Consumer Protection Only Wall Street Could Love

When it comes to finding someone to head the Financial Consumer Protection Bureau that opened its doors this week, the Republicans remind me of that Groucho Marx bit: “Whoever it is, we’re against them.”

The Republicans have a pretty straightforward position:  they’ve made it clear they’ll only be satisfied with one kind of financial consumer protection agency: one that’s dead, buried and incapable of causing the big banks any trouble.

Meanwhile, President Obama is caught between his promises to create a powerful new agency to rein in Wall Street and his need to raise $1 billion to fuel his reelection campaign.

So the president dissd the highly articulate Elizabeth Warren, who came up with the idea for the new agency and who has been a down-to-earth, no-nonsense advocate for consumers for decades, in favor of the former Ohio attorney general, Richard Cordray.

Republicans don’t like Cordray, who enjoys a decent enough reputation any more than they liked Warren. Obama could have waged a political popular fight in favor of Warren and real protection but he didn’t.

How come? On the one hand President Obama would prefer not like to see one of the signature achievements of his financial reform effort strangled in its crib.

On the other hand Wall Street doesn’t like even the whiff of anybody   implying that the bankers might take advantage of their customers let alone anybody actually trying to do something about it.

Based on his weak negotiating efforts so far, Obama and the Democrats are perfectly capable of accepting some form of the proposal offered by Sen. Jim Moran, R- Kansas, which would turn the real power over the CFPB to a committee, preserving consumer protection in name only. Obama and the Democrats can run on that with the same gusto the president is pretending that the faux financial reform actually reined the Wall Street fraud and excess that led to the 2008 financial collapse and bailout.

Democrats and Republicans are competing hard, less for the affections of voters and more for the mountains of cash beckoning to them from Wall Street and corporate coffers.

In calculating whether to keep their promise to protect consumers or whether to bend to Wall Street, the president and the Democrats know that the Democratic voters have no other place to go right now; they are unlikely to swing to the “We’re against it” party even as much as Obama disappoints them

But Obama and the Democrats know Wall Street, which was generous to them in 2008, does have a choice. The Republicans are wooing Wall Street hard, though the Republicans’ knuckleheaded stance on the debt ceiling makes them look more like surly juvenile delinquents than a party with an interest in actually governing.

Time will tell whether the Democrats or the Republicans will actually allow the new agency to do real consumer protection or if they will thwart the majority’s will in favor of Wall Street’s.

 

 

Around the Web / Consumer Financial Protection Agency / Martin Column / President Barack Obama - 07/23/2011

Missing the Message

It’s absolutely clear that the Republicans mean to work with the big banks to block any financial reform, no matter how watered down, by any political means necessary.

The Republicans have opposed the president’s nominees in committee. As far as the Consumer Financial Protection Agency, they oppose not only the popular consumer champion Elizabeth Warren to be its chief, they will oppose anyone President Obama nominates. The Republicans have made their intentions clear – they want to gut the agency before it’s born.

Meanwhile the bank lobbyists have gone to work on the regulators who are writing the actual rules to implement last year’s financial reforms, and have effectively stalled the process in its tracks.

To make sure that no one is missing the message, J.P. Morgan Chase chief Jamie Dimon went on the offensive this week, publicly stating that excessive financial regulation was weakening the economic recovery. Without offering specifics, Dimon told Fed chair Ben Bernanke at a bankers’ conference, “I have a great fear someone’s going to try to write a book in 20 years, and the book is going to talk about all the things that we did in the middle of the crisis to actually slow down recovery.”

While the bankers have been working feverishly behind the scenes to further water down the weak Dodd-Frank version of financial reform, Dimon’s statements are the most aggressive public challenge yet to any attempts to rein in the big banks.

