Posts Tagged ‘financial reform’

Wall Street Is Circling The Wagons Against Elizabeth Warren as Head of Consumer Bureau

The newly created Consumer Financial Protection Bureau was an idea conceived Harvard Professor and long time advocate for the middle class, Elizabeth Warren.  Since the agency was her idea, and she is obviously the most qualified person to lead it, then her confirmation as its head should be a shoo-in.

That would be true in the real world, but in the Washington Beltway, what is up is down and what is wrong inevitably turns out to be right as long as enough lobbyist money is spent to woo political officials along the way.

Wall Street was extremely opposed  to the consumer financial protection bureau and  through their lobbying efforts, managed to get it moved within the Fed instead of outside it. Beyond that, they haven’t managed to weaken it any further, but appointing a Wall Street insider would ensure that the agency would have no teeth and be practically useless.

Treasury Secretary Timothy Geithner,  a Wall Street insider if there ever was one, is quite opposed to Warren, who has dressed him down a time or two as he appeared before the Congressional Oversight Committee that she chairs. Where no one else would ask the tough questions, Elizabeth Warren did, and when the answers given were less than candid or complete, she poured on the heat.

 

 

 

Now we hear that Senator Chris Dodd, Chairman of the Senate Banking Committee does not believe that there are sixty votes in the Senate to confirm Warren as director of the CFPB.  From the article:

I think Elizabeth would be a terrific nominee," Dodd told NPR’s Diane Rehm on Monday. "The question is, ‘Is she confirmable?’ And there’s a serious question about it.

Senator Dodd has taken a great deal of donations from the banking industry and while fighting for financial reform, he has also worked to weaken it at the behests of his donors. His remarks today are even more of an indication that Wall Street will fight tooth and nail to prevent Warren from heading the agency that was her brainchild.

Elizabeth Warren Predicted The Financial Collapse Back In 2004

 

Elizabeth Warren,  a Harvard Law Professor and the current chairwoman of the Congressional Oversight Committee in charge of overseeing usage of the TARP bailout funds, predicted the financial collapse long before anyone else was talking about it.

In this 2004 interview with Dean Lawrence R. Velvel where she discusses her book, The Two Income Trap,  she reveals the instability that pervades the lives of most middle class Americans and why so many end up in Bankruptcy court. She says that in order to keep up with the expenses, people with median incomes have been forced to borrow and borrow. Why? Because the median income in the United States is increasingly not enough to keep up with the cost of living. She talks about the fixed expenses that families have, such as the mortgage payment, health insurance, and educational expenses as having grown dramatically in the last generation. It is important to understand, here, that, these fixed expenses can’t be cut back.  That’s why they’re called “fixed expenses.”

(more…)

Financial Reform Passes: What Does It Mean For The Average Consumer?

r579914_3638693

So the Senate voted today to pass financial reform, a bill aimed chiefly at reining in Wall Street from doing the kinds of things that lead to the financial collapse of 2008. There has been a lot of talk about derivatives  and credit default swaps, and while these are important parts of the reform bill, which ultimately affect each and every one of us, there are other aspects of this bill that will more directly affect average Americans.

The largest of these is the creation of a new consumer watchdog agency known as the Consumer Financial Protection Bureau. This agency will be located within the Federal Reserve but will be completely independent from it. It will have an independent director and will have the authority to make and enforce rules against unfair and deceptive consumer credit practices. This agency will regulate the practices any business that engages in consumer lending, from credit card companies and mortgage lenders to payday loan companies. The one group exempted from CFPB authority are auto dealers.

Basically, what the CFPB will do is make sure that when you sign a credit card agreement, you know exactly what you’re getting into. Even more importantly, it will ensure that if you borrow money, you can do it safely and with the knowledge that you can pay it back without going broke. Hopefully, the CFPB will put an end to the usurious practices of payday lenders, for example.

