It is easy to get cynical about politics. There are plenty of good reasons to feel cynical. Corporate special interests have a huge amount of power and influence. The mainstream media, especially cable news, seems to have little interest in actually informing us about what is going on. It feels like Ohio and much of the Midwest have been losing jobs for 30 years straight. We all feel it, and we hear plenty of it in the community each night from other Working America members and from people who aren’t members yet.
We have to fight that cynicism. It seems like it will keep us from being suckered, but cynicism actually serves the corporate agenda. They fund the think-tanks and cook up the talking points that tell us “government” (a.k.a. our democracy) can’t do anything right; then, they use their influence to try to make their prediction come true. The cynicism that they foster allows corporate lobbyists to block any effort to hold them accountable. Sure, Wall Street destroyed millions of jobs. By now, most everyone knows that the current jobs crisis was started by a blatant fraud carried out by Wall Street’s own Lehman Brothers. After Lehman fell, the rest of the house of cards fell and brought our jobs with them. But if the corporate interests can get away with blaming working families and American democracy for the mess they made, they just might manage to get themselves off the hook.
Yes, we need to be critical of our elected leaders, and yes, there is a lot of money corrupting our political system. But elected leaders are people too, and sometimes, in spite of the immense pressure from corporate lobbyists, they stand up for us.
One elected leader who has stood up for working families repeatedly over the past year is Congressman Steve Driehaus, whose district represents parts of Hamilton and Butler counties in Southwest Ohio. That’s why we held a thank-you event for him last Friday. We delivered over 290 handwritten letters that members had written in the last 2 weeks, urging him to continue to hold Wall Street accountable and continue to support job creation. Here is a run-down of a few votes he has taken for working people, against powerful corporate interest groups:
- He voted for large working family tax cuts and jobs creation measures in the recovery act. The non-partisan Congressional Budget Office estimates that bill created or saved 1 to 2 million jobs .
- He voted to keep our tax dollars from going to pay bonuses for Wall St. CEOs
- He voted to start holding Wall Street accountable for the millions of jobs they have destroyed. The same bill will also create a watchdog group, called the Consumer Financial Protection Agency, to protect working families from deceptive rip-offs on things like credit cards and mortgages.
Are these votes going to fix everything? Nope. Wall Street blew an 11 million job hole in our economy. A couple of million jobs helps, but ultimately we are going to have to hold Wall Street accountable for cleaning up the mess they have made of our country. Still, we need to appreciate our victories when they come. It is going to be a long, hard fight to take our country back from corporate lobbyists, and we can’t let them sell us on cynicism.
After we delivered our letters to Rep. Driehaus, he asked us if he could take a large sign that we had made, displaying letters from other members and the message “Thank You for Fighting for Main Street Jobs, Not Corporate Lobbyists”. It now sits in his office, where it will remind him and his visitors who he is fighting for: working families.
Tags: financial regulation, jobs, Steve Driehaus
Now, Free Credit Report was never really free, in the sense that getting your “free” credit report signed you up for an ongoing monthly service that was definitely not free.
But now even the part that was allegedly free—the initial credit report—costs a dollar. That’s not a lot, and they even donate it to charity. Which makes no sense at all, now does it?
It does in this context. Free Credit Report was fined $1.25 million for being misleading about the freeness of its service, and it kept on keeping on. But then new regulations were put in place:
The new F.T.C. rules went into effect on April 2, and they required sites to include a prominent notice across the top of each Web page that mentioned free reports declaring that the only authorized source under federal law for such reports is annualcreditreport.com.
Rather than include such disclosures, Experian added the $1 charge, saying that “due to federally imposed restrictions, it is no longer feasible for us to provide you” with a free credit report. And now that the report costs $1, the new F.T.C. rule would presumably no longer apply.
Or would it? Rebecca E. Kuehn, assistant director for the division of privacy and identity protection at the F.T.C., declined to comment on any particular company. But she pointed to language in the new rules stating that they apply to any company that “either expressly or impliedly” offers a free credit report to a consumer and ties it to enrollment in a paid service or product.
Expressly or impliedly like, say, calling your site “Free Credit Report”? One would think.
We’ll see how the FTC follows up on this maneuver.