What’s unclear is why the president is not meeting this assault on one of his proudest achievements (Wall Street reform) head on, despite the Republicans’ and bankers’ clear signals that they have no intention to compromise. Rather than mounting a strong public case for Warren, for example, the White House continues to float alternative, less qualified, nominees. Obama seems to be laboring under the illusion that there is somebody else who satisfy the Republicans. What’s baffling is that he has no reason to think so: the Republicans haven’t exactly been ambiguous. The bankers are also taking off the gloves, with only a few lonely voices in Washington to make the case for stronger reform.

When will our president get the message?

 

 

Around the Web / Consumer Financial Protection Agency / Financial Reform Legislation / Martin Column / President Barack Obama - 06/10/2011

3 Steps Toward Real Economic Recovery

Democrats should be less worried less about Sarah Palin’s mangling of American history and more concerned about the Obama administration’s consistent underestimation of the recession since the financial collapse.

The president and his team has been downplaying the seriousness of the jobs and housing crises since they took office, repeatedly taking inadequate steps to address the twin fiascoes of foreclosure and unemployment, while wrongly conceding to Republicans that the political focus should be the short-term deficit.

This is not only bad for the country but bad politics for the Democrats, increasing the chances that voters will blame them for not fighting harder for programs to create jobs and straighten out the housing mess. Never mind that Republican efforts to address these issues amount to less than zero.

Nobody expects the president and his party to win every fight. But we do expect him not to wave the white flag before the fight starts.

Circumstances still offer the president opportunities to show that he finally gets it – and to signal a more aggressive approach.

First, the president can launch a fight for Elizabeth Warren to head the Consumer Financial Protection Agency. Warren is popular, articulate and sensible, and the agency was her idea in the first place. Of course the Republicans hate her, in fact they don’t want a single head of the agency. Republicans favor a committee to run the agency, the more easily for the banks to bamboozle it.

Second, he can replace his outgoing economic adviser, Austan  Goolsbee with somebody more tuned in to the jobs and housing crises. How bad was Goolsbee (and the administration’s economic policies he defended)?

Here’s how economist Firedoglake blogger Scarecrow put it after listening to Goolsbee Sunday, saying it was up to the private sector to create jobs now because government could do nothing: “If I’d been asleep for the last decade and woke up to ABC This Week’s interview of Presidential economic advisor Austan Goolsbee, I would assume that Mitt Romney won the 2008 election, that he was predictably following Republican dogma about how to recover from a severe financial collapse and recession...” Scarecrow wrote.

With Democrats like these, who needs Republicans?

Third, Obama can fire his Treasury secretary, Timothy Geithner, who has shamelessly pandered to his banker cronies while ignoring Main Street’s woes since he helped engineer the bailout as head of the New York Fed prior to the Obama administration.

Of course it will take more than gestures and a few appointments for the president to tackle the continuing severe economic challenges we face. But he can still saddle up and take a brave ride on the right side of history, if he chooses.

 

Consumer Financial Protection Agency / Martin Column / President Barack Obama - 06/06/2011

Remind AGs Who They Work For

The big banks are headed to Washington D.C. in an effort to weaken any potential settlement stemming from complaints about the banks’ misbehavior in the foreclosure crisis.

Those of us who favor holding the banks accountable are taking a different route Tuesday – through the country’s 50 state capitals.

A coalition of homeowner and consumer advocates are encouraging people to contact their state attorney generals today in an effort to encourage them to conduct real robust investigations into the big banks’ foreclosure fraud, not just go through the motions.

The official response to disclosures of the big banks’ sloppiness and downright fraud in the foreclosure process has been a mishmosh. President Obama refused to declare a moratorium while the mess was sorted out; the state attorney generals promised a tough investigation but don’t appear to have followed through, and then the various federal bank regulators got involved in an effort to negotiate a settlement.

One strategy for the big banks and their Republican allies has been to demonize Elizabeth Warren, a strong homeowners’ advocate who has been working to set up the Consumer Financial Protection Bureau, which was created as part of the financial reform package passed last year. While the CFPB doesn’t exist yet, Warren has apparently been involved in the settlement process because that agency will have a hand in enforcing a settlement.

