Sen Warren periodically pops up and decries Wall Street, Big Banks, Credit Card Companies, etc. Sometimes I’m with her, sometimes I’m not. Periodically though she is on the backs (modern phrase: “up in the grill”) of regulators in the financial industries. When she is, I am the biggest fan. As I am involved in a financial compliance function, I know what my own company must do to follow the rules. Why financial services companies don’t have to do this, is beyond me.
Here’s a link to her latest:
http://www.huffingtonpost.com/2015/04/15/elizabeth-warren-wall-street_n_7073040.html
I understand the DOJ has gotten billions in fines from various Wall Street and others. That’s not the point. For many companies fines and penalties are just a cost of doing business. In the nation’s money capital, the motto is probably “so fine us- we’ll just make more.” Note: these fines are usually against the corporation. It’s only when you really put personal hardship on an individual (including making an example of him) that other individuals will ignore their greedy impulsive and behave as proper participants in our economy. The SEC used to pursue this path against company CFO’s. Basically boot them out, take all their money and make them permanently unemployed. Other CFO’s though twice before any monkey business.
Why have the regulators been slacking? I watched one Warren grilling and they have no answer- they just hang their heads. I”m sure a long Atlantic article or something could get to the bottom (starting with the revolving door). What doesn’t matter is why, the question is why doesn’t anyone care in this administration? Is it really the Republicans fault, when:
The President has appointed the entire SEC.
The DOJ is an Executive branch.
The President has appointed the entire Fed.
That’s all the regulators. Again, sure they’ve gotten a lot of money out of the offending entities. Anyone think they’ve learned their lesson and won’t do it in the future?
I fully expected in 2009 to see some perp walks. I know they’ve had trouble figuring out how to convict people (your average juror probably can’t figure out interest on a credit card, let alone listen to detailed financial dealings), but I don’t care. Figure out a way. It’s important to our economy. The financial services companies have the most money and top to bottom the smartest people. They are working to bend the rules every day (anyone think high frequency trading is okay?). They have to be countered.
Do you think Sen Clinton is going to change things? I’ve been reading stuff like this all over the business news.
http://www.vanityfair.com/news/2015/04/hillary-clinton-wall-street-rhetoric
In general on BMG Republicans get a lot of blame. I will concede they are trying to water down Dodd-Frank, though I don’t know enough about some of the particular provisions to know if it’s a good idea or not (I’m guessing not). Rules and regulations are much less effective when they are not enforced. We’re all interested in solving the inequality problem, and clearly in financial services (unlike maybe others) the super-rich can’t be making their money through activities that don’t benefit anyone but themselves. Step one on that path should be good regulations enforced by effective agencies. As much as everyone loves Elizabeth Warren as our senator, I would have rather seen her spearheading an Administration effort to fix a system that can be a competitive advantage for our country (by making sure money gets to where it needs to go to create a broad robust economy). Instead we get Geithner, Lew, et al as regulators. Does Yellen seem like a bankers worst nightmare? I might have gone at least with a known a-hole like Summers.
I’m not hopeful that anything occur any time soon.
Meanwhile what’s CFPB head Richard Cordray working on? Payday loans. http://blog.al.com/press-releases/2015/04/installment_lenders_payday_len.html Gee tough target (sarcasm 1).
oh and he’s also in the news about “homebuyer information” http://blog.al.com/press-releases/2015/04/installment_lenders_payday_len.html Glad he’s on the job (sarcasm 2).
the biggest disappointment of Barack Obama – and the national Democratic Party for quite some time – is that they are far too cozy with Wall Street. Given the way Bill Clinton’s administration did things, and her time as Senator from New York, and her statements at various times, I don’t expect much from Hillary Clinton on this. I do expect her not to eliminate the EPA outright and not to name three Scalia clones to the Supreme Court, and those things matter.
CFPB, though, is supposed to protect consumers against abusive financial practices. Payday loans surely qualify. We have an SEC and a Fed to watch the big guys. It’s not Cordray’s fault if they’re not doing it.
