Bad news for American consumer rights, as CFPB director announces departure

Richard Cordray, the head of Consumer Financial Protection Bureau, is stepping down at the end of the month. The bureau was created in the wake of the financial crisis and has recovered $12 billion from financial firms on behalf of consumers, but Republicans have fought Cordray and the bureau, claiming its very existence is illegal and that it has harmed consumers by stifling lending.

Listen to the NPR Roundtable discussion about his announcement, and what it means for American consumers here.

Trump appointees, this time in USDA, continue to violate federal ethics laws

From today’s New York Times by Danielle Ivory and Robert Faturechi:

At a private meeting in September, congressional aides asked Rebeckah Adcock, a top official at the Department of Agriculture, to reveal the identities of the people serving on the deregulation team she leads at the agency.

Teams like Ms. Adcock’s, created under an executive order by President Trump, had been taking heat from Democratic lawmakers over their secrecy. What little was publicly known suggested that some of the groups’ members had deep ties to the industries being regulated.

Ms. Adcock, a former pesticide industry executive, brushed off the request, according to House aides familiar with the exchange, who asked for anonymity because they were not authorized to comment publicly. Making the names public, they recalled her saying, would trigger a deluge of lobbyists.

In fact, interviews and visitor logs at the Agriculture Department showed that Ms. Adcock had already been meeting with lobbyists, including those from her former employer, the pesticide industry’s main trade group, CropLife America, and its members. CropLife pushes the agenda of pesticide makers in Washington, including easing rules related to safety standards and clean water.

Ms. Adcock, who left the trade group in April, maintained contact with her former industry allies despite a signed ethics agreement promising to avoid for one year issues involving CropLife as well as matters that she had lobbied about in the two years before joining the government.

In one meeting, Ms. Adcock discussed issues banned by the ethics agreement with an executive who had been her lobbying partner weeks earlier at CropLife, according to the accounts of participants and the visitor logs, obtained through a public records request by The New York Times and ProPublica.

Tim Murtaugh, a spokesman for the U.S.D.A. who also spoke on behalf of Ms. Adcock, said she had not violated her ethics agreement by meeting with her former industry allies. He also denied that Ms. Adcock had discussed issues related to her previous lobbying at the meeting, or that she had suggested that her deregulation team would be swamped by lobbyists if names of its members were released.

“The career ethics officers at U.S.D.A. agree that this is not a violation of the ethics agreement that Rebeckah Adcock signed,” said Mr. Murtaugh, citing a 2009 memo by the Office of Government Ethics.

Others dispute that interpretation of the memo; the ethics office declined to say whether the memo applied to the meeting, citing its policy not to discuss individual cases.

Read entire article here.

ParadisePapers show Trump Commerce Secretary Has Ties to Putin Cronies

From today’s Slate Magazine by Daniel Politi:

Looks like it’s Panama Papers Part Two. The non-profit International Consortium of Investigative Journalists began publishing on Sunday what it is calling the Paradise Papers. More than a year after the organization’s network of journalists around the world shook up politicians in several countries with leaked data on offshore havens, another trove of documents taken from a Bahamas-based firm promises to expose how companies and the wealthy use complicated structures to skirt taxes. Most of the more than 13.4 million documents, which were analyzed by a group of more than 380 journalists in 67 countries, are from Bermudan law firm Appleby.

Among the most explosive revelations so far involves news that Commerce Secretary Wilbur Ross shares business interests with close allies of Russian President Vladimir Putin, which he failed to fully disclose during confirmation hearings. The documents show Ross continues to have a significant interest in a shipping firm that has a Russian energy company as one of its main clients. The owners of that company include Putin’s son-in-law and an oligarch under U.S. sanctions. The stake in the firm is held in Cayman Islands, just like much of the commerce secretary’s massive wealth that has been estimated at more than $2 billion.

The Commerce Department is not disputing the allegations. Ross “recuses himself from any matters focused on transoceanic shipping vessels, but has been generally supportive of the administration’s sanctions of Russian and Venezuelan entities,” a spokesman said. “He works closely with Commerce Department ethics officials to ensure the highest ethical standards.”

Lawmakers who were part of Ross’ confirmation hearings say they feel duped. During the process, Ross was asked about his ties to Russia and his investment in another shipping company, but Navigator never came up. Sen. Richard Blumenthal from Connecticut told NBC News that the general impression was that Ross had gotten rid of his stakes in Navigator, and they didn’t know about the firm’s ties to Russia. “I am astonished and appalled because I feel misled,” Blumenthal said. “Our committee was misled, the American people were misled by the concealment of those companies.” Ethics experts say that even if there is nothing illegal about the arrangement, it still raises several ethical questions because one of the lead voices in the administration’s trade policy could make money from business with Russia.