At the national level, it’s not just the Republicans that are covering for the bankers. The Obama administration in its present mood of bank coziness hasn’t been inclined to either prosecute bankers for violating the law or drive a hard bargain with them.

So that leaves it up to the attorneys general, several of whom, including Illinois’ Lisa Madigan, Iowa’s Tom Miller and California’s new attorney general have promised tough stances in protecting homeowners and holding banks accountable. Which means it’s up to us to call them – today – and remind them to hang tough.

 

 

Consumer Financial Protection Agency / Foreclosure / Martin Column - 03/28/2011

Top 4 Lesson Big Bankers Can Teach Us

America’s bankers have been extraordinarily effective in responding to a financial crisis that they created. They’ve worked hard to make sure that the response to the crisis didn’t threaten their fat bonuses or their awesome political power.

They succeeded in gutting the toughest aspects of financial reform. Then they started lobbying the regulators who will have the enforcement power.

Now they’re toiling to undermine a proposed settlement with authorities over widespread abuses in the foreclosure process, and demonizing consumer champion Elizabeth Warren and the Consumer Financial Protection Agency in the process.

Of course they’re getting plenty of help from their government enablers. As Gretchen Morgenstern reported in the New York Times, the 50 state attorney generals who are supposed to be spearheading the investigation into the foreclosures aren’t doing any actual investigating.

This puts them at a definite disadvantage when they sit down to negotiate with the banks.

Those of us who aren’t bankers and would like to see a different outcome could learn a few things from the bankers.

How do the bankers do it?

  1. They’re relentless. They don’t take no for an answer and they don’t know the meaning of defeat. They have lots of money and they’re not afraid to spend it on campaign contributions and lobbying. While we may not be able to match their cash, there’s no reason we can’t be as relentless as the big bankers. They wouldn’t still be in business, let alone raking in billions in bonuses, if we hadn’t bailed them out.
  2. They have no illusions about loyalty. They spent big to elect President Obama. But when it looked like they could get more from the Republicans, they switched sides. Nobody can take their support for granted.
  3. They have no shame. They never apologized for all the risk and fraud that created the collapse. They never offered to tighten their belts or pick up part of the tab. They just kept fighting for their selfish interests.
  4. They maintained their sense of humor. How else do you explain their carping about how anti-business the president is, while Obama’s team does whatever it can to prop up the “too big to fail banks” while wringing its hands that it just can’t do any more to help the unemployed or distressed homeowners?

 

Financial Crisis / Financial Reform Legislation / Foreclosure / Martin Column / Outrage - 03/19/2011

Elizabeth Warren's Inside Move

So President Obama did not appoint bailout critic and middle-class champion Elizabeth Warren to head the new Consumer Financial Protection Agency.

He did appoint her to an important-sounding post as a White House adviser with responsibility to set up the agency, which after all was her idea in the first place.

Is the president actually marginalizing her with the window dressing of a fancy title? Or will she have a meaningful role in setting up the agency and shaping policy?

The punditocracy has gone into overdrive analyzing the president’s handling of Warren.

The positive spin is that it’s a savvy political move on Obama’s part to get her to work right away creating the agency and avoid a Republican filibuster, and that the president will finally be hearing from an insider not under Wall Street’s spell.

The more skeptical interpretation sees it as the latest example of the president’s failure to push back against Wall Street on issues that Wall Street cares about. As he has in the past, rather than picking a principled fight with Wall Street (and Republicans) Obama found a way around it.

The third spin, from Barney Frank, is that Warren actually didn’t  want a permanent appointment now, keeping her options open to either exit the administration or accept the job later.

Writing on WheresOurMoney.org earlier, Harvey Rosenfield, eloquently described why Warren is the best person to lead the new agency.

Warren has been a long-time critic of predatory lending practices and the American way of debt. In her role as congressional monitor of the federal bank bailout she’s been a fearless straight shooter and a down-to-earth demystifier of the complexities and foibles of high finance.