Just wish they were onto some bigger things and contrasting what visibility that agency might have had with Warren in charge.
They aren’t a big problem in Mass, but they were a big (bottom) feeder of many of the clients we got at the bankruptcy law firm I used to work in. Lot of immigrants, poorer people, elderly folks, and folks with gambling problems taken advantage of. These guys are the worst, and even conservatives are coming around to seeing that.
Can’t states ban them?
Lobbyists love state legislatures since its so much cheaper to bribe, er ‘influence’ the representatives. So that article discusses South Dakota, a lot of these payday folks are on tribal property and can be a real bitch to track down and get to honor even legal agreements like a bankruptcy filing. And the poorer the state, the more clients you can get.
In Illinois we ended up with a compromise reform that cracked down on the worst offenders and severely limited the profits and interest that could be charged, but I agree states can and should ban the practice entirely.
They are technically legal, but the lender must be licensed to do small loans, and those licenses are tough to get. And the interest rates/fees that are permitted make it very hard to actually make money in the business.
It costs money to make a loan. There are just fixed transaction costs that exist regardless of whether the loan is for $200 or $20,000. Those costs are a higher % of a small loan, which is why those loans are expensive. That’s not even counting the risk– people with good credit don’t buy these loans because they can get money more cheaply elsewhere.
In MA we have decided that these loans shouldn’t happen much, and so our legal framework makes them very difficult to do profitably.
But what people don’t recognize is that this policy has significant costs of its own. People with very poor credit still need credit. If you are paycheck to paycheck, and the car needs brakes for $1500, where do you get the money? You borrow it, because if you don’t, you lose your job.
I know that anecdotes are not data, but my professional experience here, and in a state where these loans are far more prevalent, strongly suggests that while Massachusetts has a far smaller “legitimate” payday loan industry, we have a FAR more vibrant criminal lending industry that is wholly unregulated, and doesn’t really have much respect for things like the bankruptcy discharge or state usury laws.
By deeming legitimate high-risk small loans “predatory,” we make a deliberate choice to drive desperate people to make weekly vig payments to Vinny the Fist instead.
My suspicion is that, once we have casinos entrenched, that our state regulation of these kind of lenders will erode under lobbying pressure, and more closely approximate the regulatory environment of red states. Casinos want to encourage the poor to have liquidity for the slots, but dont want leg-breakers around.
Your point is that if predatory loans are prohibited, only criminals will make predatory loans? As with all such arguments, why should that be a reason to allow them?
But that’s also a fairly forthright departure from the world of reality, in which public policy is at least in theory intended to make things better, rather than make abstract symbolic rules based on whether “Wall Street” is for or agin’.
People need access to credit, and will borrow from someone, because they must. These sort of regulations act, in practice, as part of a fence that keeps the poor outside of the modern financial system.
If I get an unexpected car repair bill, I can spend some savings. Or I can use a credit card, and pay off the bill a bit at a time. Not really a threatening event. If the same happens to someone who is poor and does not have savings, or sufficient credit to pay for the repair on a credit card, what, exactly, are they supposed to do?
for that someone. If they can’t go to friends or family, or pawn something, I guess they’d have to fall back on the usual Republican method of lifting themselves by their bootstraps by working harder. Taking out a payday loan pretty much ensures that they will never get out from under that debt, and the next time the car breaks, they will have to give it up. How does allowing that benefit the poor?
just speaks to the need to raise pay at the bottom end of the scale.
Totally agree w/ you, fenway
Desperate people will make desperate decisions, and we know that going to a payday lender is a seriously bad idea for a person’s finances.
Create fewer desperate (financially) people, and all of a sudden there’s not so much of a market for payday loans and other predatory products bc people can go to legit banks or other lenders.
Yet another reason we need post office banking, imo.
And an increasingly bipartisan one. We need to expand working people’s access to banks and credit, as Chesteron said, the best way to fix capitalism is to make as many capitalists as possible. And some right of center friends form the old bankruptcy firm love this idea too.
