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October 31, 2022

Better Markets Month in Review Newsletter October 2022

View the newsletter online here.

Hi friend,

First, let me start by saying how great it was to join our friends, partners and supporters from the Omidyar Network at a recent live in person (!) event to celebrate Elena Botella’s insightful and thought-provoking new book “Delinquent: Inside America’s Debt Machine.”  You really should read it!


Chris Jurgens, Omidyar Senior Director of Reimaging Capitalism; Michele Jawando, Omidyar’s SVP; Elena Botella, Omidyar Principal and book author; Dennis Kelleher.

Second, don’t miss the letter we sent to the Chairman of the Securities and Exchange Commission (SEC), Gary Gensler, regarding a letter twelve U.S. Senators sent him about the rulemaking process.  Too many people think that the process for making a law a reality ends once Congress passes it and the President signs it – an unfortunate outcome of kids watching the Schoolhouse Rock video “I’m Just a Bill.”  However, a rulemaking process is necessary for almost all laws before they become a reality, which is why the rulemaking process is so important (at the SEC and elsewhere).  Having participated in more than 300 rulemakings since being founded in 2010, we pointed out what the SEC is and isn’t doing in that process, rebutting industry complaints along the way.

Finally, while often boring, technical and seemingly impenetrable, the safety, soundness and stability of a well-regulated banking and financial sector are critically important to every American’s financial and personal well-being. That’s because they are supposed to support and finance the real, productive economy, enabling job growth, rising living standards, and widespread wealth creation.  They do that by facilitating savings and making credit widely availability (via credit/debit cards and loans of all types) to families to pay bills or buy a car or home, and to businesses of all sizes to get started, operate and grow, creating jobs for most people who work in the country.

However, a banking and financial sector that isn’t properly regulated and policed can also be a threat to every American’s job, home, savings and much more, which the 2008 financial crash vividly and painfully illustrated. That was caused by the biggest, most complex, leveraged, interconnected, and systemically important financial institutions in the country (called TBTF for “too-big-to-fail”) engaging in reckless and often illegal conduct to boost their short-term profits and bonuses. They caused the worst financial crash since 1929 and the worst economy since the Great Depression of the 1930s. Their actions threw more than 25 million Americans out of work, resulted in more than 16 million foreclosure filings, depleted the savings and ruined the retirement plans of tens of millions of Americans and much more.  The economic and human costs on Main Street of Wall Street’s actions was catastrophic: more than $20 trillion in lost GDP and as much as $29 trillion diverted from society’s priorities to fund bailouts for Wall Street.

Those TBTF financial institutions were so dangerous that elected officials, policymakers, and regulators faced an impossible choice: bail them out with taxpayer money or let them fail and risk precipitating a second Great Depression. That’s why they are called “too-big-to-fail”: their failure would collapse the financial system and economy and, thereby, ruin the lives and livelihoods of almost all Americans.

The 2010 Dodd-Frank Financial Reform and Consumer Protection law was supposed to ensure that those types of financial institutions could never again pose the danger of systemic failure. It was meant to end TBTF entirely. Yet, a recent spree of bank mergers is creating the most TBTF banks since the 2008 crash. In a recent Barron’s op-ed, I pointed out that regulators need to get serious about applying the law to end TBTF or history is going to tragically repeat itself.

Apparently fearing that many people would find the common sense points I made in the Op Ed persuasive, one of Wall Street’s top Washington lobby shops, the Bank Policy Institute, immediately responded with a letter defending TBTF, repeating vacuous industry talking points, and mischaracterizing my Op Ed.  That’s not a surprise given Wall Street’s biggest banks are in the business of maximizing their profits and bonuses, not prioritizing financial stability or preventing taxpayer bailouts of their banks which unfairly protect their jobs and wealth while inflicting pain on Main Street.

To set the record straight, I responded to BPI’s letter, pointing out what should be noncontroversial: “We just want big banks to be good for banks and the country.”

We will continue to fight Wall Street’s TBTF banks and their army of Washington lobbyists, lawyers and innumerable purchased allies. We are only able to do that with your generous support, which we deeply appreciate.

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 the economy have been sought after and featured in major news outlets. Here are our top hits from October.

Washington heavy hitters back election betting bid
“Nobody addresses the fact that this proposal has nothing to do with the purpose of the futures market, which is hedging and price discovery …  very few people, organizations and, frankly, even sophisticated Washington operators are aware of what the CFTC does.”

