’s lead. A Bank of America spokesman says the firm has no plans to fire its proprietary traders because most of the business now involves dealing with customers, as opposed to traders coming up with their own market ideas and then using firm capital to trade.”

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AFL-CIO Officially Opposing Senate’s DISCLOSE Act

July 27, 2010

One of the country’s largest and most powerful union groups is formally opposing new campaign finance laws being pushed in the Senate, calling the bill noble in spirit but “onerous” and overbearing in its requirements. In a statement released just hours before the Senate is set to vote on the DISCLOSE ACT, the union federation AFL-CIO offered its official opposition to the bill: The AFL-CIO supports reasonable disclosure and disclaimer requirements related to political and advocacy activities. We have long argued that there is too much special interest money in politics and that much of it remains hidden behind a smokescreen of third-party organizations established for the purpose of obscuring the real source of funding. However, the Senate bill imposes extraordinary new, costly, and impractical record-keeping and reporting obligations on thousands of labor (and other non-profit) organizations with regard to routine inter-affiliate payments that bear little or not connection with public communications about federal elections. The statement, signed by Bill Samuel, the AFL-CIO’s director of government affairs, adds another potential hurdle to Senate passage. Already leadership is trying to round up a single Republican member to break a filibuster of the DISCLOSE Act. To court a GOP lawmaker, they added to the legislative language the type of disclosure requirements for unions that the AFL-CIO cites as the basis of its opposition. This could, in the end, help win over a Senate Republican — though at this juncture there is only one left: Sen. Olympia Snowe (R-Maine). But the bill has to inevitably go back to the House of Representatives for a second vote. And it is there that the AFL-CIO could have the biggest impact, lobbying more forgiving members to either strip away the objectionable parts or torpedo the legislation altogether. In his letter, Samuel addresses the additions the Senate made to its version of the legislation, calling them unnecessary to the goal of campaign-related disclosure. Opponents of the House passed bill claim that the bill includes a special carve out for labor unions. This is not accurate as the House bill avoids needless disclosure of member dues and routine inter-affiliate payments within all membership organizations, not just unions. By ensuring that those ordinary transactions are not subjected to onerous and inappropriate campaign finance reporting requirements and penalties, the House bill recognizes that requiring hundreds – if not thousands – of reports, all from different levels of the same organization, add nothing to the public’s understanding of who is behind the campaign or issue ads they see on television. READ THE FULL LETTER: aflciodisclose

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Goldman Sachs, JPMorgan CEOs NOT Invited To Signing Of Financial Reform Bill

July 21, 2010

When President Obama signs legislation that is being called the most sweeping set of reforms to hit the financial industry since the 1930s, some very prominent bankers will not be present. Politico’s “Morning Money” reports that the Obama administration did not extend invitations to JPMorgan CEO Jamie Dimon and Goldman Sachs chief Lloyd Blankfein for the Dodd-Frank bill signing ceremony today in Washington D.C. Industry sources told Politico they found the decision “bizarre.” Citigroup CEO Vikram Pandi t will be among the 400 or so invitees, the Washington Post notes, as will Cam Fine, the head of the Independent Community Bankers of America. The paper also notes that Wells Fargo’s John Stumpf and Morgan Stanley’s James Gorman didn’t make the invite list. As for the logic behind keeping Wall Street’s most powerful leaders from a ceremony celebrating rules that are meant to the rein the industry’s worst excesses, one Obama aide explained it this way to the Washington Post : “If you were part of an effort to spend millions of dollars opposing the legislation, you were not at the top of our list for an invitation,” deadpanned Jen Psaki, the deputy communications director for the White House. President Obama is expected to highlight the new safeguards offered by the soon-to-be-created Consumer Financial Protection Bureau. Attending the ceremony, the WashPost adds , will be a seventh-grade teacher who saw her credit card rates double even though she didn’t miss any payments. What do you think? Did the Obama administration make the right decision in excluding big bank CEOs from the signing?

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Financial Reform Bill Passes — And Regulators Left To Sort Out Bill’s Details

