Financial Reform Newsletter
January 29, 2015
President Obama Promises to Protect America’s Families and Workers from Wall Street and another Financial Crash by Vetoing Attempts to Weaken Financial Reform: In last week’s State of the Union , President Obama reaffirmed that he will use the veto to prevent attacks to weaken or kill financial reform, which is in place to protect America’s families and workers from another devastating crash and economic catastrophe like what happened in 2008. The President reminded Americans that Wall Street fought to prevent financial reform from passing and claimed that it would kill jobs and growth while causing skyrocketing deficits. That did not happen: seven years after the Wall Street crash, unemployment and the deficit have been on a steady decline while growth has increased.
President Obama declared that “the shadow of crisis has passed, and the State of the Union is strong.” While many things are certainly better, we must remember that millions of American families and workers are still suffering from the $12.8 trillion cost of the 2008 crisis. Many among us have not recovered from the loss of their homes, their jobs, and their savings and, for others, wages are stagnant, homes are underwater, and most don’t have enough savings to pay an unexpected bill.
These are the costs the financial crisis inflicted on America’s families and workers and they are going to last for a very long time. This should never have happened in the first place, and in the State of the Union the President made clear his commitment to trying to make sure it never happens again:
As the President recognizes, it is vital to the strength of our nation that financial reform not be weakened or killed. That includes protecting the ability of trained public servants, with expertise and experience, to prevent another crash by applying tailored and targeted regulations. In addition, they must be provided with the funding necessary for them to do their jobs. Those civil servants are the cops on the Wall Street beat and the only alternative would be to let Wall Street police itself again, but that ended in disaster last time.
We could not afford the last crisis and we definitely cannot afford another one. The American people have suffered enough. It is past time to stop the attacks on financial reform and the hard-working civil servants that Wall Street has relentlessly pressured for years now. We applaud the President for promising to protect reform by using his veto power if necessary.
Better Markets and six other public interest organizations launched a new campaign to protect Americans from the “Retirement Advice Loophole” that can drain away thousands of dollars of hard-earned savings from a single retirement account. As a focal point for the effort, the groups launched SaveOurRetirement.com, a new website that will educate workers and retirees about threats to their retirement security under current law and mobilize their support for long-delayed consumer protections that the U.S. Department of Labor is trying to adopt.
Because of the 1970s-era Retirement Advice Loophole, Wall Street brokers and other financial firms are allowed to provide investment advice that serves their own interests instead of what’s best for their clients. They can sell financial products that pay them large commissions but hurt their clients with unnecessary fees, poor returns, or excessive risks. Millions of Americans are affected every year by this loophole without even knowing it, yet it is draining away their savings and putting their retirement security at risk.
However, the Department of Labor is expected to act soon to update the rules for the first time in 40 years, revising them to close the retirement loophole by limiting conflicts of interest and requiring everyone who gives retirement investment advice to act solely in their client’s best interest – a common sense fiduciary duty standard.
Importantly, as we have said before, we are not suggesting that everyone who gives retirement investment advice is taking advantage of their clients, since many advisers do act in their client’s best interest. However, far too many do not, and that’s why the DOL’s action to close this loophole is so important.
The goals of the new campaign are twofold: 1) educate Americans about threats to their retirement from the current system and how they can protect themselves, and 2) mobilize public support for an effective consumer protection rule from the U.S. Department of Labor that will close the loophole for good.
Better Markets applauds FSOC for increasing transparency: Remember in 2008 when you and I and the rest of American taxpayers were put on the hook for trillions of dollars in bad bets made by AIG? And, remember that even after AIG was bailed out by US taxpayers it paid bonuses to some of the same employees who reckless actions caused AIG to fail in the first place?
Well, the financial reform law passed in 2010 (called the Dodd-Frank Act) created a special council to make sure that never happened again. It is known as the “Financial Stability Oversight Council” or “FSOC.” It is our early warning system that protects American families from hidden risks that could grow unseen, surprise everyone with a future crash, require more taxpayer bailouts, and cause another economic catastrophe that destroys jobs, homes, savings, economic growth, and our standard of living.
Recently, FSOC held a public meeting where its staff proposed changes that would increase its transparency so that the public can better understand how they designate companies like future AIGs that pose systemic risk to our economy. FSOC’s success requires the trust, confidence, and support of the American people. That means FSOC and its members, meetings, and actions must be as open, inclusive, deliberative, and thorough as possible. The actions the staff proposed are a good start, but more needs to be done. For more on this meeting please read this statement from Better Markets.
Better Markets submitted a comment letter to the Basel Committee on Banking Supervision (BCBS) on corporate governance principles for banks: The letter reviews the BCBS corporate governance publications from 1998, 1999, 2006, and 2010 to identify why the previous principles have failed to ensure sound corporate governance in many big banks. Better Markets proposes two practical and immediate steps to promote sound corporate governance in banks: 1) the mandatory disclosure of long-term performance measures of bank performance, and 2) a greater focus on the collection and reporting of financial data.
Better Markets In The News
Politico Morning Money: Obama goes bold – Hillary and Warren liked it – The swipe fee fight will never die: Politico MM by Ben White 1/21/2015
To Drive Economy Toward Equality, Obama Requests More Spending: NPR by Marilyn Geewax 1/21/2015
Articles of Interest
Nominate A Qualified Undersecretary Of Domestic Finance Now: The Baseline Scenario by Simon Johnson 1/25/2015
Behind Sen. Elizabeth Warren’s Treasury takedown: Politico by Ben White 1/26/2015
In Push for Change, Finra Is Opposed by the Wall St. Firms It Regulates: New York Times Dealbook by Susan Antilla 1/26/2015
Ending Greece’s Nightmare: New York Times by Paul Krugman 1/26/2015
January 29, 2015
Financial Reform Newsletter – January 29, 2015