Read the entire article here.

Pence casts deciding vote in Senate to deny consumers rights to sue banks

From today’s Washington Post by Ken Sweet:

Call it a win for “the swamp.”

President Trump and Republicans in Congress handed Wall Street banks a big victory by effectively killing off a politically popular rule that would have allowed consumers to band together to sue their banks.

The 51-50 vote in the Senate, with Vice President Mike Pence casting the deciding vote, means bank customers will still be subject to what are known as mandatory arbitration clauses. These clauses are buried in the fine print of nearly every checking account, credit card, payday loan, auto loan or other financial services contract and require customers to use arbitration to resolve any dispute with his or her bank. They effectively waive the customer’s right to sue.

The banking industry lobbied hard to roll back a proposed regulation from the Consumer Financial Protection Bureau that would have largely restricted mandatory arbitration clauses by 2019. Consumers would have been allowed to sue their bank as a group in a class-action lawsuit. Individual consumers with individual complaints would still have to use arbitration under the rules.

President Trump is expected to sign the Senate resolution into law, overturning yet another Obama-administration initiative. Trump spent months of the 2016 campaign accusing his opponent Hillary Clinton of being in the pocket of the big banks and therefore unwilling to take on Wall Street.

At least among voters, the CFPB’s regulations had bipartisan support. A poll done by the GOP-leaning American Future Fund found that 67 percent of those surveyed were in favor of the rules, including 64 percent of Republicans. Other polls on the subject show similar levels of support.

The overturn marks a significant victory for Wall Street. After the financial crisis, Congress and the Obama administration put substantial new regulations on how banks operated and fined them tens of billions of dollars for the damage they caused to the housing market. But since Trump’s victory last year, banking lobbyists have felt emboldened to get some of the rules repealed or replaced altogether. Top or near the top of the list was the CFPB’s arbitration rules.

“(The) vote is a giant setback for every consumer in this country. Wall Street won and ordinary people lost. This vote means the courtroom doors will remain closed for groups of people seeking justice and relief when they are wronged by a company,” said CFPB Director Richard Cordray, who was appointed by President Barack Obama, in a statement.

The big banks and its lobbyist groups are calling this a victory for U.S. consumers, saying that arbitration is faster and the rules would have been an economic stimulus package for class-action trial lawyers. They also cite statistics from the Consumer Financial Protection Bureau’s own 2015 study that show that the average award from a class-action lawsuit is roughly $32 while an award from arbitration is $5,389.

But reality is more complicated. At best, the banking industry’s arguments twist the truth.

The reason why the award for most class-action suits is small is because people don’t typically sue individually his or her bank over a small sum of money, like an overdraft charge or account service fee, because it’s not worth the financial effort to recover a $10, $25, or $35 fee. Arbitration cases are less common, and usually involve more substantial disputes, hence the larger awards. Also the majority of consumers resolve their dispute with their banks in person, typically at a branch or over the phone.

If the CFPB’s rules had gone into effect, companies like Wells Fargo, JPMorgan Chase, Citigroup and Equifax would have been exposed to billions of dollars in lawsuits for future bad behavior. The Center for Responsible Lending estimates the U.S. banking customers paid $14 billion dollars in overdraft fee last year, and the industry has gotten in trouble in the past for shady tactics like transaction reordering, where a bank would reorder a day’s debits and withdrawals to extract the most overdraft fee income from its customers that day.

To overturn the CFPB’s rule, Congress used the Congressional Review Act. The CRA allows Congress to overturn any executive agency’s rules or regulations with a bare majority vote, but more importantly, the law prohibits that agency from issuing any “substantially similar” regulations without Congressional authorization. That means that until Congress passes a law to restrict arbitration, the CFPB’s hands are now permanently bound on this issue.

The political winds are in Wall Street’s favor going forward. Cordray’s term at the CFPB will end in mid-2018 but he is expected to step down before then to make a run for Governor of Ohio. Trump will be able to choose his own appointee and will likely pick someone more likely to favor the banks.

The CFPB was created after the financial crisis as part of the Dodd-Frank financial regulatory reform law that passed in 2010. The bureau was crafted to be independent and powerful, funded by the Federal Reserve instead of through the traditional Congressional appropriations process. Its director has considerable authority to pursue issues he or she considers important and generally cannot be removed from office.

There’s another major financial consumer protection now pending in front of Congress focused on the payday lending industry. The CFPB finalized new regulations weeks ago that would severely restrict the ability for payday lenders to make loans that its customers, often the poor and financially desperate, cannot afford. The payday lending industry is pushing hard to overturn these rules using the same process that was used to overturn the arbitration rules.