July 16, 2010

WASHINGTON — In the end, it’s only a beginning. The far-reaching new banking and consumer protection bill awaiting President Barack Obama’s signature now shifts from the politicians to the technocrats. The legislation gives regulators latitude and time to come up with new rules, requires scores of studies and, in some instances, depends on international agreements falling into place. For Wall Street, the next phase represents continuing uncertainty. It also offers banks and other financial institutions yet another opportunity to influence and shape the rules that govern their businesses. In hailing the bill’s passage in the Senate on Thursday, Treasury Secretary Timothy Geithner acknowledged that implementing the new law will take time. “But we are determined to move as quickly as we can to provide clarity and certainty,” he said. Sen. Richard Shelby of Alabama, the top Republican on the Senate Banking Committee, criticized the bill as not “real reform,” saying it doesn’t address the problems of mortgage giants Fannie Mae and Freddie Mac, whose questionable lending helped start a collapse in the housing market. Speaking on ABC’s “Good Morning America,” he also complained the bill creates a massive bureaucracy but doesn’t create jobs. Among the first impacts of the bill, which Obama is expected to sign as early as Wednesday, will be the immediate creation of a 10-member Financial Stability Oversight Council, a powerful assembly of regulators chaired by the treasury secretary to keep watch over the entire financial system. The Obama administration has one year to create a new Bureau of Consumer Financial Protection. Congress will keep its eye on that agency, eager to see whom Obama chooses as its director. The agency will have vast powers to enforce regulations covering mortgages, credit cards and other financial products. One of the candidates often mentioned for the top consumer spot is Elizabeth Warren, a Harvard Law School professor who was among the first to suggest the creation of an agency to safeguard consumers in their financial transactions. Warren heads the Congressional Oversight Panel, which has been a watchdog over the Treasury Department’s bank bailout fund. Others mentioned include Michael Barr, an assistant treasury secretary who has been one of the architects of the administration’s regulatory plan. But while the oversight council and the consumer bureau might bloom swiftly, other central provisions of the bill will take time, in some cases years, to take root. The consumer bureau, for instance, has as long as 30 months after it is created for its regulations on predatory lending to take effect. The legislation calls for a two-year study before regulators write rules on how risk-rating agencies should avoid any conflict of interest with the firms whose financial products they assess. The Fed has until April to derive standards to measure the fairness of fees charged by banks to merchants for customers who use debit cards. And regulators will have to fine tune the broad restrictions in the legislation for the complex derivatives market. Key will be determining what firms and corporations will face new restrictions. The U.S. Chamber of Commerce counts more than 350 rules that the legislation directs regulators to write. Senate Banking Committee Chairman Christopher Dodd, an author of the bill, says the legislation gives regulators a specific blueprint to follow. “This bill directs the regulators to do things,” he said in an interview. “We leave to the regulators how best to achieve the goals, but the goals are clear. Congress is not a regulator.” In many instances, regulators already have embarked on rule-writing. The SEC, for instance, has been working on rules that would impose the same professional standards on stockbrokers and dealers that are imposed on financial advisers. The legislation insists that the SEC conduct a study first. Hailing the bill Thursday, Fed Chairman Ben Bernanke said the central bank is also ahead of the game, “overhauling its supervision and regulation of banking organizations.” Regulators also will have to figure out how to implement new standards for how much capital banks should hold in reserve to protect against losses. The legislation requires rules in 18 months. But the U.S. is also part of international negotiations on what global capital standards should be, and those could move more slowly. “I am very confident with the strong hand that this (legislation) gives us, that we will be able to bring the world with us,” Geithner told reporters Thursday. ___ AP Economics Writer Martin Crutsinger contributed to this report.

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Jim Collura: Derivatives Reform Will Benefit — Not Burden — End Users

July 15, 2010

In the course of the two-year long debate on how best to reform the derivatives markets, much attention has been given to the concerns of so-called “end-users,” or businesses that use derivatives to hedge against various forms of risk, including not only airlines, utilities and manufacturers, but also small business farmers, gasoline stations and home heating companies. However, end-users have had growing concerns about the state of the derivatives markets that predate the 2008 financial collapse. Many have argued that these concerns are addressed, not exacerbated, by proposed reforms included in Wall Street reform package. For more than a century, derivatives have been used by producers, processors, transporters and marketers of commodities – such as gasoline, home heating oil, wheat and livestock – to insulate their businesses and consumers from price risk. And for much of their history, they were a stable, reliable and transparent means of doing so. However, if you speak to anyone who has used derivatives products for more than a decade, they will tell you that everything changed in 2000. The financial industry successfully secured blanket exemptions from Congress and federal regulators that led to a transformation of derivatives markets from simple commodity exchanges to the opaque and unregulated, multi-trillion dollar markets we know today. To remain competitive, regulated exchanges weakened their own prohibitions on speculation, and allowed traders in the U.S. to access new subsidiaries in countries with weaker oversight. Over-the-counter and foreign derivative trading markets boomed, to the detriment of the traditionally stable domestic environments. These changes lead to a “Wild West”-like environment. Excess volatility became the norm. Price spikes in commodities, most especially those experienced in 2007-2008, seemed to be dislocated from supply and demand fundamentals. Speculators were diving head-long into derivatives, and by 2008, came to dominate commercial hedgers four-to-one. As commodity speculation swelled, retail gasoline and home heating oil prices surged beyond $4 per gallon. Trade associations attributed as much as $1 or more of these prices to speculation, despite the more than adequate inventories and a decline in demand. Global food prices were similarly rocked and the UN estimates that an additional 130 million people were driven to hunger as a result. Derivatives reform will address many of these issues. Mandatory reporting, clearing and capital requirements for all derivatives would create transparency and much needed confidence in these markets, while a hedge exemption for bona-fide end-users would protect commercial businesses. It would also require that foreign exchanges doing business in the U.S. register with our regulators and encourage new cooperation with overseas agencies. The bill also contains new tools that will help the Commodity Futures Trading Commission or CFTC, the principal regulator of derivatives, police against fraud and manipulation. It would also protect end-users from excessive speculation by expanding a 1936 statute requiring the CFTC to limit positions that speculators can take in a commodity, include over-the-counter markets in these limits and, importantly, establish aggregate limits across all markets. Still, news coverage and op-eds have suggested that end-users are unified in opposition to reform due to fears that it will result in new government regulation and capital requirements, despite the well articulated hedge exemption and support for the legislation from airline, trucking, gasoline, home heating, and various agricultural industry groups. If the “Wild West” was tamed by law and order, then the derivatives markets will be tamed by increased transparency, stability and confidence that legislative reform will bring. An important and reliable tool that hedgers have relied on for years will be returned to them and for this reason, end-users will benefit – not be burdened by – long overdue and comprehensive reform. The only derivatives users that need worry about this reform are those that have exploited the status quo recklessly and irresponsibly, driving up costs for all Americans and threatening our nation’s economic stability and competitiveness. They fear it, and rightly so.