Tags: financial regulation, predatory economy
It’s clear, in case you had wondered, that big corporations are not going to be changing their executive pay practices any time soon. The Washington Post reports:
When the Obama administration imposed restrictions on executive pay last year at some of the largest companies the government had bailed out, officials said they were aiming to set a new standard for compensation across corporate America that would discourage risky business practices.
But as firms begin to disclose last year’s bonuses ahead of annual shareholder meetings, it is becoming clear that companies across a wide range of industries are paying executives in ways that officials worry will not discourage the kind of excessive short-term risk-taking that led to the financial crisis.
You can see this in just about any industry. But one of the most infuriating has to be the financial industry. You know, the ones who got not so much more than the $700 billion bailout we think about most readily; according to Nomi Prins and Chris Hayes,
TARP was but a small fraction (roughly 4 percent) of the full $17.5 trillion bailout and subsidization of the financial sector.
It’s not just the official bailout recipients, in other words, being underwritten by all of us and causing problems for all of us. It’s the whole industry and the way of doing business. As Prins and Hayes wrote (in September 2009),
Finally, our tale shows how fully the banking industry has relied on the government to keep it afloat. This is a crucial point because many banks want to argue that once they’ve paid back their TARP money, they have discharged their obligations and are private entities again, unbeholden in any way to taxpayers.
Right on schedule, that’s what we’re hearing. They’re profitable, they tell us! We have to leave them alone! This is as they fight tooth and nail against regulatory reform that would prevent their worst abuses and protect consumers and taxpayers.
So that’s a fun context for reading that Wells Fargo “more than tripled the cash salary this year of chief executive John Stumpf.”
And it’s why Working America has been fighting for financial reform. Our Final Notice campaign sent 140,000 faxes and emails to the country’s biggest banks calling on them to stop fighting regulatory reform including a Consumer Financial Protection Agency and a financial responsibility fee. Of course, we didn’t really expect them to listen, so we also CC’d senators on that. But we did get their attention – Wells Fargo faxed us back our own members’ letters to them, and Bank of America called and demanded we stop. (We didn’t.)
We talked about those issues to 100,000 people on a series of tele-town halls that featured Senators Al Franken and Bob Casey, Gov. Ted Strickland, Representatives Tim Walz and Harry Teague, and Colorado State Senate President Brandon Shaffer, along with AFL-CIO President Richard Trumka, AFL-CIO Executive Vice President Arlene Holt-Baker, AFL-CIO Deputy Chief of Staff Thea Lee, and consumer educator Gerri Detweiler.
We printed 70,000 flyers asking people to call and leave voicemail messages to be delivered to the big banks; those are in the field going to people in neighborhoods across the country. And we launched Not Your ATM – pictures of people letting Wall Street know just that: We’re Not Your ATM. Unemployed workers need jobs more than CEOs need multimillion dollar bonuses, and we need laws and regulations that reflect that and make it a reality.
You can join in – post a picture of yourself at NotYourATM.com. We’ve got pictures of people in front of banks, people at home, people at work. Pictures we took in the field and pictures people submitted online, all posted to tell the banks—and lawmakers—that something’s got to change. While you’re there, you can take action in campaigns calling for jobs and financial reform legislation.
We know that if we’re going to get the balance the economy, level the playing field, and reduce inequality, we need to get Wall Street in check. We know that if we’re going to create good jobs, we need an economy that emphasizes actual work and production over derivative swaps. Take action and add your picture to let Wall Street know you won’t be their ATM
Tags: financial regulation, Wall Street
There were 457,000 initial claims for unemployment insurance in the week ending March 13, according to the report released this morning by the Department of Labor. While those numbers are definitely lower than a year ago, they are still 43 percent higher than they were for the same period before the recession. And because only about one-third of those officially unemployed are receiving unemployment benefits, the total of newly jobless workers is certainly higher than the 457,000 in the initial claims report.
So what’s going on? For one thing, while last month’s jobs report showed we’re still treading water, as Gretchen Morgenson reported in last Sunday’s New York Times, beneath the surface lurk the private equity sharks.
Using a specific, albeit foreign example, Ms. Morgenson writes:
WHENEVER savvy private equity firms sell debt in the companies they own, buyer beware.