Finally, the reform bill contains new regulations with respect to mortgage lending.  Lenders will no longer be allowed to pay brokers additional fees for steering borrowers into riskier and more expensive loans if they qualify for cheaper safer ones. It also forces lenders to adopt stricter underwriting standards to ensure that no one receives a loan they can’t afford to repay and it reduces abusive repayment terms like huge prepayment penalties and other “junk” fees.

While the reform bill isn’t as strong as many would like, it does have some good aspects that will help consumers better manage their debt. I hope that Elizabeth Warren is appointed to be the director of the CFPB. 

I’m curious….what do YOU think about the financial reform bill?

ING Direct’s Overdraft Line Of Credit Saves Money

ingdirect_logo

 

Normally, I am pretty hard on banks and the financial services industry in general. However, when I read a story about the Internet bank, ING Direct and its overdraft policies, I had to give kudos where kudos are certainly due. It turns out that ING Direct won’t have to change one thing about how it does business in the wake of the new law effective July 1 of this year requiring banks to specifically get permission via an opt-in request for overdraft protection.

ING Direct has always offered overdraft protection on the basis of opt-in only, and only in the form of a low interest line of credit. To make people aware of the high cost of conventional overdraft protection, ING now offers up its overdraft  calculator.

Using the calculator, overdrawing your account by $100 for a ten day period will cost you $30, which is 20 cents of interest per day.  With ING Direct’s method via an overdraft line of credit, you would be charged 20 cents in total for that same $100 overdraft.

As ING Direct’s CEO, Jim Kelly puts it:

That’s $30 for 10 days equates to an interest rate somewhere north of 1000%. That doesn’t seem right. The way those transactions get stacked up — in terms of clearing checks, debit card transactions — you get three or four of those for a few dollars and end up paying $100 or $200 in fees in a day or a month.

That doesn’t seem like the value is in the hands of the consumer. It seems like all the value is going to go to the bank.

Read the complete story here.

More Foreclosure Assistance Provided In Financial Reform Bill

As the financial reform bill continues to make its way through Congress, at least one measure has been hammered out: a plan to combat mortgage foreclosures styled after the Pennsylvania HEMAP program has been approved by both the House and Senate.  I wrote about the HEMAP program in an earlier blog post.

The plan, called HEMA, would take $3 billion from unused TARP funds to provide assistance to homeowners in financial distress.  HEMA will require servicers and lenders to inform homeowners of the program availability before starting the foreclosure process.

If the homeowner is accepted into the program, he or she would make a small payment, based on what is affordable to the HUD and HUD would remit the full payment to the homeowner’s servicer. Payments would continue until the homeowner’s financial problems were resolved, whereupon he or she would resume making the full mortgage payment to the servicer and would also need to repay HUD for the payments advanced.

It is unclear how closely the HEMA program mirrors the HEMAP program, but if it is fairly close, any repayment of advanced monies would be over a long term period of time and capped at a level that is affordable for the homeowner.

The inclusion of a foreclosure assistance program within the financial reform bill is welcome news. Unlike HAMP, the HEMA program will carry the full force of law, which means that servicers and lenders can be forced to comply.

Financial Reform Passes In Senate, Long Fight Remains Ahead

The financial reform bill has passed in the Senate, which includes the Consumer Finance Protection Agency, the brainchild of Elizabeth Warren, head of the TARP Oversight Panel, Harvard law professor, and bankruptcy expert.

The fight is not over, however, and the financial services industry hasn’t stopped working hard to weaken the final bill.  Robert E. Story, Jr., Chairman of the Mortgage Bankers Association released a statement today that remains inline with previous statements:

Unless improvements are made during the Senate-House negotiations, this bill will likely bring regulations that will only further constrain credit for borrowers, make real estate purchases more expensive and drag out the ongoing turmoil in the real estate markets.

The financial services industry doesn’t like the reform bill one bit. They don’t like the fact that they face new rules that limit their ability to gouge consumers. The sad truth is they really don’t have much to fear, at least from the Senate version of the bill. While it does do some things that are good,  among them, the audit of the Fed, and the creation of the CFPA, it doesn’t reinstate the Glass-Stegall Act,  nor does it address “too big to fail.” You can bet that they’re going to fight to further weaken the CFPA, too, because after all, too much consumer protection is a BAD thing.