How to Restore Government Ethics in the Trump Era

From today’s New York Times by Walter Shaub, Director of the United States Office of Government Ethics:

Shortly after his inauguration, President George H. W. Bush counseled freshly minted White House appointees that, “It’s not really very complicated. It’s a question of knowing right from wrong, avoiding conflicts of interest, bending over backwards to see that there’s not even a perception of conflict of interest.” He paired this straightforward declaration with action, establishing unified standards of conduct for the executive branch and resolving his own conflicts of interest. These words and deeds set the tone for ethical governance.

Since the enactment of the Ethics in Government Act, our past presidents entered government with an appreciation for the importance of tone from the top. Though exempt from the conflict of interest statute, which bars other officials from working on matters affecting their financial interests, they all voluntarily divested conflicting holdings and put the proceeds in blind trusts or nonconflicting assets. They knew their exemption from the statute was not a reward for attaining high office but a pragmatic recognition that America needs its president engaged in urgent matters of state. By holding themselves to the same exacting standards as the rest of the executive branch, they sent a clear message to those serving under them.

This tradition came to an abrupt stop with President Trump. By continuing to hold onto his businesses and effectively advertising them through frequent visits to his properties, our leader creates the appearance of profiting from the presidency. As things stand, we can’t know whether policy aims or personal financial interests motivate his decisions as president. Whatever his intentions may be, the resulting uncertainty casts a pall of doubt over governmental decision-making.

This shift fundamentally changes the executive branch ethics program. I have been a student of that program since I first came to the Office of Government Ethics in 2001, appointed by Marilyn L. Glynn, then the office’s general counsel. Every past administration actively supported O.G.E.’s work and respected it for taking stands when necessary. That White House support provided the office with the leverage it needed to fulfill its mission.

I am not suggesting that it was always easy. Having served for much of my career on the front lines of the presidential nominee program, I regularly locked horns with nominees and White House lawyers in both the Bush and Obama administrations as we wrestled over our differing notions of how best to address ethical risks. Sometimes those deliberations were animated; occasionally they were heated. I am also sure that more than a few nominees felt bruised by the painful process of resolving their conflicts of interest. Even if we did not always agree, however, White House officials always understood that O.G.E.’s only goal — and, indeed, my only goal — was to protect the integrity of the government’s operations. The incidental beneficiaries of those efforts were the Bush and Obama administrations and the nominees we kept out of trouble. That’s why it is disheartening now to witness parts of the ethics program slipping away.

The Office of Government Ethics has been performing the same service it has always provided with respect to the current administration’s nominees. In fact, I have succeeded in moving President Trump’s nominees on average almost a week (six days to be exact) faster than I moved President Obama’s nominees during the last presidential transition, without compromising O.G.E.’s high standards. I am particularly proud of this accomplishment because this administration’s nominees generally hold far more complex financial interests than the last administration’s nominees, a circumstance that would normally be expected to slow O.G.E.’s work. Unfortunately, it has been harder to address other aspects of the lagging ethical culture in the current administration.

The cascading effects of the president’s departure from existing ethical norms have touched others in government. The tone from the top led one White House appointee to use her position to hawk the merchandise of the president’s daughter and another to endorse the president’s book. It led a cabinet official, whose recent wedding reportedly featured a chartered bus ride from the president’s hotel, to urge the public to see a movie he produced. The press secretary touts one of the president’s commercial enterprises as the “winter White House,” and the State Department has publicized it around the globe. A White House lawyer made the extraordinary assertion that “many regulations promulgated by the Office of Government Ethics (‘OGE’) do not apply to employees of the Executive Office of the President.” Appearing to echo this view, the Office of Management and Budget challenged O.G.E.’s authority to collect routine ethics records. Even some presidential nominees have pushed back against ethics processes with uncommon intensity.

Affected, too, is the very official charged with responsibility for White House ethics, the counsel to the president. His office recently ginned up ten unsigned, undated waivers, many of which seem intended to have retroactive effect, raising the specter of a possible effort to paper over ethics violations. Worse, the counsel appears to be both issuer and recipient of two waivers. His deputy also beat back a press inquiry regarding the applicability of ethics rules to one of the deputy’s former clients. In addition, his office has dragged its feet on responding to O.G.E.’s questions about appointees, despite the office’s statutory duty to review their disclosures and certify their ethical compliance.