That’s the lesson — learned the hard way — for bondholders in Wind Hellas, a Greek mobile phone operator whose parent company defaulted on some of its debt payments last November.
A once-healthy company that is Greece’s third-largest mobile phone operator, Wind Hellas was taken over in a 2005 buyout by two global private equity giants: Apax Partners out of London and the Texas Pacific Group, led by David Bonderman. The two firms larded Wind Hellas with debt before selling it off just two years after they bought it.
Noting that Wind Hellas filed for bankruptcy protection last fall, Ms. Morgenson quotes one of the firm’s largest bondholders on what went wrong:
Bertrand des Pallières, the chief executive of SPQR Capital, a London investment firm, was one of the larger bondholders in Wind Hellas. He says the decision by Apax and T.P.G. to heap debt onto the company while simultaneously extracting so much cash from it ultimately contributed mightily to its woes.
“The private equity industry always pitches how constructive it is as an investor force to create jobs and growth,” says Mr. des Pallières. “But there are private equity funds that get rich by breaking companies and making others poor — whether they are creditors, states or employees.”
The article, well worth reading in its entirety, goes on to describe how the private equity firms engineered a series of leveraging steps that increased the bought-out company’s debt while simultaneously extracting sizable amounts of its cash flow to ensure that they got paid back — at everyone else’s expense. The article concludes, quoting Mr. des Pallières:
“Private equity and banking can be very constructive functions of the economy, but they will destroy this industry if the leading players do not regulate themselves,” he says.
Given the abysmal record of financial firms regulating themselves in the U.S., one might expect that the nearly 2,500 private equity firms based here would be a focus of the latest financial regulatory reform proposal.
Nope.
Under the proposal, hedge fund managers in charge of more than $100 million will be required to register with the Securities and Exchange Commission and to disclose information to a new systemic risk regulator. But venture capital and private equity fund advisers are exempt from that requirement.
And as the Wall Street Journal reports the private equity guys are down with that.
Private-equity and venture-capital funds appear to have largely escaped the regulatory net closing in on many other types of financial institutions in the revised financial-reform bill unveiled Monday by Senate Banking Committee Chairman Chris Dodd (D., Conn.).
Dodd’s bill represents an “excellent approach,” said Doug Lowenstein, president of the Private Equity Council, a trade group whose members include the largest private-equity firms.
Maybe not so excellent, when you take into account the latest in The New York Times series “Payback Time” that Laura picked up on yesterday.
… the approaching scramble for corporate financing could strain the broader economy as jobs are cut, consumer spending is scaled back and credit is tightened for both consumers and businesses.
Private equity firms and many nonfinancial companies were able to borrow on easy terms until the credit crisis hit in 2007, but not until 2012 does the long-delayed reckoning begin for a series of leveraged buyouts and other deals that preceded the crisis.
That is because the record number of bonds and loans that were issued to finance those transactions typically come due in five to seven years, said Diane Vazza, head of global fixed-income research at Standard & Poor’s.
In addition, she said, many companies whose debt matured in 2009 and 2010 have been able to extend their loans, but the extra breathing room is only adding to the bill for 2012 and after.
The result is a potential financial doomsday, or what bond analysts call a maturity wall.
Not wanting to expose themselves to the risks of hitting that maturity wall, private equity firms are extracting what they can from the companies they took over in order to pay themselves back first. By siphoning off cash flow, they leave less cash available for company payrolls, operating expenses and inventories. That’s why many companies that were buy-out targets in the pre-recession days are now experiencing a second contraction. While not as severe as the mass layoffs and wholesale restructuring that firms engaged in during late 2008 and 2009, the ongoing contraction in many firms now is more “surgical”. Instead of the “last in, first out” approach which resulted in many more less-experienced and younger workers being laid off, now it’s increasingly more experienced, higher-paid and older workers who are losing their jobs.
And since those workers tend to have families and more financial responsibilities, the consequences can be devastating.
In the pre-recession, pre-credit crisis days many companies, including many mid-sized privately-held ones, viewed the influx of capital from private equity firms as a blessing. And, as long as the overall economy was riding the wave of false “bubble” wealth, companies bought by private equity groups were able to finance their own expansions.