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Zach Carter: Wall Street Is Laundering Drug Money And Getting Away With It

July 14, 2010

Too-big-to-fail is a much bigger problem than you thought. We’ve all read damning accounts of the government saving banks from their risky subprime bets, but it turns out that the Wall Street privilege problem is far more deeply ingrained in the U.S. legal system than the simple bailouts witnessed in 2008. America’s largest banks can engage in flagrantly criminal activity on a massive scale and emerge almost completely unscathed. The latest sickening example comes from Wachovia Bank: Accused of laundering $380 billion in Mexican drug cartel money , the financial behemoth is expected to emerge with nothing more than a slap on the wrist thanks to an official government policy which protects megabanks from criminal charges. Bloomberg’s Michael Smith has penned a devastating expose detailing Wachovia’s drug-money operations and the government’s twisted response. The bank was moving money behind literally tons of cocaine from violent drug cartels. It wasn’t an accident. Internal whistleblowers at Wachovia warned that the bank was laundering drug money, higher-ups at the bank actively looked the other way in order to score bigger profits, and the U.S. government is about to let everyone involved get off scott free. The bank will not be indicted, because it is official government policy not to prosecute megabanks. From Smith’s story: No big U.S. bank . . . has ever been indicted for violating the Bank Secrecy Act or any other federal law. Instead, the Justice Department settles criminal charges by using deferred-prosecution agreements, in which a bank pays a fine and promises not to break the law again . . . . Large banks are protected from indictments by a variant of the too-big-to-fail theory. Indicting a big bank could trigger a mad dash by investors to dump shares and cause panic in financial markets. Wachovia was acquired by Wells Fargo in late 2008. The bank’s penalty for laundering over $380 billion in drug money is going to be a promise not to ever do it again, and a $160 million fine. The fine is so small that Wachovia will almost certainly turn a profit on its drug financing business after legal costs and penalties are taken into account. This is several steps beyond what most of us think about when we debate too-big-to-fail. The government isn’t shielding Wachovia from losses on risky bets in the capital markets casinos– it’s shielding the bank from the prosecution of outright criminal behavior. The drug money business did not pose risks to the financial system, and Wachovia wasn’t losing money on it. Wachovia is simply being protected because the Think about what would happen if you or I were accused of laundering $380 billion in drug money. We could not simply settle the allegations out of court in exchange for an apology and a fine. We’d spend the rest of our lives in jail for financing a ruthless, bloody and illegal business. About 22,000 people have been killed in the Mexican drug trade since 2006, and the drug trade itself can’t happen without extensive money laundering operations. Moving the money is one of the most difficult and critical elements of any criminal enterprise–without ways to convert crooked cash into seemingly innocuous funds, crooks simply can’t operate. Wachovia was doing top-level dirty work for drug dealers. On the streets of American cities, the mere possession of these drugs can land you with a multi-year prison sentence. But financing multi-billion-dollar drug empires? Don’t do it again, pretty please. Too-big-to-fail isn’t just a matter of systemic risk and mathematical models gone haywire, It’s about the basic functioning of our democracy. You cannot have a functional democracy in which an entire privileged class of bankers can get away with anything –and if you can get away with laundering hundreds of billions of dollars in drug money, there’s not much you can’t get away with. Congress is poised to pass a decent Wall Street reform bill, but that legislation will not end this criminal imbalance. If the bill will really end too-big-to-fail, the Justice Department could immediately end its special immunity policies for large financial institutions. That isn’t going to happen. The public deserves tougher prosecutors, but we also need further legislation to break up the megabanks so that they can’t use their economic clout to bully everyone in Washington.

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Olympia Snowe Says She’ll Vote For Financial Reform

July 12, 2010

WASHINGTON (AP) — Sens. Olympia Snowe and Scott Brown pushed sweeping financial legislation to the edge of final passage Monday, both announcing they intend to support the regulatory overhaul despite initial misgivings. Snowe of Maine and Brown of Massachusetts join Susan Collins of Maine as three crucial Republican votes for the legislation. “While not perfect, the legislation takes necessary steps to implement meaningful regulatory reforms, create strong consumer protections and restore confidence in the American financial system,” Snowe said in a statement Monday evening. In breaking with the rest of the Republican Party, the three lawmakers appeared to give Democratic leaders the 60 votes needed to overcome procedural hurdles facing the legislation. Majority Leader Harry Reid of Nevada said the legislation would be wrapped up this week. “We will finish our work on this bill this week to ensure that these critical protections and accountability for Wall Street are in place as soon as possible.” Reid said in a statement. He commended the three Republicans. “Despite the difficult political climate, these Republicans have joined Democrats to support these common-sense protections for consumers, investors and financial institutions that will help prevent another financial crisis,” Reid said. Democratic Sen. Ben Nelson of Nebraska kept the vote count in limbo Monday, saying he remained undecided on the legislation. Nelson voted for an earlier Senate version of the bill. “We’ve got some concerns that some of the banks in Nebraska have raised,” Nelson said Monday. “We also have some banks in Nebraska saying vote for it. We’re trying to balance out the concerns that have been raised. There’s a certain amount of uncertainty. You don’t have regulations written. You don’t know who’s going to be the head of the consumer protection bureau.” A fourth Republican who voted for the Senate version in May, Charles Grassley of Iowa, has indicated he has reservations as well. The legislation attempts to rein in banks, police previously unregulated markets and provide a new array of consumer protections. It aims to avoid a recurrence of the 2008 financial crisis that helped drive the country into the worst recession since the Great Depression. Without Nelson, Democrats would have to wait for West Virginia Gov. Joe Manchin, who is a Democrat, to fill the vacancy created by the death of Sen. Robert Byrd. Manchin said Monday that he would fill the vacancy as early as Friday and no later than Sunday. Manchin’s appointment would be expected to vote for the legislation. Like Snowe, Brown won concessions in the bill and said Monday that the legislation “is a better bill than it was when this whole process started.” “While it isn’t perfect, I expect to support the bill when it comes up for a vote,” he said in a statement. “It includes safeguards to help prevent another financial meltdown, ensures that consumers are protected and it is paid for without new taxes.”

