February 1, 2023

Better Markets Month in Review Newsletter – January 2023

View the newsletter online here.

Hi friend,

Fighting for a financial system that supports the productive economy, jobs, rising living standards, and broad-based wealth creation can be difficult to understand at times. Even funders often don’t understand the incredible importance of finance and financial matters to social, economic and racial justice in America.

But sometimes these issues do break through. We recently released a report on the Federal Reserve’s policies since the 2008 crash and how they have created instability, massive risk taking, and widespread inequality. Gillian Tett, one of the Financial Times’ most senior, highly regarded, widely read and astute commentators and editors, wrote an entire column on the report, and said this:

Better Markets “first shot to fame during the 2008 global financial crisis when it became a thorn in the side of Wall Street and Washington regulators because it complained loudly—and correctly—about the follies of excessive financial deregulation. Since then, it has continued to scrutinise the more recondite details of US regulation, complaining, again rightly, that the rules have recently been watered down.”

She then goes on discuss, in a highly favorable way, our recent report on the Federal Reserve: “Fed Policies and Systemic Instability: Decoupling Asset Pricing from Underlying Risks.” It’s not easy reading, but incredibly important and available here.

With so many developments related to crypto, we created a dedicated webpage of materials here and released a new report on the SEC’s crypto work and how effective it has been in fighting the crypto crime wave. We released a broader report that looks at the SEC’s performance in 2022 across the range of issues. It’s clear that the agency is making progress in many areas, but it needs to more often severely punish individuals.

Finally, I had an Op-Ed recently in the Financial Times reviewing what’s happening across the financial regulatory agencies (SEC, CFTC, Fed, FDIC and OCC) and their agenda for 2023. Lots of opportunities coming this year!

With your help and support, we will continue to fight for Washington’s policymakers to prioritize Main Street’s issues and concerns.

Best,

Dennis

Dennis Kelleher
Co-founder, President, and CEO Better Markets

MEDIA IMPACT

From TV, radio, and print — Better Markets’ views on all matters related to finance and the economy have been sought after and featured in major news outlets. Here are our top hits from January.

Big banks get shape-up or break-up warning — but does it matter?
“Good framework for future cases but should be applied immediately to Wells Fargo and Citi, two recidivists that today are clearly too big to manage. It is long past time for action, not talk.”

Justices Bat Down Fannie, Freddie Investor ‘Sweep’ Appeals
“We’re gratified the assault on the taxpayer bailout of the GSEs by opportunistic investors is coming to an end…[the Supreme Court’s] review might have rescinded billions in repayments taxpayers received, undermined FHFA’s authority, & restored a risky status quo.”

Global anti-money laundering fines surge 50%
“It doesn’t take a rocket scientist to figure out that the way to punish a banker is to take away his or her money.”

U.S. Justice Department rolls out policy to coax companies to report wrongdoing
“The DOJ is right to incentivize and reward companies for self-reporting. The key is getting the balance of carrots and sticks right. Individuals must be meaningfully and personally prosecuted in every case.”

FOCUS ON

Federal Reserve Policies and Systemic Instability
While most of the current focus on the Federal Reserve (“Fed”) is around inflation, the big missing story is how the Fed’s actions have created many of the most significant risks and issues we face today. Our report reviews how we got here, the risk implications of the Fed’s prior actions, and what the Fed must do to prevent making similar mistakes in the future.

The Securities And Exchange Commission: Regulation And Enforcement In 2022
In our latest report, we examine the SEC’s progress over the past year on two fronts, rulemaking and enforcement. We review the agency’s steps to make the securities markets more fair and transparent for investors, and we also identify areas where the SEC can do more to fulfill its mission and protect investors.

ACTIVITIES AT THE REGULATORY AGENCIES

The CFTC’s New Regulatory Agenda Shows it is AWOL and Failing to Fulfill its Important Mission
The CFTC’s recently released fall 2022 regulatory agenda (available here) is virtually identical to its spring 2022 agenda (available here). Don’t be fooled because the fall agenda has fewer items than the spring agenda.

Better Markets Urges the Federal Reserve to Expand Disclosure Around Institutions that Apply for or Have Access to Fed Accounts and Services
As an institution that was established to serve the American public, the Fed should always seek to provide the highest level of transparency to the public as possible without creating harm to the public or undermining its core mandates. Thus far, there has been essentially no transparency around Federal Reserve access and that must change.