But that just served to hide the story taking place behind the scenes. Because when the private equity guys step in, they start by putting their people on the company’s Board. Then they do some tinkering with the executive personnel. That’s when the moving vans pull up. It’s as if some rich deal-makers moved into your house. They rearrange the furniture. Then they set up shop in the bedrooms. Pretty soon Aunt Tillie is sleeping out on the screened porch and the family’s only allowed to come to the table once a day. And more and more of your funds are going to them in some form of debt payment.
Then you lose your job.
Meanwhile the private equity guys make out like bandits.
That’s why right now we should make them pay.
Tags: financial regulation, private equity, unemployment
Crossposted from the AFL-CIO Now blog.
Working people have plenty to be angry with Wall Street about. A $700 billion bailout. Toxic assets and loan guarantees to the tune of hundreds of billions of dollars. A financial crisis and credit crunch. Billions of dollars in six- and seven-figure bonuses to the Wall Street executives who got us into this mess.
Unemployment reaching 10 percent. A mortgage crisis extending far beyond subprime loans. Abusive credit and debit card fees. More than five job-seekers for every one job.
Wall Street has treated Main Street as a giant ATM—gambling with the economy, then coming back with their hands out for help. But somehow, no matter how much help the banks need to survive, they always have the resources to fight proposals to regulate them or get them to pay their fair share.
That’s why Working America has launched the ”I am not your ATM” campaign. Already, people in Albuquerque, N.M.; Columbus, Ohio; Portland, Ore.; Ann Arbor, Mich.; Little Rock, Ark.; and Minneapolis have been photographed with “I am not your ATM” signs at major banks to let Wall Street know they’ve had enough. Wall Street’s biggest banks need to be held accountable, with a strong, independent Consumer Financial Protection Agency. Rather than asking taxpayers for more money, Big Banks need to start repaying us for the damage they’ve done.
In the coming week, we at Working America will hold more events in cities across the country, but you can participate online. Submit a photo to NotYourATM.com and send Wall Street the message that you’re done being Big Banks’ ATM. It’s time for them to clean up the mess they made, instead of expecting working people to do it for them.
Tags: banks, Consumer Financial Protection Agency, financial regulation, Not Your ATM, Wall Street
Are you in a bad relationship…with your bank? Did it lure you in with sweet talk and low rates, then turn around and raise those rates when you weren’t looking? Do you feel burned by having to pay fees, fees, and more fees, while the banks get bailed, bailed, bailed out? And don’t even get me started on the big bonuses executives at your bank got.
We need legislation that gets back bailout money and creates a Consumer Financial Protection Agency to provide the oversight that’s been missing for years—to give us back a little of the power in our relationships with the banks.
But there’s something else we can do in the mean time. Something you can do as an individual to get yourself out of that bad relationship with your bank, and that will send the message to the banks in a way they can understand: money.
A New Way Forward is giving you the information you need to break up with your bank and get into a relationship with a bank that treats you better, and won’t hurt the economy.
Tags: banks, financial regulation, Wall Street
Yesterday, Working America received a whole bunch of angry faxes from Wells Fargo.
Only, the anger was ours—they just couldn’t think of anything better to do than try to send it back to us. We had asked our members to let the big banks know that we’re angry that they’re handing out giant bonuses to executives while millions of unemployed working people struggle. We’re angry that hundreds of billions of dollars in taxpayer money went to bailing out the banks, and now they’re opposed to the regulations that would protect us from future financial crises.
We offered members a sample letter or the opportunity to write their own. Our sample letter read:
This is your final notice. You’ve gone over the line too many times—and made it clear you’ll keep going over the line until someone stops you.
We’ve had enough with the greedy and reckless abuses on Wall Street. Now, with 10 percent unemployment and families losing their homes to the mortgage crisis that Wall Street created, we hear that bank executives will be taking home six- and even seven-figure bonuses—bonuses made possible by our tax dollars.
It’s past time that the interests working people in the real economy are put before those of reckless CEOs. Wall Street has made clear that it will not rein in its own excesses. That means that the only way to restore balance to the American economy is for the government to rein in Wall Street.