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Paul Volcker Gives Financial Reform Bill ‘B Minus,’ Regrets Past Silence On Deregulation

July 10, 2010

A well-regarded lion of the regulatory world, Mr. Volcker had endorsed the legislation before he went fishing, but unenthusiastically. If he were a teacher, and not a senior White House adviser and the towering former chairman of the Federal Reserve, he says, he would have given the new rules just an ordinary B — not even a B-plus.

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Paul Volcker Gives Financial Reform Bill ‘B Minus,’ Regrets Past Silence On Deregulation

July 10, 2010

A well-regarded lion of the regulatory world, Mr. Volcker had endorsed the legislation before he went fishing, but unenthusiastically. If he were a teacher, and not a senior White House adviser and the towering former chairman of the Federal Reserve, he says, he would have given the new rules just an ordinary B — not even a B-plus.

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Tom Donohue: Financial Regulation Bill Lacks Real Reform

July 6, 2010

Our elected officials in Washington have struck again. Just months after passing a tax-raising, job-killing health care bill, Congress is about to approve financial regulatory reform legislation that, ironically, lacks actual reform. Proponents of the Dodd-Frank Wall Street Reform and Consumer Protection Act will undoubtedly hail it as a triumph of Main Street over Wall Street, but they have it backward. It will be small businesses and families shouldering the brunt of this legislation through higher fees, less choice, and fewer opportunities to responsibly access credit. So what does the Dodd-Frank Act do? For one thing, it calls for more than 350 regulatory rulemakings, 47 studies, 74 reports, and counting. This tsunami of new rules and studies will cause tremendous uncertainty, making it harder for businesses to raise capital, make investments, and create jobs. To put this effort into context, the Sarbanes-Oxley Act required 16 rulemakings and 6 studies–which took more than two years to complete. In the meantime, businesses must contend with a bill of which Sen. Christopher Dodd (D-CT), one of its chief architects, remarked, “No one will know until this is actually in place how it works.” If that’s not a recipe for confusion, uncertainty, and litigation, I don’t know what is! The complications don’t end there. The Chamber believes that you can’t have real reform without reforming the regulators. So it comes as a disappointment that the Dodd-Frank Act creates even more regulatory agencies on top of a fundamentally flawed, outdated system, instead of fixing the system itself. These new bodies include the Consumer Financial Protection Bureau, a sprawling new bureaucracy with unchecked and far-reaching powers that could potentially regulate hundreds of thousands of non-financial businesses. The Dodd-Frank Act will also put American financial firms at a disadvantage by imposing rules and regulations that haven’t been or won’t be adopted globally. In a world where capital can move easily, it will go to where it is welcome, safe, and can generate a decent return. This new legislation is the equivalent of a “keep out” sign on the front lawn, forcing legitimate business activity to foreign markets that are hungry for additional capital. This will increase the cost of capital here at home, and could further put the squeeze on small businesses. While the House passage of the Dodd-Frank Act marks a sad day for the U.S. economy, jobs, and the future of our capital markets, the fight is far from over. The Chamber will continue to work vigorously through all available avenues–regulatory, legislative, and legal–to guarantee appropriate implementation of the bill and to ensure that we have the most efficient, transparent, and well-regulated capital markets in the world.

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Moody’s Credit Rating Cut Threatened By S&P

July 1, 2010

NEW YORK ( AP ) — Standard & Poor’s said it may cut its rating on the parent of rival ratings agency Moody’s Investors Service, because financial legislation could erode profits in the ratings industry and heighten legal risks. Standard & Poor’s placed Moody’s Corp.’s top ‘A-1′ short-term credit rating on watch for possible downgrade. S&P doesn’t anticipate lowering the company’s short-term rating more than one notch. S&P highlighted the risks to the ratings industry from financial overhaul legislation that is nearing final approval, particularly a provision expanding investors’ powers to sue ratings agencies. Investors could sue if they could show an agency “knowingly or recklessly failed to conduct a reasonable investigation of the factual elements relied upon by a credit rating agency’s rating methodology, or obtain a reasonable verification of those factual elements from independent third-party sources,” according to S&P. Ratings agencies have been criticized for giving high ratings to complex investments backed by risky mortgages whose values fell sharply when the housing market collapsed in 2007 and 2008. When homeowners defaulted, the agencies downgraded billions of dollars of investments at once. That helped spark the financial crisis. Lawmakers have accused the industry of having a conflict of interest because the agencies are paid by the banks whose investments they rate. S&P said it’s likely that new standard will increase Moody’s litigation costs. Moody’s management has said it plans to adapt its business practices to partially offset any potential new litigation risks from the legislation. But S&P said it believes Moody’s “may face higher operating costs, lower margins, and increases in litigation-related event risk, which would likely increase its business risk.” S&P also said the legislation may reduce investor demand for ratings, depending on whether the final legislation removes many or all references in federal regulations to internationally recognized ratings agencies like Moody’s, S&P and Fitch Ratings. The proposal would make many business transactions less reliant on rating agencies’ involvement. Moody’s shares fell 6 cents to close at $19.95 Wednesday. Meanwhile, shares of S&P’s parent, McGraw-Hill Cos., finished down $1.25, or more than 4 percent, at $28.14.