But Obama’s handling of her appointment reinforces the impression that he’s weak in the face of Wall Street’s power. Why in the world, with a high-stakes election less than 2 months away, would the president want to avoid a fight with Wall Street and Republicans on behalf of the undisputed champion of the middle-class and consumers? If the president does intend to appoint Warren to head the agency later, does he seriously think it will be easier later?

Unlike most of the president’s other top economic advisers, Warren has never been cozy with Wall Street. But it’s simply not realistic to expect the president is about to get more aggressive in reining in the big banks with Warren on the inside.

The president has shown that he is capable of ignoring perfectly good advice from well-respected advisers with impressive job titles within his administration. Remember Paul Volcker? The former Fed adviser has been a lonely voice within the Obama administration warning about the continuing dangers of the too big to fail banks and too much risky business in the financial system. But the president used Volcker as little more than a populist prop, preferring the more conciliatory approach championed by his other top economic adviser, Larry Summers, Treasury Secretary Tim Geithner and Fed president Ben Bernanke. These three effectively fought off the tougher aspects of financial regulation at the same they time touted themselves as real reformers. While the president made clear Warren will work directly for him, will she be able to match Summers, Geithner and Bernanke, all seasoned bureaucratic infighters? She’s done little to endear herself to them and has publicly tangled with Geithner.

There’s no question that Warren, a Harvard bankruptcy law professor, has already played an extraordinary and important role in helping understand the financial collapse and its fallout. She’s never been anything but forthright, no-nonsense, principled, unafraid to speak truth to financial power and to demand accountability. She will need all those qualities as well as thick skin and nerves of steel for her new job. The stakes are high. I wish her well.

Consumer Financial Protection Agency / Martin Column / Paul Volcker / President Barack Obama - 09/17/2010

The Lawyer With the Dragon Tattoo

This year’s most fearsome movie heroine is Lisbeth Sander, the hacker vigilante who outwits corporate and political evildoers with her superior investigatory skills, not to mention some kickboxing and the deft use of a taser. “The Girl With the Dragon Tattoo” smashes and hacks her way through the government officials, business executives and journalists that comprise Sweden’s lazy and corrupt Establishment. They do everything they can to stop her, but – I’m about to give away the ending – Sander ultimately triumphs, exposing decades-long corporate and government conspiracies.

Elizabeth Warren shares none of Sanders’ characteristics – except an exceptional intellect – ­but when it comes to inspiring fear and loathing among the denizens of Washington and Wall Street, she is every inch as frightening, as has been pointed out over the last few days in profiles and posts across the mediascape.

Warren, a bankruptcy professor at Harvard Law, long criticized the practices of America’s banks and credit card companies in law reviews and academic pieces. In 2005, when the financial industry was lobbying Congress to make it harder for the average American to declare bankruptcy, Warren penned a landmark analysis that concluded that most Americans sought bankruptcy protection not because they were freeloaders but because they could no longer afford to pay their medical bills. Long before the current crash, Warren proposed the establishment of a federal agency to protect consumers against credit card tricks and other financial abuses.

In November 2008, in a rare example of a perfect congressional appointment, Senate President Harry Reid put her in charge of the congressional task force monitoring how the $700 billion in taxpayers' bailout money was spent. She has demanded answers to the same question we ask here: “where did the money go?”  The results of her investigations, which can be found here, pull no punches.

Back in 2008, no one could have expected that Congress would create a financial consumer watchdog agency of the kind Warren advocated for years.  But her powerful and outspoken performance as chair of the bailout oversight panel has made her the obvious and only credible candidate to head the new Consumer Financial Protection Bureau created by the otherwise innocuous financial “reform” legislation Congress passed a few weeks ago.

Which, of course, has got Wall Street fired up, members of Congress tied in knots and the White House cornered. Unlike the Byzantine complexities of the financial swindles and the ostensible legislative “solutions,” none of which garnered public attention much less support, the question of whether the President will appoint a skilled lawyer/consumer advocate to protect consumers, or whether he will instead choose a Wall Street insider as he did when he appointed Treasury Secretary Geithner and White House economic advisor Larry Summers, is one the public and press can easily grasp.