How does it affect someone like me whether my checking account is held by the post office or a traditional bank? Would there be different rules or something that I’m not clear on?
I think one of the advantages is that an enormous number of towns in rural America have a Post Office and no bank.
Another driver is the difference in business models of postal banking versus a traditional retail bank. The post office is already there and already staffed. The additional overhead required to allow people to put money into and take money out of their account is very small, and even small loans are much less expensive to process. Traditional banks are designed around making profits from lending money, and around collecting enormous fees in order to pay for their much higher property costs.
I think a reasonable model is the post office handling of passport transactions — low overhead and very convenient for the easy 90% of the business they handle. The hard ones end up somewhere else.
Similarly, in postal banking, the banking needs of most people — especially working people and low-income people — are easy and inexpensive to meet (and without the onerous and deceptive fees).
It does seem to me that raising the pay of all poor people is a noble idea, it probably won’t have that much impact on this particular problem–which isn’t purely an income problem, but a cash flow problem. It is unrealistic to think that something like minimum wage policy is suddenly going to make everyone have a rainy-day savings account.
Certainly postal banking could go a long way toward getting a lot of people presently on the outside of the financial system to the inside, which is good. But I am not sure that the type of loans here discussed can fit within that model, because those loans are costly, and the post office faces the same costs as any other lender.
Also, I suppose the post office would have to view banking as a break-even service, rather than as a way to subsidize continued daily deliveries to East Assbump, Wyoming.
One of the most clarifying moments in recent history has been the confirmation of Treasury Secretary Jack Lew. He was confirmed by a fat 71-26 margin.
That’s right. The GOP won’t even let an Attorney General nominee come up for a vote, and filibusters d-mn near every nominee. They filibuster their own Republican colleague Chuck Hagel before letting him through with a 58-41 vote. But for Wall Street Boy Jack Lew, everyone said yes. I mean, politics is politics and all, but this was about money.
This agency is doing its job, which for better or worse does not include fighting with the SEC or Treasury or Justice.
Your criticism of the man who sits behind the desk where the buck stops is more on target.
just musing that Ms. Warren, as part of an overall Administration effort to change the way the financial services industry does business, might have raised its profile as well as targeted bigger fish.
I think she has proved us both wrong with the attention she has brought to these issues as a Senator, the teeth of the bipartisan legislation she is trying to pass, and the new loci of the democratic wing of the Democratic Party.
If nothing has gotten done so far, unlikely nothing will be done under a President Clinton. As to the left of centeredness of the Democratic Party, have fun watching what good that does (if it actually is real) as the minority party. Maybe if Obama had done something they would still at least hold the Senate.
But Yellen wouldn’t have gone in instead of Summers had Warren not been in the Senate. We wouldn’t be seeing Hillary praising her in Time, meeting with her, or copying all her rhetoric had she been in charge of a deliberately weakened agency. Had we run a populist uprising instead of a war on women campaign, we would’ve seen a blue Senate. I am positive of that. He played softball and got tackled by the hardball tactics of the GOP who wage every campaign whether they win or lose as staunch conservatives. Something we could learn from.
I’ve wondered why progressives haven’t banded together to create a left-left wing of the Democratic party, like the tea partiers have done for the Republicans. Mainstream Dems would know that the progressives would still vote for their party, but they might gain a little influence in setting the agenda. Sen. Warren would obviously be the leader of the pack but it often seems she is tilting at windmills on her own, if there were a more organized progressive “stamp of approval” it might bolster the number of allies she could lead to the negotiations.
It was called the Coffee Party, remember?
This is full video of the EW speech that is referenced in this post
https://www.youtube.com/watch?v=HSpfGodTrtk
Also somewhat related to the subject of this post, I was intrigued to see this HRC campaign hiring news. Cautiously optimistic, I am…
http://www.vox.com/2015/4/17/8442293/gary-gensler-hillary-clinton