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Video: Jobless Claims in U.S. Increased Last Week to 472,000: Video

July 1, 2010

July 1 (Bloomberg) — More Americans unexpectedly applied or jobless benefits last week, as initial jobless claims increased by 13,000 to 472,000, Labor Department figures showed today. The number of people receiving unemployment insurance rose, while those getting emergency benefits dropped after Congress failed to act on extending the legislation. Bloomberg’s Michael McKee and Betty Liu report. (Source: Bloomberg)

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Obama Hails House Passage Of Financial Reform

June 30, 2010

WASHINGTON — President Barack Obama says House passage of a massive overhaul of financial regulations is a victory for everyone who was hurt by what he is calling Wall Street “recklessness and irresponsibility” that caused the financial meltdown and millions of job losses. House lawmakers voted 237-192 Wednesday in favor of the bill, sending it to the Senate for a vote expected in mid-July. Obama says the legislation provides a sensible framework of rules and regulations that will hold financial institutions accountable for their actions and help prevent another economic crisis like the one the U.S. is still recovering from.

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Sen. Russ Feingold: Standing Up to the Unholy Alliance Between Washington and Wall Street

June 30, 2010

Wall Street and its allies have been calling the shots in Congress for decades, so they must be glad to see how things are shaping up on financial regulatory reform. Congress is about to vote on a final bill that fails to fix the key flaws in the bills passed by both the House and Senate. At the start of this process I made clear that I had a simple test for financial reform — will it stop another financial meltdown? This bill fails that test, and I won’t support legislation that fails to protect the people of Wisconsin from the pain of another economic disaster. And I don’t need to be lectured about this issue by people who supported the repeal of Glass-Steagall, which paved the way for this terrible recession. I had hoped I would be able to support the legislation, given the clear need for strong reform. I cosponsored a number of critical amendments during Senate consideration of the bill including a Cantwell-McCain amendment to restore Glass-Steagall safeguards, Senator Dorgan’s amendment that addressed the problem of “too big to fail” financial institutions, and another “too big to fail” reform offered by Senators Brown and Kaufman that proposed strict limits on the size of those institutions. Each of those amendments would have improved the bill significantly, and each of them either failed or was blocked from even getting a vote. After that, it wasn’t a close call for me. It would be a huge mistake to pass a bill that purports to re-regulate the financial industry but is simply too weak to protect people from the recklessness of Wall Street. That would be like building an impressive-looking dam without telling everyone that it has a few leaks in it. False security is no security at all. Since the Senate bill passed, I have had a number of conversations with key members of the administration, Senate leadership and the conference committee that drafted the final bill. Unfortunately, not once has anyone suggested in those conversations the possibility of strengthening the bill to address my concerns and win my support. People want my vote, but they want it for a bill that, while including some positive provisions, has Wall Street’s fingerprints all over it. In fact, reports indicate that the administration and conference leaders have gone to significant lengths to avoid making the bill stronger. Rather than discussing with me ways to strengthen the bill, for example, they chose to eliminate a levy that was to be imposed on the largest banks and hedge funds in order to obtain the vote of members who prefer a weaker bill. Nothing could be more revealing of the true position of those who are crafting this legislation. They had a choice between pursuing a weaker bill or a stronger one. Their decision is clear. On this bill, like the others that preceded it, the biggest financial interests have won. I’ve seen this too many times before. When I was in the Wisconsin State Senate, I chaired the Senate Banking Committee for nearly a decade, and fought against enactment of an interstate banking law that resulted in the concentration of financial assets and most large Wisconsin banks being bought up by even larger out-of-state banks. Shortly after I came to the U.S. Senate we considered a national interstate banking bill, the Riegle-Neal Interstate Banking and Branching Act of 1994, which accelerated the concentration of financial assets, and the creation of “too big to fail” firms. I was one of only four senators to oppose that legislation. Five years later, I was one of only eight Senators to oppose the Gramm-Leach-Bliley Act, the bill that repealed Glass-Steagall and paved the way for this disastrous recession, which has been an economic nightmare for so many Americans. Those two measures — the 1994 law and the 1999 law — accelerated the trend toward increased concentration of financial assets, aggravating the problem of “too big to fail.” Before those two laws were enacted, the six largest U.S. banks had assets equal to 17 percent of our GDP. Today the six largest U.S. banks have assets equal to more than 60 percent of our GDP. Ultimately, it was the threat of the failure of the nation’s largest financial institutions that spurred the Wall Street bailout. I opposed that measure as well, in part because it was not tied to any fundamental reforms of our financial system that would prevent a future crisis and the need for another bailout. We could have had a much tougher reform package if the bailout had been tied to such a measure. Every single one of those bills caved to Wall Street and the biggest financial interests, and so does the current regulatory reform bill. Economist Dean Baker called this bill a “fig leaf,” and former IMF Economist Simon Johnson has slammed the bill’s failure to address “too big to fail.” These experts paint an accurate picture of this bill’s failings, and frankly those failings shouldn’t come as a surprise. Many of the critical actors who shaped this bill were present at the creation of the financial crisis. They supported the enactment of Gramm-Leach-Bliley, deregulating derivatives, even the massive Interstate Banking bill that helped grease the “too big to fail” skids. It shouldn’t be a surprise to anyone that the final version of the bill looks the way it does, or that I won’t fall in line with their version of “reform.” This bill caves to Wall Street interests, it doesn’t meet the test of preventing another financial crisis, and it won’t get my vote.

