New Banking Regulations, Who Needs ‘Em?

6a00d8341bf80c53ef01310f93088a970c-320wiNew Orleans    Someone having folks over to the White House for cokes and coffee with the President doesn’t seem like much of a visit to the woodshed, but, hey, I guess a fella has to do something to be heard and heeded by his appointees even if he is the boss and the President of the United States. 

            This coffee klatch with the Federal Reserve and a slew of regulators of our financial institutions and practices was about the fact that they have missed 40% of the deadlines for coming up with new rules under the Dodd-Frank banking reforms that seek to curb the pitfalls and practices of “too big to fail” banks that led to the Great Recession five years ago.  Dodd-Frank was passed in 2010, but bank lobbyists have managed to manacle the feet of the slow stepping regulators so that many of the items have been diluted or delayed.   The much ballyhooed Volcker Amendment that was designed to prevent some of the worst of the big banks derivative and securitization messes by stopping them essentially from trading on their own accounts and forcing that to be separate has seen no implementation.  Treasury Secretary Jacob Lew is now promising action on that by the end of the year. 

            When even people like Louisiana’s arch conservative Senator David Vitter has reached across the aisles to Ohio Democrat Sherrod Brown to sponsor legislation requiring the big banks to increase their capital requirements, you have to know this is getting bad.   On the other hand one of the act’s namesakes, Barney Frank, now retired in Massachusetts, said part of the delay might be funding problems in some of the agencies due to the sequester.  You have to admire, Frank.  He still doesn’t miss a chance to get a shot in at the folks across the aisle from him, even if this is one case where no excuses are acceptable.

            Nonetheless, if there is one thing we must be able to agree on in the highly polarized state of our politics today, it should be that financial institutions need a stout rule book and perhaps some of the rules should be tattooed on the back of their hands, easily available while hitting computer keys or making phone calls to implement moron trades.  The daily news is still full of multi-gazillion dollar settlements from banks for actions that would normally be seen as criminal conspiracies and there is no sign on any front that they have learned anything from any of this.

            A meeting at the White House for these folks almost seems like a perk.  Obama needs to start kicking some butt with these regulators and hold them to the fire until they finally get the job done, rather than waiting for more lobbyists to wine and dine them to slow justice down once again while we are still teetering way too close to the financial abyss.

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Elizabeth Warren’s Two-Income Trap

NElizabeth-Warren-Sheriffew Orleans With the passage of Dodd-Frank and the advent of the coming Consumer Protection Finance Agency there was a huge hubbub from business and others opposing the appointment of Harvard Law Professor and bankruptcy expert Elizabeth Warren to run the agency.  Supposedly she was opposed by Treasury Secretary Timothy Geithner, the bank bailout Wall Street buddy-boy, which made me like her in a kneejerk sort of way:  anyone who was his enemy was surely my friend!  She had a hardscrabble personal story that started in red dirt Oklahoma with a father pushed over the financial edge, and knowing that country also biased me towards her, even though her being at Harvard stuck in my craw.  All of that is over now.  I read the book she wrote with her daughter, Amelia Tyagi, called The Two-Income Trap:  Why Middle-Class Mothers & Fathers are Going Broke, and now I’ve gotten my head together on the true facts and her core arguments, and I totally get it.  Count me as a fan!

I also get why so many were lined up against her:  first, she’s an equal-opportunity offender zinging left, right and in-between on the issues whether banks or unions, and, secondly, she’s an iconoclastic feminist arguing a totally womanist line with women and children in front, but questioning the normally unchallenged assumptions about women in the workplace.  That’s a deadly set of variables for any political calculation.  No doubt she only got this far because most people – like me! – didn’t ever bother to read the book!

Some examples:

  • She zings Citibank before the meltdown for an average mortgage interest rate of about 17% and in a tell-all story relates the tale of a one-day consulting gig she did for them about bankruptcy and families in which she argued that Citi should simply not lend to people overstretched, and a senior executive dismissed the entire argument because jacking the overextended with more products and predatory interest rates was essentially their golden goose and business model.
  • She tells a moving story of a meeting with Hilary Clinton as a former First Lady and how quickly Clinton got the importance of opposing the passage of a proposed new corporate-backed bankruptcy law and committed her support to the fight, but then once elected as a U.S. Senator from New York, turned around completely to support her new constituency on Wall Street rather than women.  She everything but says that Clinton and senior Senator Chuck Schumer were bought and paid for by campaign contributions.
  • She comes out for universal school vouchers and total school choice for good reasons perhaps, but based on the fuzziest of political and economic premises about what would really create “equity” in school offerings, all of which must have driven the teacher unions up a wall.

Generally she drives the hammer hard on the nail.

Over-consumption is roundly dismissed as the economic trigger of the debt crises, which she argues sprang directly from middle class parents trying to find two critically essential things for their children:  good schools and safety.  In the midst of a national education crises and too often random urban crime, both parents were not only forced to work, but also ended up doubling down on inflated house mortgages in the best school districts:  the two-income trap.  Unfortunately, doing so eliminated in the Warrens argument, the historic bench strength of having a reserve worker ready (the wife) that could go to work in a crisis brought on my job loss, medical bills, or family breakups.  Folks were already stretched over the line so tautly that the least twist and they were pulled under.

I can’t say how happy I was to read this book and find out that Elizabeth Warren is fellow traveler on the citizen wealth bus.  I could go on and on, but every once in a while it’s such a pleasure to go back to the first sources and find with total surprise that someone is even better than I could have imagined.

Props to President Obama for stepping up and finding a way for Warren to work in the White House and make the Consumer Financial Protection Agency happen!  The beginnings always prejudice the ends, so she’s in the right space, regardless of whether or not she can run the show.  Better to have a toe smasher than a tiptoe dancer protecting the financial futures of desperate families!

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