Projecting their own cynical partisanship, some defenders of this conduct dismiss any expressions of concern — or, in my case, resignation — as politically motivated.Underlying my own expressions of concern, however, is fidelity to the principle that public service is a public trust. I would not have gone looking for this particular fight; it found me. I can assure those reciting the administration’s talking points that I have not enjoyed the attention, nor have I enjoyed watching the negative effects on the ethics program. As I told the Senate during my confirmation hearing in 2012, I am a true believer in the foundational principles of the executive branch ethics program. I am also acutely aware that the program owes a debt to both parties for its past successes and that it will take both parties to restore the program to good health. To advocate for the executive branch ethics program is to advance the nonpartisan mission of an essential institution of our representative form of government.

Defenders of the status quo also seem unwilling to acknowledge the existence of a problem absent clear evidence of significant violations. This argument risks legitimizing an approach of bare minimum legal compliance. The existence or absence of identified violations is not the only measure of an ethics program — no program can detect every violation and those detected are often hard to prove. At its heart, an ethics program acts as a prevention mechanism through systems designed to reduce the risk of violations occurring. Those systems depend on adherence to ethical norms.

Recent experiences have convinced me that the existing mechanism is insufficient. The Office of Government Ethics needs greater authority to obtain information from the executive branch, including the White House. The White House and agencies lacking inspectors general need investigative oversight, which should be coordinated with O.G.E. The ethics office needs more independence, including authority to communicate directly with Congress on budgetary and legislative matters. Because we can no longer rely on presidents to comply voluntarily with ethical norms, we need new laws to address their conflicts of interest, their receipt of compensation for the use of their names while in office, nepotism and the release of tax forms. Transparency should be increased through laws mandating creation and release of documents related to divestitures, recusals, waivers and training. Disclosure requirements can be refined and the revolving door tightened. These changes would give O.G.E. the tools it needs to address the current challenges and, perhaps more importantly, reinforce for presidents the importance of setting a strong ethical tone from the top.

FED Chair says risk of financial crisis increases if Trump deregulates economy

From today’s LA Times by Jim Puzzanghera:

Federal Reserve Chairwoman Janet L. Yellen told senators Thursday that the risk of another financial crisis would increase if some Trump administration proposals to roll back regulations were enacted.

In her second straight day of Capitol Hill testimony, she walked back her statement last month that she didn’t expect another financial crisis “in our lifetimes.”

“I think we can never be confident there won’t be another financial crisis,” Yellen told members of the Senate Banking Committee.

The U.S. has “done a great deal” since the 2008 crisis to strengthen the financial system, she said. That includes forcing banks to hold more capital to cover potential losses as part of the 2010 Dodd-Frank financial regulatory overhaul law.

“It is important that we maintain the improvements that have been put in place that mitigate the risk and the potential damage,” Yellen said.

President Trump has promised to dismantle Dodd-Frank, which Republicans have said has been too burdensome for banks.

In a report last month ordered by Trump, Treasury Secretary Steven T. Mnuchin proposed sweeping regulatory reductions, including changes that would reduce capital requirements for the biggest banks.

Yellen said she would not favor reducing those capital requirements.

Read the entire article here.

House Republicans Are Trying to Pass the Most Dangerous Wall Street Deregulation Bill Ever

From Mother Jones, June 7, 2017 by Hannah Levintova:
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From the earliest days of his campaign, Donald Trump has opposed the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Obama-era financial reform law passed in response to the 2008 financial crisis.  Trump has characterized it as a “disaster” that has created obstacles for the financial sector and hurt growth. In April, he repeated his promise to gut the existing law.
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“We’re doing a major elimination of the horrendous Dodd-Frank regulations, keeping some, obviously, but getting rid of many,” Trump said in a meeting with top executives during a “Strategic and Policy CEO Discussion,” which included the leaders of major companies like Walmart and Pepsi. He added, “For the the bankers in the room, they’ll be very happy.”
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The Republican Congress shares Trump’s dislike of Dodd-Frank and this week, the House plans to vote on the Financial CHOICE Act, a Dodd-Frank overhaul bill that will, as promised, make banks and Wall Street “very happy” if it becomes law, while undoing numerous financial safeguards for regular Americans. (CHOICE is an acronym for “Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs.”)
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The bill, sponsored by Rep. Jeb Hensarling (R-Texas), takes aim at some of Dodd-Frank’s main achievements: It guts rules intended to protect mortgage borrowers and military veterans, and restrict predatory lenders. It also weakens the Consumer Financial Protection Bureau’s ability to oversee and enforce consumer protection laws against banks around the country—upending a mix of powers that have helped the CFPB recover nearly $12 billion for 29 million individuals since opening its doors in July 2011. The bill also weakens or outright cuts a number of bank regulations enacted through Dodd-Frank to keep risky investing behavior in check in order to avoid the economic devastation of another financial crisis or taxpayer-funded bailout.