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Without Byrd, Senate Financial Reform Vote In Doubt

June 28, 2010

WASHINGTON — A sweeping overhaul of financial regulations faced new obstacles in the Senate on Monday – the loss of one and potentially more crucial votes to guarantee its passage. The death of Sen. Robert Byrd, D-W.Va., and new misgivings by Republican senators who previously supported the legislation put the bill’s fate in doubt. Democrats scrambled to secure votes for one of President Barack Obama’s top priorities. Last month, 61 senators backed an original Senate version of the bill; only four of them were Republicans. On Monday, three of them – Scott Brown of Massachusetts and Susan Collins and Olympia Snowe of Maine – complained about a $19 billion fee on large banks and hedge funds that House and Senate negotiators added to the bill last week to pay for the cost of the legislation. With Byrd’s death, Democrats can’t afford to lose any votes to overcome the 60-vote procedural hurdles that could defeat the legislation. Brown was the most adamant about his opposition. “I can’t support adding another $19 billion of pass-through taxes to individual consumers, especially in the middle of a two-year recession,” he said Monday shortly after officially introducing Supreme Court nominee Elena Kagan to the Senate Judiciary Committee. Asked whether his stance meant he would vote against a filibuster of the bill, Brown said: “I’m not sure.” The legislation would rewrite financial regulations, putting new limits on bank activities, creating an independent consumer protection bureau, and adding new rules for largely unregulated financial instruments. The House was likely to vote on the bill as early as Tuesday; the Senate vote would follow, though no date has been set. Congressional leaders had wanted to send the bill to Obama by July 4, but the final vote may now be delayed. While Collins said she was pleased with a series of provisions in the bill, she said she was “not happy” that the $19 billion fee had not been considered in the original Senate bill. She said she was looking at the new bill before deciding how to vote. Snowe said she found the bank fee “regrettable” but said she would weigh it against the bill’s benefits. It was also unclear when Byrd’s seat would be filled. West Virginia Gov. Joe Manchin, a Democrat, said Monday he had no timetable to consider a replacement for Byrd. Senate Democrats have been in this situation before. They had to scour for votes to pass the Senate’s version last month. To secure Brown’s vote, Senate Majority Leader Harry Reid of Nevada assured him that the bill would not hurt financial institutions in Massachusetts that trade with their own money and that invest in hedge funds and private equity funds. The House-Senate conference committee that combined the final bill added exemptions in the bill to permit some trading and investing within limits. Negotiators also made sure provisions backed by Snowe and Collins remained in the bill for fear of losing them as well. Two Democrats – Sens. Russ Feingold of Wisconsin and Maria Cantwell of Washington – voted against the Senate version last month, saying it wasn’t tough enough on banks. Feingold on Monday reiterated his position. “My test for the financial regulatory reform bill is whether it will prevent another crisis,” he said in a statement. “The conference committee’s proposal fails that test and for that reason I will not vote to advance it.” Cantwell spokesman John Diamond said she was reviewing the new bill and had not taken a position. Cantwell did vote with Democrats on one procedural vote last month but resisted other entreaties to support the bill. Cantwell is likely to hear a pitch for the bill Tuesday when she attends a White House meeting with senators working on energy legislation.

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U.S. G20 Message: Stimulus Money Is Vital To Economic Recovery, Don’t Pull Back Yet

June 26, 2010

TORONTO — World leaders must work together to make sure the global recovery stays on track, Treasury Secretary Timothy Geithner said Saturday. Geithner made his remarks as President Barack Obama has warned his counterparts from the Group of 20 nations to not reel in measures to stimulate their economies too quickly. The United States fears doing so could endanger the global recovery. Nations like Germany, Britain and others are shifting their focus on cutting deficits – especially in the wake of Greece’s debt crisis, which rattled world markets. Asked if the global economy could slip back into another “double dip” recession, Geithner said the answer to that question hinges on decisions made by world leaders. “It is within the capacity of the people who are going to be in those rooms together in the next few days to avoid that outcome,” he said. But Geithner’s insistence that nations continue stimulus spending to avoid another global recession w as not bolstered by America’s own actions at home . On Thursday, Senate Republicans defeated a jobs bill that included unemployment extensions, provisions for the elderly and poor, state funding for medicaid, and various tax cuts. Republicans threatened to filibuster the legislation and because Democrats were short of the 60 votes needed to overcome the legislative block, they did not vote on the bill. But Geithner did not mention the failed stimulus bill at home as he told politicians from the world’s largest economies that global economic recovery depended upon government spending. Geithner told the Toronto audience that one of the mistakes made in the 1930s was that countries pulled back their recovery efforts too soon, prolonging the Great Depression, he said. He said the United States doesn’t want to see that happen again. “What we want to do is continue to emphasize that we are going to avoid that mistake,” he said. “It’s only been a year since the world economy stopped collapsing … it will take some time to heal.” Although the world economy has recovered from the worst financial and economic crisis since the 1930s, many challenges remain, Geithner said. “The scars of this crisis are still with us,” Geithner told reporters. “If the world economy is to expand at its potential, if growth is going to be sustainable in the future, then we need to act together to strengthen the recovery and finish the job of repairing the damage of the crisis.”