New Tax Law Provides no Basis for Holding Back or Diluting
Better Markets supports the SEC’s proposed rule to modernize and improve disclosures about a company’s share repurchases, or stock buybacks.

Better Markets Applauds CFPB’s Regulatory Agenda Attacking Excessive Fees on Consumers
The CFPB has set an agenda that prioritizes relief for the millions of consumers subjected to abusive overdraft fees, fees for insufficient funds, credit card penalty fees, and the wide variety of other fees financial firms use to extract wealth from hard-working Americans.

Proposed Rule on Large Bank Resolution is Fundamentally Flawed
In a comment letter to the Fed and FDIC, Better Markets explains what else must be done to strengthen large bank resolution to prevent future bailouts.

Long Overdue Rulemaking Will Prohibit Conflicts of Interests in Securitization Transactions
Better Markets welcomed the SEC’s long-overdue proposal to implement Section 621 of the Dodd-Frank Act which will target some of the most outrageous abuses we saw leading up to the 2008 financial crisis.

The Federal Reserve’s Decision to Keep a Crypto Bank out of the Banking System is a Huge Win for Financial Stability and Taxpayers
The Fed’s decision to deny Custodia Bank’s application to become a member of the Federal Reserve System is in the best interest of the banking system, the country and Main Street taxpayers because crypto activities pose a significant threat to the safety and soundness of the banking system.

ACTIVITIES AT THE FEDERAL COURTS

Each month our legal team outlines some of the top cases we’re keeping an eye on, the Amicus “Friend of the Court” Briefs we have filed, and why everyone with a bank account, credit card, mortgage loan, or retirement loan should be interested in those cases.

Read the latest updates from our team of legal experts.

HILL UPDATE

This month marks the beginning of a new Congress, which means most Senators and Representatives are focused on administrative issues, such as determining what Committees they will serve on and organizing their priorities. While there haven’t been any hearings as Committees are still being formed, many Members of Congress have signaled issues that are important for them in the upcoming year.

Senators Tell Banking Regulators to Protect Taxpayers
Sen. Sherrod Brown (D-OH), Chairman of the Senate Banking Committee, and Sen. Chris Van Hollen (D-MD) sent letters to both the FDIC and the Fed to stress the importance of banks, and not taxpayers, to be responsible for their failures. The Senators called any action by the banks that would hold taxpayers responsible for their failure to be “irresponsible.” You can read the full letter to the regulators here.

Representatives Support the SEC Crypto Enforcement
Reps. Stephen Lynch (D-MA) and Chuy Garcia (D-IL) penned an op-ed in The Hill supporting the SEC’s work and regulation of crypto. This op-ed comes at an important time, as the SEC has been under attacks from some Members on Capitol Hill after FTX’s collapse at the end of last year. As Better Markets has pointed out, the SEC has an excellent track record reining in the crypto industry. Be sure to check out the full op-ed here.

Senators Pushback on Anti-ESG Talking Points
Senators Sheldon Whitehouse (D-RI), Brian Schatz (D-HI), and Martin Heinrich (D-NV) wrote an op-ed in CNBC pushing back on common talking points against environmental, social, and governance (ESG) investing. The Senators note that efforts to limit ESG investing are ‘anti-capitalist’ and point out the dark money campaign from the oil and gas industry behind these efforts. ESG investments are likely to face increased scrutiny on Capitol Hill from a Republican controlled House of Representatives. You can read the full op-ed here.

Chairman McHenry Eliminates Diversity & Inclusion Subcommittee
The new Chair of the House Financial Services Committee, Patrick McHenry (R-NC), eliminated the Diversity & Inclusion (D&I) subcommittee, renaming it to the new “Digital Assets, Financial Technology, and Inclusion Subcommittee.” Instead of a dedicated subcommittee, Chairman McHenry has promised to make diversity and inclusion issues the jurisdiction of all the subcommittees. Since its creation in 2019, the D&I Subcommittee held important hearings and issued reports to combat the inequalities within the financial industry. Members of Congress must continue to be held responsible to ensure that their pledge to bring these issues forward without a dedicated subcommittee holds true.

IN CASE YOU MISSED IT

In a Financial Times Op-Ed, Dennis Kelleher, provided an overview of U.S. regulatory agencies’ recent work, including the SEC’s efforts to protect investors and the CFTC’s failures. He also emphasized that that with a full complement of confirmed presidential nominees, agencies have a strong agenda to improve the protection of investors and markets in 2023.