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By Ed Mierzwinski - 11/2/2009 (1) Links appear when you click "READ MORE" (bottom right, or click the post title). We're working on that. (2) Subscribe to RSS: Click the RSS icon in your browser link window at top. (3) Click "READ MORE" for how to post reply comments to blog.

Dodd to announce partisan Wall Street reform Monday

By Ed Mierzwinski - 3/12/2010 Fed up after 3-4 months of slow-walking by Republicans and special-interest lobbyists seeking to delay and/or gut needed Wall Street reform, Senate Banking Chairman Chris Dodd (D-CT) will announce his own Wall Street reform package Monday (Washington Post, click READ MORE for all links). The question is: Will the package include already-weakened negotiating points on both the CFPA and other aspects of reform or will Dodd reinstate minimum standards in the bill that will better protect the public, taxpayers and consumers from the next reckless actions of the financial titans? (1) Will the CFPA be given full authority over predatory payday lenders and rent-to-own stores and other non-banks? If the CFPA cannot examine this $30-100 billion sector (depending on whose numbers you look at it, but huge either way) for violations, no federal agency can. (2) Will the CFPA have equal power to the prudential regulators that failed to protect us, or be subject to their veto? What's wrong with the House bill, which requires consultation and then sets up a dispute resolution mechanism, but doesn't make the CFPA subservient? (3) Will states and their attorneys general be taken off the corporate crime beat despite their strong record of defense of the public? Congress routinely preempts powers of state Attorneys General as a political courtesy to powerful special interests seeking to avoid full accountability for their actions. It is always a political decision, as it is atrocious public policy. Why? States are an early warning system for new threats to the public; states act more quickly that Congress (does Congress ever act quickly at all?); and, state enforcers often work together with each other and smart federal regulators in a synergistic way. The states are rational actors. If federal law and federal enforcement is good enough, the states will cover other problems and industry won't have to make its tired, unsubstantiated claims of "patchwork" regulation; but if federal responses are inadequate, then the states are needed. So, a doctrine of making federal law the floor of protection, not the ceiling, is the best way to guarantee robust protection against unfair practices. The costs of taking state consumer cops off the beat are extremely high. Congress should reject the notion.

Student loan reform in jeopardy

By Ed Mierzwinski - 3/11/2010 The New York Times [click READ MORE for all links] is reporting that the for-profit private student loan industry is pushing hard in the Senate to jettison House-passed student loan reforms from the special budget bill being used for the health care package. The loan reforms would save taxpayers billions by eliminating cushy subsidies to Sallie Mae and other lenders while providing more student loans and grants to offset the skyrocketing cost of college. Over at HuffPo, Christine Lindstrom, head of our higher education programs, says in her column: "Sallie Mae, That’s Just Not Right!"

Dumb quote of the day: Derivatives did not cause crisis."

By Ed Mierzwinski - 3/11/2010 In Washington, if you say something enough times, no matter how untrue, you can always find a Senator to believe you. In a story today about Gary Gensler, once a Goldman trader and now a reformer (true) as head of the Commodity Futures Trading Commission (CFTC), an industry lobbyist says that "derivatives were not the cause of the crisis" (completely false, living on Bizarro World, unbelievable, ludicrous, etc.). From the New York Times: "Conrad P. Voldstad, [the chief executive of the International Swaps and Derivatives Association, which represents the big Wall Street banks] said that derivatives were not the cause of the crisis. The problem was elsewhere, like subprime mortgages, he says, and those areas should be the focus of any new regulation." As I often say, "only in Washington. Does anyone remember AIG?" Unfortunately, Voldstad's got a phalanx of lobbyists working for him and he's got a bunch of much more sympathetic actual productive companies that are end-users of derivatives fronting for his big shadow market firms and Wall Street banks. So the extent that Congress will restrict wild trading in derivatives is unclear. We agree with Gensler, who says to Times reporter Graham Bowley: “I disagree with anyone who says derivatives did not play a part in the crisis,” he said in defense of more oversight. He added: “Like San Francisco after the earthquake, we had a calamity, and now we need building codes.”

BofA finds some common-sense, to end $39 latte from debit overdrafts

By Ed Mierzwinski - 3/10/2010 It's not on the corporate website yet, but the papers (New York Times story "Bank of America Plans To End Overdraft Fees On Debit Purchases") [click READ MORE for all links] are reporting that Bank of America will start declining debit cards at point of sale instead of allowing transactions to go forward against insufficient funds and resulting in the $39 latte at Starbucks or other coffee shop-- $4 for the coffee, $35 for Bank of America. The move to restore what was the logical and former default switch on debit cards -- until banks got hooked on overdraft profits -- is an interesting effort to regain the trust of consumers after many missteps by big banks in recent years as the abusive consumer "gotcha fee" business model became prevalent.Consumer advocate Martin Eakes, CEO of Center for Responsible Lending, calls its move "a very big deal" in the Times story. BofA may be seeking to gain a " first-mover advantage" by refilling a market niche that had long been abandoned-- the big bank as a responsible community and consumer partner. Its competitors are moving in the other direction. As of July 1, banks will be required by the Federal Reserve to only charge consumers debit overdraft "protection" fees if they opt-in to the programs that have in recent years been touted as "features" and imposed without consumer choice. As the Times has recently reported, BofA's competitors are taking the typical, opposite route-- trying to seduce customers into opting in to keep paying the OD fees. As I often say, quoting singer James McMurtry, "They likes that money, they don't mind the smell." So, the good guy niche opportunity of doing away with the practice altogether is there for BofA. We think consumers will prefer to say "oops" and pay $4 cash for that latte, rather than $39 plastic.

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Ed Mierzwinski
U.S. PIRG Consumer Program Director
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