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Unions, Consumer Groups Rally Behind Wall Street Reform

June 25, 2010

Consumer advocates, labor unions and progressive advocates of Wall Street reform are hailing passage of the bill by the conference committee early Friday, even as analysts warn that it fails to solve the problems of bank size and interconnectedness that led to the financial crisis. Given the complexity of financial regulatory reform, progressive observers looked to key leaders to gauge the value of the proposals under discussion. Among others, the group included Elizabeth Warren, a Harvard professor and head of the congressional panel overseeing the bailout; Heather Booth, the director of Americans for Financial Reform; Richard Trumka, the president of the AFL-CIO who has made confronting Wall Street a central part of his union’s mission; and Kathleen Day, a former Washington Post business reporter now with the Center for Responsible Lending. All of them are out with statements celebrating the final bill, though with some reservations. The AFL-CIO put its statement out under the name of the director of the office of investment, Daniel Pedrotty. “This is a David and Goliath victory of working people against the big banks and Wall Street,” he said. “While it’s not perfect, this legislation is a giant step to changing the rules of the game that caused the economic crisis.” Elizabeth Warren’s statement comes as she is routinely floated as the best candidate to head the Consumer Financial Protection Bureau. “It has been more than 20 months since the largest financial crisis since the Great Depression, and we are still living under the same set of rules we had in place before the meltdown. Thanks to the leadership of President Obama, Chairman Frank, and Chairman Dodd, that’s about to change. Members of the House-Senate conference committee and their staffs worked through the night to produce the strongest set of Wall Street reforms in three generations. They created a strong, independent consumer agency that will have the tools to rein in industry tricks and traps and to cut out the fine print. For the first time, there will be a financial regulator in Washington watching out for families instead of banks,” said Warren. Warren didn’t mention in her statement that the CFPB won’t have the power to regulate lending by auto dealers, an often predatory practice involving the second-largest purchase a consumer typically makes. The Pentagon battled the auto dealers over the carve-out, arguing that soldiers are being ripped off so routinely that it is damaging military readiness and national security. The auto dealer lobby is chest thumping. Ed Tonkin, chairman of the National Automobile Dealers Association, said that the carve-out was “a testament to the hard work of all of the auto dealers and dealership employees around the country who made sure that the merits of the issue were heard. Their grassroots efforts truly made today’s victory possible.” Day praised the creation of the bureau but chided Congress for buckling to the auto dealers. “House and Senate conferees reached a historic agreement to create a consumer protection agency that is truly independent from the lenders it will oversee: It will have a single director nominated by the president and confirmed by the Senate; funding that is largely insulated from meddling by industry lobbyists; and the tools and scope needed to ensure most lenders operate under one set of common-sense rules. That’s a win for families, small businesses, taxpayers and the economy,” she said. “Auto dealers — whose lending record is rife with unfair, deceptive practices, especially for people of color and military personnel — should not have been exempted from oversight.” Day was more enthusiastic about tight mortgage lending rules that survived in conference. Originally passed by the House as Miller-Watt-Frank, after lead sponsors Brad Miller (D-N.C.), Mel Watt (D-N.C.) and Barney Frank (D-Mass.), the legislation bans a number of abuses that helped fuel the crisis. Brokers can no longer be rewarded for steering borrowers into dangerous loans, among other reforms, and the CFPB is empowered to rein in deceptive and abusive practices. Stabilizing mortgage lending would go a long way to stabilizing the financial sector, said Miller. “It’s hard to believe what went on in the mortgage market in the last decade, and that so many members of Congress just parroted the talking points of lobbyists defending the indefensible. The financial crisis began with millions of Americans trapped in subprime mortgages that they couldn’t pay, when they qualified for prime mortgages that they could,” Miller told HuffPost. “If these rules had been in place we would never have had the foreclosure crisis, the financial crisis or the Great Recession.” Booth, of Americans for Financial Reform, a coalition of unions, consumer groups and progressive organization, “hailed” the legislation. “We see landmark legislation when it comes to consumer protection, offering all of us an independent watchdog on our side. For the first time, the $600 trillion derivatives market will be transparent and have to maintain capital to back up its bets — a move that was once inconceivable. The adoption of the Volcker Rule represents a major change of direction, stopping banks from using insured deposits to support speculative activity. We see big steps in the right directions when it comes to hedge funds and private equity, as well as improvements for investors to have a voice,” she said. “Americans for Financial Reform calls for members of Congress to support this bill and move to final passage immediately. This is a big step forward, and a first step towards the further changes we need to make sure Wall Street serves Main Street and not vice versa.”