Read the entire article here.

Behind Trump’s Climate Policy Change? Oil Lobbyists and GOP Lackeys

The data is self-evident. Conservative politicians in the GOP don’t believe the science of climate change because they take the most money from oil and energy lobbyists. Notice they hedged their bets by donating significant amounts to Hillary Clinton’s presidential campaign?

However, Clinton would almost certainly have upheld the climate accord, since she helped pave the way for an international consensus of countries to reduce their carbon emissions during her tenure as Secretary of State.

Top 20 recipients of oil and energy money from lobbyists and industry executives. This is why Trump and the GOP do not support common sense climate legislation and oppose environmental protections for American citizens and future generations.

Economic inequality in LA ripens new concerns about future riots

From today’s LA Times by Victoria Kim and Melissa Edelhed:

Nearly 6 out of 10 Angelenos think another riot is likely in the next five years, increasing for the first time after two decades of steady decline. That’s higher than in any year except for 1997, the first year the survey was conducted, and more than a 10-point jump compared with the 2012 survey.

Young adults ages 18 to 29, who didn’t directly experience the riots, were more likely than older residents to feel another riot was a possibility, with nearly 7 out of 10 saying one was likely, compared with about half of those 45 or older. Those who were unemployed or worked part-time were also more pessimistic, as were black and Latino residents, compared with whites and Asians, the poll found.

Researchers theorized that the turnaround may be linked to several factors, including the more polarized national dialogue on race sparked by police shootings in Ferguson, Mo., and elsewhere, as well as by the tenor of last year’s presidential election. Moreover, many parts of L.A. still suffer from some of the economic problems and lack of opportunities that fueled anger before the riots.

“Economic disparity continues to increase, and at the end of the day, that is what causes disruption,” said Fernando Guerra, a political science professor who has worked on the survey since its inception. “People are trying to get along and want to get along, but they understand economic tension boils over to political and social tension.”Los Angeles riots rememberedThere was a moment of silence candlelight vigil in Koreatown to commemoratethe 17th anniversary of the Los Angeles riots. This year’s theme focused on teaching their history to Korean American youth, many of whom were born after the riots, during which tensions between the city’s black and Korean communities exploded.

Although the city’s unemployment rate last year was about half of what it was in 1992, the median income of Angelenos, when adjusted for inflation, is lower than it was around the time of the riots. Poverty rates still remain high at 22%, comparable with the years preceding the riots.

Read the entire article here.

Read coverage of LA Times Special Edition: 25th Anniversary of LA Riots here.

Bribe Cases, Secret Jared Kushner Partner, Potential Conflicts of Interest

From today’s New York Times by Jesse Drucker

It was the summer of 2012, and Jared Kushner was headed downtown.

His family’s real estate firm, the Kushner Companies, would spend about $190 million over the next few months on dozens of apartment buildings in tony Lower Manhattan neighborhoods including the East Village, the West Village and SoHo.

For much of the roughly $50 million in down payments, Mr. Kushner turned to an undisclosed overseas partner. Public records and shell companies shield the investor’s identity. But, it turns out, the money came from a member of Israel’s Steinmetz family, which built a fortune as one of the world’s leading diamond traders.

A Kushner Companies spokeswoman and several Steinmetz representatives say Raz Steinmetz, 53, was behind the deals. His uncle, and the family’s most prominent figure, is the billionaire Beny Steinmetz, who is under scrutiny by law enforcement authorities in four countries. In the United States, federal prosecutors are investigating whether representatives of his firm bribed government officials in Guinea to secure a multibillion dollar mining concession. In Israel, Mr. Steinmetz was detained in December and questioned in a bribery and money laundering investigation. In Switzerland and Guinea, prosecutors have conducted similar inquiries.

The Steinmetz partnership with Mr. Kushner underscores the mystery behind his family’s multibillion-dollar business and its potential for conflicts with his role as perhaps the second-most powerful man in the White House, behind only his father-in-law, President Trump.

Although Mr. Kushner resigned in January from his chief executive role at Kushner Companies, he remains the beneficiary of trusts that own the sprawling real estate business. The firm has taken part in roughly $7 billion in acquisitions over the last decade, many of them backed by foreign partners whose identities he will not reveal. Last month, his company announced that it had ended talks with the Anbang Insurance Group, a Chinese financial firm linked to leading members of the ruling Communist Party. The potential agreement, first disclosed by The New York Times, had raised questions because of its favorable terms for the Kushners.

Read the entire article here.