The appointment raises the kind of simple and straightforward “whose side is he really on?” question that Obama has so far been able to soft peddle, though he unceremoniously surrendered on the public option in the health care bill and on “too big to fail” banks in the financial reform bill, to name just a few instances of his unilateral disarmament.

Make no mistake: Warren is a highly sophisticated lawyer that knows all the tricks of the financial industry and how to use the powers of government to stop them. This expertise will be essential. I wrote a ballot proposition, approved by California voters in 1988, that regulates the insurance industry. Having spent the last twenty-two years defending it against incessant lawsuits by industry lawyers and not infrequent efforts of elected state officials to hobble it, I can tell you that few decision-makers in the federal government have the technical skills and expertise to go head to head against the battalions of lawyering orcs deployed by big financial firms. Warren does.

Which brings us back to the fascinating spectacle of the hypocritical Washington establishment trying to grapple with her candidacy. She is, literally, made for the job, and a spontaneous grassroots campaign for her appointment is mounting around the country. But the politicians, obeying their paymasters on Wall Street, are trying to figure out a strategy to sabotage her nomination. It’s almost comic to behold. Republicans should be hailing Warren as a savior of beleaguered taxpayers, but one of their Senate leaders said that her tenure as chair of the bailout watchdog was “marked with ‘controversy”” and implied that Warren doesn’t have the necessary qualifications.

It’s the same for some Dems: Senate Finance Committee Chair Chris Dodd, who had never met a financial “innovation” (or industry lobbyist) he didn’t embrace until the whole rotten system collapsed two years ago, damned Warren with faint praise, then suggested she couldn’t be confirmed. He floated the name of FDIC Chair Sheila Bair, but she said no thanks.

Nor has the Obama administrationt been particularly supportive. Two weeks ago, Treasury Secretary Geithner was forced to dispel rumors that he is opposed to Warren by mouthing some platitudes about how “capable” and “effective” she would be in the post. A White House spokesperson told reporters, “We’ve got many good candidates. I know that the president will look at this job and the several other jobs that are created as part of this legislation and make an announcement.”

Warren’s appointment could be one of the few meaningful victories for consumers in the aftermath of the Wall Street deregulation disaster. She is not your typical accommodating political appointee. She does not appear likely to “play ball” with Team Obama or anyone else inside the Beltway when it comes to protecting consumers against the pillaging financial industry. The White House is well aware that once appointed, she would be very hard to fire, especially for doing her job with the zeal it requires. Having never served in such a position, Warren has not yet been tested, so my assessment of her political spine is partly speculation. But if I’m right, she's at least as threatening as Lisbeth Sander.

Harvey Column / President Barack Obama - 08/07/2010

Bursting D.C.'s Bubble

The battle for financial reform comes down to the ownership of one critical piece of real estate, one that has managed to avoid the crash that has ended the dreams of security for so many: the nation’s Capital.

“We’re at a critical moment point in our democracy,” Elizabeth Warren, the congressional bailout monitor, told those of us gathered on a webinar Wednesday. “Either the banks own Washington or the people do.”

Warren was referring to something that the Democratic Senate whip, Dick Durbin, said last year about the place where he works, in an rare moment of a politician telling the truth:  “The banks own this place.”

Elizabeth Warren, a tireless promoter of consumer protection and truth teller about the decline of the decline of fortunes of regular folks, prefers to view Durbin’s declaration as premature.

But a more definitive answer is not far off, according to Warren; it could come next month. The full Senate is expected to begin debate on financial reform when it returns from recess this month with a final vote in May.

Congress is one place where the bubble hasn’t burst. The value of those congressional seats hasn’t gone down since the crash; it’s gone up. Representatives and senators are raking n more than ever from corporate lobbyists.

The banks are fully mobilized, unloading $1 million a day to block, neutralize and weaken reform. The webinar, sponsored by Americans for Financial Reform and Americans for Responsible Lending, was an effort to galvanize reform supporters into action.