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Eric Rodriguez: Latino Consumers Have Much to Celebrate in New Banking Bill

June 25, 2010

Early this morning, lawmakers finalized the banking reform bill. The “Restoring American Financial Stability Act of 2010″ is a great victory for consumers, who will now have vastly improved protections against predatory lending. The bill also contains very strong and much-needed foreclosure assistance. This is an historic piece of legislation that will change financial markets for the better. The one unfortunate blemish was Congress caving to the will of auto dealers and exempting them from new federal oversight. In a momentary lapse back into politics as usual, lawmakers shielded a loosely regulated industry from accountability. This occurred over strenuous objections from President Obama, the Pentagon, independent community banks, civil and consumer rights organizations, Congressman Gutierrez (D-IL), and many others who know all too well how auto dealers have exploited Latinos and other consumers seeking to finance their car purchases. Communities of color are most frequently targeted by abusive lenders in the auto industry and the National Council of La Raza (NCLR) pledges to work with regulators, consumer advocates, and the industry to end discrimination and exploitation in auto dealer financing. That said, on balance, there is much to celebrate about this legislation. We congratulate our champions on several major victories: Consumer Financial Protection Bureau (CFPB) The creation of a CFPB is unprecedented. This bureau will be entirely devoted to protecting families from predatory loans and other unsound financial products. It will be autonomous and have the authority to write and enforce rules. This is the cornerstone of true consumer rights. Money Transfers New disclosures included in the legislation will create a more transparent process for wiring money abroad. Tens of billions of U.S. dollars are sent every year by American residents to their relatives overseas. In fact, immigrants from Mexico alone sent over $17.3 billion home in 2009. These same remitters also spent an estimated $948 million in fees and other costs getting it there. New protections championed by Congressman Gutierrez and Senator Akaka (D-HI) will create a disclosure that displays the true cost of the remittance and the value received. Foreclosure Assistance Two provisions stand as real boosts for those struggling with foreclosure , as experts estimate that more than 2.3 million Black and Latino households will lose their homes to foreclosure between 2009 and 2012 and approximately two million Blacks and Latinos have lost their jobs since the recession began. The first includes a bridge loan program for unemployed homeowners while they look for a job. The second is an infusion of funding for a Neighborhood Stabilization Program (NSP) that allows states to purchase and redevelop foreclosed homes. A solid NSP can also help generate employment in hard-hit areas. Mortgage Protection Reckless and deceptive lending has severely impacted Latinos and other communities of color. For example, Latinos are 30% more likely than Whites to receive a high-cost loan when purchasing their home. They are also more likely to receive loans with high-risk features. The bill includes comprehensive mortgage reform and antipredatory lending measures essential to combating abusive lending practices that played a key role in the economic crisis. Financial Counseling Funds will be infused into community-based organizations that offer financial counseling. They will help families open bank accounts, build credit, identify an affordable car loan or credit card, and recover from a foreclosure or bankruptcy. This service is critical to helping consumers recover and avoid disastrous products in the future. Safe Bank Accounts Low-income, minority, and underbanked families will have access to safe and affordable bank accounts. Currently, many Latino consumers rely on fringe financial products such as payday and car title loans to pay their bills and otherwise make ends meet. Approximately 19.3% of Latinos and 21.7% of Blacks are unbanked, compared to only 3.3% of Whites. The bill will provide grants to help families connect to bank accounts and provide alternatives to payday loans.

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Chuck Collins: Finally, A Progressive Estate Tax Introduced

June 24, 2010

Would you trust Sens. Max Baucus and Blanche Lincoln to design the next estate tax, our country’s only levy on inherited wealth? Unless progressives stand up, Baucus and Lincoln will team with the GOP’s anti-tax point person, Senator John Kyl, to push through a bad estate tax reform. The Kyl-Lincoln reform proposal would gut the law and give additional tax breaks to multi-millionaires and billionaires. Fortunately, Senate progressives have just introduced an estate tax reform with some spine. The Responsible Estate Tax Act proposes graduated rates on larger estates, closes loopholes, exempts farms and small businesses, and encourages conservation easements. It imposes a “billionaire surcharge” rate of 65 percent on estates over $500 million. Led by Senators Sherrod Brown (D-OH), Tom Harkin (D-IA) Bernard Sanders (I-VT), and Sheldon Whitehouse (D-RI), this progressive estate tax would raise at least $264 billon over ten years. “At a time when we have a record-breaking $13 trillion national debt and a growing gap between the very rich and everyone else, people who inherit multi-million and billion dollar estates must not be allowed to avoid paying their fair share in estate taxes,” said Senator Sanders in a prepared statement. The politics within the Democrats on the estate tax are bizarre. In 2009, thanks to Senate inaction, the federal estate tax expired on January 1, 2010. In March, a Texas oilman became the first billionaire in U.S. history to die without any estate tax in place, costing the treasury billions. The good news is that on January 1, 2011, the estate tax returns at its year 2000 level — with a wealth exemption of $1 million and 55 percent rate. This is what will happen if the Senate takes no action, which seems to be the norm. Now to us common folks, it seems like a tremendous bargain position for Senate Democrats. If nothing happens, we get a strong estate tax law. So how is the Senate Democratic leadership using this huge leverage? You guessed it. They’re like poker players with three aces in their hand and are ready to fold. Instead of using their leverage to press for something like the Responsible Estate Tax Act, they’re allowing Lincoln and Baucus to dominate the stage. Fair tax advocates are mobilizing to build support for the Responsible Estate Tax Act. Wealth for the Common Good , a network of business leaders and wealthy investors, is backing the legislation and has compiled fact sheets and other resources . If Democrats are going to address the political impasse created by “deficit politics,” they have to step up and support progressive revenue proposals like the Responsible Estate Tax Act.

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