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October 1, 2014

Financial Reform Newsletter October 1, 2014


Financial Reform Newsletter
October 1, 2014

Would you trust a lawyer to represent you in a dispute if he or she was getting paid by the other side? Certainly not, but that is the very scenario many hardworking Americans face when seeking investment advice from certain financial advisers to plan for retirement. Millions of professional financial advisers working today can recommend retirement investment products from companies that pay these advisers handsome fees and commissions but drain their clients’ retirement savings with high costs, poor returns, and even substantial risks of loss.  That’s because those advisers have no “fiduciary duty” obligating them to act in the best interest of their clients.  As we’ve mentioned before in previous newsletters, that could all change soon if the Department of Labor is allowed to move forward with a new fiduciary duty rule that would require all professional financial advisors to act solely in the best interest of their clients. Better Markets is just one among a diverse collection of public interest groups and prominent labor organizations that are urging the Obama administration to support this vital rule, which can significantly improve the quality of life for millions of American workers and retirees. 

President Obama should nominate an Attorney General who will actually hold Wall Street executives accountable when they violate the law:  Many critics from across the political spectrum  have been vocal in their disappointment over Attorney General Eric Holder’s failure to prosecute any top executives at the too-big-to-fail Wall Street banks who participated in or oversaw the illegal behavior that led to the worst financial crisis since the stock market crash of 1929 and the subsequent Great Depression of the 1930’s.

“It is no secret Better Markets has been critical over the Attorney General’s approach to enforcement on Wall Street,” said Better Markets in a statement for The Hill Newspaper. Mr. Holder and his deputies have not held a single Wall Street banker accountable for the egregious, risky, and illegal behavior that plunged the economy into chaos and that ultimately cost the taxpayers more than $13 trillion in lost wealth, retirement funds, college savings, income, jobs, and for millions of Americans, the roof over their heads.  And under his leadership, the Department of Justice has repeatedly entered settlements with the banks without ever  providing anyone outside the secret negotiations—the public, the press, or a court of law—with enough facts to determine if the eye-popping settlement dollars  represent real accountability or a slap on the wrist.      

 It is our hope the President nominates someone who will begin to police Wall Street with real conviction and prosecute the individual executives who commit crimes with the full force of the law. Slapping the big banks with what appear to be “cost of doing business” fines is not a sufficient deterrent and will not prevent another devastating crime wave at the hands of Wall Street bankers.”

Under Attorney General Holder’s leadership, the Department of Justice has not only given a pass to the bank executives, but also favored the banks themselves with settlement agreements, struck behind closed doors, that shielded their illegal conduct from any meaningful scrutiny by the public, the press, or a court.  To address this lack of transparency and accountability in the settlement process, earlier this year, Better Markets filed a lawsuit challenging the DOJ’s agreement granting JPMorgan Chase blanket civil immunity for years of illegal conduct that contributed directly to the worst financial crisis since the Great Depression, all in exchange for $13 billion and without any judicial review.

“The Ray Rice Video for the financial sector has arrived.” – Michael Lewis: Nearly 50 hours of secret recordings of conversations by New York Fed officials and Goldman Sachs executives made public in a terrific report by Chicago Public Radio’s This American Life is an eye-opening look behind the scenes at how the nation’s top Wall Street bank regulators, even after the worst financial crisis since 1929, defer to  and protect the very banks it’s supposed to oversee.  To learn more, read this  print account of the radio report by ProPublica’s Jake Bernstein, showing  how a former top NY Fed examiner tried to stand up for the American taxpayer and against the powerful Wall Street banks and, it appears, was ultimately fired for doing so.  

In light of these revelations, U.S. Senators Elizabeth Warren (D-Mass.) and Sherrod Brown (D-OH) have both called on Congress to investigate: “When regulators care more about protecting big banks from accountability than they do about protecting the American people from risky and illegal behavior on Wall Street, it threatens our whole economy,” said Sen. Warren. “We learned this the hard way in 2008. Congress must hold oversight hearings on the disturbing issues raised by today’s whistleblower report when it returns in November – because it’s our job to make sure our financial regulators are doing their jobs.”  Better Markets weighed in with some questions members of Congress should have in mind if and when a hearing on the subject is convened.  Perhaps the most central inquiry is this:  Who is the key stakeholder (and decision-maker) at the NY Fed?  Is it the team of in-house experts on bank regulation who ostensibly work for the public, or is it the group of Wall Street’s too-big-to-fail banks that the NY Fed is charged with supervising?

 Better Markets in the News:

 Bank critics urge Obama to get tough with DOJ pick The Hill by Peter Schroeder 9-30-14

 Gay-Marriage Hero David Boies Has an Infuriating New Cause: New Republic by Alec MacGillis 9-24-14

Articles of Interest:

Transcript: Sen. Warren’s Full NPR Interview On Financial Regulation: NPR by Steve Inskeep 10/1/2014

 U.S. SEC’s Piwowar proposes alternative to broker fiduciary rules: Reuters by Sarah N. Lynch 9/30/2014

 Financial firms don’t need an inside job to get favorable Fed treatment: Washington Post by Kindred Winecoff 9-30-14

 Revisiting the Lehman Brothers Bailout That Never Was: New York Times by Peter Eavis and James Stewart 9-29-14

As SEC Enforcement Cases Rise, Big Actions Are Sparse: Wall Street Journal by Jean Eaglesham 9-29-14

Banks to Adopt Crisis-Clause Derivatives by Next Month: Bloomberg by Ben Moshinsky 9-29-14

Don’t Laugh Off Hank Greenberg’s Ridiculous AIG Lawsuit: New Republic by David Dayen 9-29-14

FSB Backs 5-Minute Currency Benchmark Window in Overhaul: Bloomberg by Jim Brunsden and Ben Moshinsky 9-30-14

Secret Goldman Sachs Tapes Reveal the Fed Burying Wall Street’s Bodies…Again: Medium by Alexis Goldstein 9-29-14

Eric Holder’s Mixed Legacy on White-Collar Crime: The New York Times Dealbook by Peter Henning 9/29/2014

Finally, the Truth About the A.I.G. Bailout: The New York Times Opinion Pages by Noam Scheiber 9/28/2014



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