As reluctant as I am to disagree with Warren about anything, on this one I’m with Durbin. From the evidence, it’s hard to see how Wall Street hasn’t gotten everything it wants from the politicians, even after the greatest financial meltdown since the Depression.

The question is whether we can take back that inflated piece of real estate and reestablish its true value.  Can we turn our frustration and rage over the bailouts and our elected representatives’ impotence into action?

There are marches – April 29th on Wall Street and May 17 on K street, where the lobbyists have their offices. And there are elected representatives to inundate with messages in favor of reform. Reform advocates can’t match the bankers’ cash, but they have people power on their side.

One questioner asked Warren at what point the Senate reform proposal from Sen. Chris Dodd, which was initially strong before Dodd watered it down, would become so weak it wouldn’t be worth supporting. Warren didn’t answer the question directly. “They’re not leaving much margin for error,” she said.

Unfortunately, when it comes to financial reform, the devil is in the details, and we have to insist on real reforms.

That means:

× Breaking up banks that are too big to fail (Dodd’s proposal doesn’t do that now).

× Creating a strong and independent financial consumer protection agency  (Dodd proposes to house it in the Fed, with other banking regulators able to veto the consumer protector’s decisions)

× Forcing banks to have more “skin in the game” (The Senate bill require bankers to keep money in reserve equal to 5 percent of loans they bundle and sell off; European regulators require twice that amount).

× Congress setting the amounts of capital financial institutions would have to keep on hand, rather than leaving it for the regulators to decide.

What we’ve learned in the past several months, from the report on the Lehman bankruptcy and the Fed’s recent disclosures on its involvement in Bear-Stearns takeover by J.P. Morgan, is that regulators weren’t asleep at the switch before, during and after the financial crisis. Rather, the regulators have actively colluded with the banks in an attempt to conceal the banks shady practices. Too much of what is being called financial reform is actually just maintaining the status quo while pretending to overhaul the system.

I don’t agree with a lot of what the Tea Party has offered. They don’t offer much in the way of positive proposals, and seem particularly weak in grappling with the issue of unchecked corporate power. But I think they’ve shown how a group of people (with some corporate funding) can shake up and shape a national debate. The Tea Party has no corner on frustration, anger, betrayal or the sense that something has gone deeply wrong in our country. There’s no reason we can’t channel that frustration and anger to plant the flag of real reform in the middle of real estate that, after all, belongs to us. Now’s the time to do it.
Here’s how to contact your senator and representative. Here’s the web site for Americans for Financial Reform.

Action / Consumer Financial Protection Agency / Martin Column / Too Big To Fail - 04/08/2010

Around the Web: Rewarding Fed Failure

Bottom line on the new Chris Dodd reform proposal: much watered down from his earlier proposal and maybe even weaker than the weak House bill.

Here’s the summary from A New Way Forward: “The bill contains no real solution to too-big-to-fail, no real enforcement guarantees, the bad guys are off the hook, the financial system will continue to be as big and dangerous and full of risk taxpayers will likely own. Dodd made a few good steps forward and major steps backwards”. The rest of their analysis is here.

From the Atlantic Wire, a solid roundup of assessments. The takeaway: Too many concessions to the big banks, and it is still faces many obstacles to passage. And who exactly besides Chris Dodd and Wall Street thinks it’s a great idea to house consumer protection within the Federal Reserve? Only last year, Reuters reminds us, Dodd was labeling the Fed “an abymsal failure."

But Elizabeth Warren, the congressional bailout monitor who has campaigned aggressively for strong reform, including an independent agency to protect financial consumers, offered a lukewam endorsement of Dodd’s plan.

I’ll give Alan Sherter the last word. When Dodd says that he doesn’t have the votes for an independent financial consumer protection agency, what he really means is that “lawmakers have more to gain by advocating the interests of banks than those of consumers.”

Around the Web / Consumer Financial Protection Agency / Derivatives / Executive Pay - 03/15/2010