That’s why I’m calling for my senators to support legislation that:
1) Gets back the bailout money through a Financial Crisis Responsibility Fee on the largest banks and those that have taken on the most debt.
2) Creates a Consumer Financial Protection Agency to provide the oversight that’s been missing in recent years. The regulators we trusted to protect consumers from Wall Street risk-taking have failed us, and it’s time for a new, independent watchdog agency.
Thousands of Working America members sent faxes telling the banks how angry they were—and we emailed their letters to their senators as well. Wells Fargo, which recently gave $25 million in stock bonuses to just four executives, apparently didn’t like hearing how angry people were.
So they faxed the letters they got back to us. Now, we knew the letters had been sent, so we can only figure they wanted to let us know it bothered them. If you’d like to send a letter to Wells Fargo and other banks that have been announcing huge bonuses for their executives, you can do so here.
We really don’t mind getting a few more faxes from Wells Fargo.
Tags: banks, financial regulation, Wall Street
A year ago Wall Street’s financial rupture sent the economy hurtling into a massive crisis, crushing tens of millions of Americans in an avalanche of unemployment, underemployment, home foreclosures, reduced incomes and lost benefits. That financial rupture was caused by a combination of rapacious, mindless greed on Wall Street, the then-bloated housing bubble, and the failure of both regulators and of the financial regulatory structure.
Tomorrow the Senate Banking Committee will begin to take up Senator Chris Dodd’s (D-CT) proposals for sweeping financial regulatory changes. In a statement announcing the proposed legislation last week, committee chairman Dodd said:
“Over the past year, Americans have faced the worst financial crisis since the Great Depression. Millions of Americans have lost their homes, their jobs, and their savings – and yet, they’ve watched some of the people and institutions that caused this mess collect million dollar bonuses and receive billion dollar bailouts.”
“Those hard working Americans are asking, what is the government doing to ensure their economic security?”
“It is the job of this Congress to restore responsibility and accountability in our financial system to give Americans confidence that there is a system in place that works for and protects them.”
“We must create a sound foundation to grow the economy and create jobs.”
“The financial crisis exposed a financial regulatory structure that was the product of historic accident, created piece by piece over decades with little thought given to how it would function as a whole, and unable to prevent threats to our economic security.”
“For decades, Washington has failed to deliver the substantial reform we need. If we fail again this time, our economy will be vulnerable to another crisis.”
Both the Obama Administration and the House Financial Services Committee have developed separate regulatory reform plans. But in the view of most observers, Dodd’s proposals would go much further in establishing a fundamentally new regulatory structure and in imposing tighter controls on financial institutions, investment instruments and trading practices — particularly for derivatives.
In a statement released by the Senate Banking Committee, and at his press conference, Dodd marked his determination to succeed with this major regulatory overhaul:
“I will not stand for attempts to protect a broken status quo, particularly when those attempts are made by some of the same special interests who caused this mess in the first place.”
“The American people have been through a lot over the past year. I hear from them every day. They are business owners forced to shutter their doors and lay off workers because their credit dried up. They are senior citizens who have delayed their retirement because their 401(k) vanished. They are ordinary Americans who did nothing wrong, but are paying a steep price. They deserve an economy in which Americans can find jobs, manage their money, and build better futures for their families. They deserve the real and meaningful change in this bill.”
Discussing two of the most critical components of his plan, Dodd continued:
“Our plan will stop abusive practices by creating an independent Consumer Financial Protection Agency with one mission: standing up for consumers. Whether taking out a mortgage, getting a credit card, or investing for retirement, Americans deserve to receive clear and accurate information, to be protected from hidden fees and abusive terms, and to know that the financial products they’re being offered are safe.”
“We will end “too big to fail.” We cannot allow the collapse of a few firms to threaten our entire economy. Our plan will create an independent council of regulators to identify risks, so that government can act to prevent a crisis. We will have a mechanism in place to safely shut down large failing companies without destabilizing the financial system. No longer will the Federal Reserve’s emergency lending authority be used to prop up a failed institution.”