‘Everything’s on the table’ for Fed, FDIC as they weigh resolution reform
“TLAC is a fraud on the public because it has the appearance of helping financial stability when it will likely be destabilizing in a crisis and increase the likelihood of taxpayer bailouts.”

Deceptive fund name crackdown puts investment managers on edge
“We wholeheartedly support this proposal. Investors need to know that their funds are being invested in the way that they expect. The name is a very powerful influence.”

WHAT’S IN THE WHITE HOUSE STUDY ON CRYPTO POLICIES AND REGULATIONS?
Federal News Network’s Eric White spoke to Dennis Kelleher about the White House’s recently released Comprehensive Framework for Responsible Development of Digital Assets.

*You can find all of Better Markets’ media hits from October here.

FOCUS ON

Acting FDIC Chair Gruenberg’s Framework for Evaluating the Risks and Benefits of Crypto Strikes the Right Balance

In a speech this month at the Brookings Institution, Acting Chair Gruenberg laid out a balanced, methodical approach for regulating digital assets that is guided by protecting consumers and investors.

Read Better Markets’ full statement

After the speech, a panel of experts reacted to the remarks and discussed their views. Watch Dennis Kelleher’s question to the panel in the below video:

 

The full video of the Brookings Institution event can be viewed here.

 

ACTIVITIES AT THE REGULATORY AGENCIES

CFTC Must Act to Protect America’s Families From the Risks Climate Change Poses
Climate change is an issue of great importance and urgency, and the CFTC must move quickly to help address its causes and consequences. 

Better Markets filed a comment letter to the SEC in response to a proposed rule to reform the governance and the management of conflicts of interest at financial clearing agencies. 
This proposal addresses information gaps that have evolved since Form PF was originally implemented nearly ten years ago. 
Better Markets filed a comment letter to the CFTC stating that capital and financial reporting requirements in Japan are not comparable to U.S. requirements. 

 

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

With the November elections right around the corner, October is a month many Members of Congress spend back home on the campaign trail. However, there have still been important developments on Capitol Hill, including the following:

Twelve Senators Send Letter to SEC Chair Gensler
Days after Politico reported on a letter sent to SEC Chair Gary Gensler by twelve moderate Democratic Senators, Better Markets also sent a letter to the SEC Chair. The twelve Senators, including four on the Senate Banking Committee, highlighted the importance of the work done at the SEC, as well as their notice and comment period for rulemakings. Better Markets agrees with the Senators that the notice and comment period is especially important to address serious gaps that currently exist, but clarified some baseless issues that the industry has raised.

Senator Brown on Bank Mergers
Senator Sherrod Brown (D-OH), Chairman of the Senate Banking Committee released a statement following the approval of the US Bank-MUFG merger. In his statement he reaffirmed his concerns with the increased risk to our financial system that come with megabank mergers. If not addressed properly, these risks can harm consumers with branch closures and decreased competition among the banks. Better Markets shares Senator Brown’s concerns and will continue to work to ensure the merger process is strengthened to protect consumers from the systemic risk they create.

Members of Congress on Crypto Revolving Door
Senator Elizabeth Warren (D-MA), Representative Alexandria Ocasio-Cortez (D-NY), Senator Sheldon Whitehouse (D-RI), Representative Jesus Garcia (D-IL), and Representative Rashida Tlaib (D-MI) sent a letter to the SEC, CFTC, Fed, FDIC, OCC, CFPB, and the Treasury to gain information on the revolving door issue between their agencies and the crypto industry. Crypto firms have hired over 200 officials from public service to increase their foothold in Washington DC and create friendlier laws surrounding crypto. This comes at a time when the crypto industry has increased their lobbying efforts on Capitol Hill and their political donations in key House and Senate races. The lawmakers call on the agencies to address several questions surrounding their guidelines and transparency rules to ensure the integrity of the agencies and the rulemaking process remains intact.

 

IN CASE YOU MISSED IT

Our friend and tireless investor advocate, Joe Saluzzi, co-founder of Themis Trading, discussed market structure issues, including payment-for-order-flow (PFOF), on Zeroes TV. Joe kindly mentioned Better Markets’ work as “the anti-lobbyists” and saying that “they speak the language of DC. Dennis Kelleher knows all the players and can go toe to toe with them.” Joe does the same in the markets where he’s fighting and outsmarting the financial predators every day.

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