 

If_Anti-CFPA_Folks_Ran_Toyota_Today_by_crlonline

Source image: http://pixton.com/comic/gl8jabmu

Franken Amendment Regarding Credit Rating Agencies Passes 64-35

An important amendment that makes the current financial reform bill winding its way through Congress stronger has been passed by a vote of 64-35. Introduced by Senator Franken of Minnesota, this amendment would create a clearing house through which all credit agencies, such as Fitch Ratings, Standard & Poors, and Moody’s would be assigned to rate debt instruments.

Currently, securities firms may choose which agency to use based on the ratings the agency gives the bonds they wish to sell. This ability to shop around for the highest ratings constitutes a major conflict of interest since it incentivizes the rating agencies to inflate their ratings in order to compete for more business. This systemic conflict of interest played a major role in the financial collapse that we are still crawling out from under.

What the Franken amendment does is to put an non-biased, intermediary agency in between the securities brokers and the credit rating agencies.  Since this intermediary agency would assign out work to the credit rating agencies on a random basis, the incentive to rate a security higher in order to get more business would be gone.

Way to go, Senator Franken and Congress!

Senator Sanders’ Amendment To Audit The Fed Passed Unanimously 96-0

 

fed

In  a rare show of complete bipartisanship, the Senate today voted unanimously,  96-0, to approve an audit of the Federal Reserve.  The audit would be limited to Federal Reserve activity that took place from the beginning of the financial crisis in December of 2007 until the time the law is enacted. In addition, the Fed would be required to disclose the recipients of the more than $2 trillion dollars in emergency aid funding since that time. The list of recipients will be available on the Fed’s website beginning on December 1st 2010. The GAO will also look into whether or not there were any conflicts of interest involved in any of these financial deals granted during the review time period.

Today’s vote was on an amendment, proposed by Senator Bernard Sanders,  to the larger financial reform bill currently being worked on by both houses of Congress.  Originally, the measure had stronger language that would have required an on-going audit of the Fed, but faced with bipartisan opposition in the Senate as well as opposition from the White House and from Federal Reserve Chairman Bernake himself, the scope of the audit was scaled back to a one time occurrence.  In addition, the names of the recipients of the two trillion dollar emergency aid would not have to be published on the Fed’s website until December 1, 2010 instead of within 30 days of its enactment.

While this is good news, it is important to remember that this vote was only on an amendment to the larger financial reform bill, which is still has a long way to go before it passes, after which, it must be signed by President Obama in order to become law.

Too Big To Fail Failed In The Senate 61-33

goldman_sachs

 

Well, there can no longer be any doubts that the Senate is firmly in the pockets of the big banks. Once again, they’ve proven completely unwilling to do what good governance and the lessons of history suggest they must.

Today an amendment to the financial reform bill, sponsored by Senators Sherrod Brown of Ohio and Ted Kaufman of Delaware that would have required the big banks to be broken down into smaller and more manageable institutions failed by a vote of 61 to 33.

Not that I really thought ending “too big to fail” had a chance, but I thought the vote would be narrower than that. There are way too many senators who are responding to the wishes of their campaign donors and not to the needs of their constituents.

Major U.S. Corporations Against Derivative Reform

The Huffington Post reports today that companies like Apple and Whirlpool want Wall Street to continue trading derivatives in complete secrecy and without an ounce of governmental regulation. Why? Because, apparently, they don’t want to be forced to come up with the capital to back up their deals.

These companies have formed a coalition and have proposed several amendments to the financial reform bill that would, for all intents and purposes, remove any regulation of derivatives from the bill.

Buy VerizonCell Phones and Save. | Thanks to Bank Rates & Reviews, CD Rates and UK Loan
Easy AdSense by Unreal