Other key provisions would create a single federal banking regulator; eliminate regulatory gaps for over-the-counter derivatives, hedge funds, asset-backed securities, and payday lending; require companies that sell mortgage-backed securities to keep “skin in the game” so investors won’t be sold worthless securities; and give shareholders a greater say in how executives are compensated.
Not surprisingly, the two biggest defenders of the financial status quo are not at all happy with Dodd’s regulatory reform plan. The American Bankers Association immediately attacked the Dodd plan saying it “would tear apart the existing regulatory structure only to create a new one”. And the U.S. Chamber of Commerce has launched an effort to kill the proposed Consumer Financial Protection Agency (CFPA). These and other powerful special interests and financial industry lobbyists will no doubt be working feverishly to kill Dodd’s reform plan outright, or slice and dice it until its substantative provisions are eliminated or fundamentally weakened.
Tags: CFPA, Chris Dodd, Consumer Financial Protection Agency, financial reform, financial regulation, financial regulatory reform, too big to fail
When Senator Chris Dodd (D-CT) decided recently to remain chairman of the Senate Banking Committee you could hear the financial industry lobbyists let out a collective groan.
It was Dodd who earlier this year championed credit card reform in Congress, helping to pass a bill, then signed by President Obama, to end the abusive and deceptive practices of the credit card companies.
Now Senator Dodd is gearing up to take on the banks on several fronts including overdraft fees, consumer financial protection and regulatory reform.
The Washington Post reported Monday that Sen. Dodd plans to introduce legislation to rein in bank overdraft fees.
A backlash is brewing on Capitol Hill against banks that charge large fees for overdrafts without asking or telling customers, the latest sign that the financial crisis is shifting the balance of power from banks toward borrowers.
Sen. Christopher J. Dodd (D-Conn.) plans to introduce legislation requiring banks to get permission from customers, rather than allowing overdrafts automatically. If customers decline and then try to overspend, the transaction would be rejected. A similar bill is pending in the House.
With the rapid expansion of bank debit card use in recent years, banks have found it highly profitable to automatically allow most debit transactions to process regardless of whether sufficient funds are available in the account, then charge the customer anywhere from $10 to upwards of $30 per overdraft.
In an announcement Dodd added:
Some banks maximize penalties by processing the largest purchases a customer makes first, draining accounts faster and creating the potential for multiple fees on multiple smaller purchases. Even on point of sale transactions, such as debit card or ATM transactions, banks do not notify the customer when they are withdrawing against insufficient funds. As a result, customers can unknowingly be charged hundreds of dollars in fees for only overdrawing their account on a few small purchases.
As evidence that the tide is beginning to turn against the unfettered power of the banks, even before Sen. Dodd’s legislation is introduced, major banks are scurrying to try to cover themselves.
Yesterday The New York Times reported
Bank of America and JPMorgan Chase, two of the nation’s biggest banks, announced plans on Tuesday to drastically overhaul their debit card programs by lowering or eliminating fees, changing the way they credit transactions and allowing customers to opt out of overdraft protection.
As part of a broader effort to reform America’s financial regulatory system and make it more effective, Dodd is also busy reviving his push for a new Consumer Financial Protection Agency. And the big business lobby doesn’t like it one bit.
The Chamber of Commerce, the business community’s umbrella group in Washington, recently organized a conference call coordinating some 200 representatives of groups who oppose the legislation. The call doesn’t mention any of the serious problems that led to the financial crisis or why consumer regulation is important. Instead, it follows a “death panel” approach to political discussion: Scare the hell out of everyone.
Dodd has been slamming industry opponents of the plan for months. At a Senate committee hearing earlier this session, referring to a story in the Washington Post, Dodd said:
“When I pick up the morning newspaper and I read the first headline that ‘Fault Lines Emerge and Industry Groups Blast Plan to Create Consumer Agency,’ what planet are you living on? The very people who created the damn mess are the ones now arguing that consumers ought not to be protected. They’re the people who paid this price. And the idea that you’re going to first attack the very clients and customers who depend on you every day is not the place to begin.”
Next Dodd sets his sights on more comprehensive, sweeping regulatory reform.
We can be sure the big boys on Wall Street won’t like that either.
Stay tuned.
Tags: banks, Chris Dodd, consumer protection, financial regulation
