Financial Regulation

  • February 22, 2017
    Guest Post

    by Maura Healey, Attorney General of Massachusetts*

    To pay for the hallmarks of a decent middle-class life, American families have found it increasingly necessary to borrow money. We tell our children that a college degree is essential for their success in the modern economy, but few students can afford the ever-increasing costs of higher education without incurring student loans. (1) We extoll the virtues and benefits of homeownership, but the high cost of housing requires most homeowners to have a mortgage loan. (2) As middle-class wages have remained stagnant, consumers have looked to credit to pay for essential expenses like transportation, medical bills, and childcare. As a result, many American households find themselves deeply in debt.

    Too often, these debts have proven to be disastrous. Countless students sought to learn essential job skills and borrowed heavily to do so, but instead became the victims of high-cost, fraudulent, for-profit schools that offered no meaningful vocational training. (3) Homeowners across the country are still grappling with the consequences of the predatory subprime mortgage loans that caused the financial crisis of 2008. (4) While debt may allow some families to succeed, debt cripples the aspirations and ambitions of many others— approximately seventy-seven million Americans have at least one delinquent debt on their credit report. (5) 

    Given the challenges that consumer debt poses to the economic security of so many people, I applaud the Harvard Law & Policy Review for devoting this issue to discussing the rights and obligations of creditors and debtors and to the appropriate policy responses to America’s ongoing struggles with debt.

  • February 21, 2017
    Guest Post

    by Ryan Cohen and Shane Hebel, Harvard Law & Policy Review, Volume 11 Editors-in-Chief

    During this time, when our nation appears so divided, there is one thing that we all share, whether we are Democratic or Republican, teacher or coal miner, voter or U.S. President, from the coasts or from Appalachia. Debt. We may be a nation of red, white, and blue, but mostly, we are just in the red.

    Our students are in debt (as graduate students, we can attest to that from personal experience). Our households are in debt. Our cities are in debt. Our nation is debt. Even our new president is in debt—billions of dollars of it. Collectively, Americans are $12.35 trillion in the hole. And that is not even including our $19 trillion national debt. In the past decade, U.S. household debt has risen 11 percent. Today, the average household with any debt at all is $132,529 in debt, including mortgages. Meanwhile, student loan debt has increased 186 percent.

    Debt is so pervasive and central in American society that The Week published an article late last year entitled How the Politics of Debt Explains Everything that described the “underlying political economy” as “a creditor/debtor stand-off where the creditors have the whip hand” and attributed Donald Trump’s ascendency to his “riding debtor anger against creditor strength.”

    While strategies to address debt divide us along partisan lines, there is bipartisan recognition that debt--in some form or another--is a problem. Rep. Brian Babin (R-TX) has said: “Would I like to see [the budget] balance? Certainly. Absolutely. I’ve got 13 grandchildren, and I don’t want to see them buried under $30 trillion of debt.” Focusing on individual debt, Sen. Elizabeth Warren (D-MA) has said: “College students today are drowning in debt, and it is hurting them and hurting our economy. We must find a way to help families pay for college without condemning them to a lifetime of indebtedness.”

  • December 21, 2016
    Guest Post

    by Brian Simmonds Marshall, Policy Counsel and Veronica Meffe, Legal Fellow; Americans for Financial Reform

    No president has removed an appointee for cause. Most presidents have not attempted it and the three times a president has tried to remove an official with for-cause protections—on the ground that the for-cause protection were invalid (not that there was cause for removals)—the courts stopped the president from doing so. Those simple and important facts have been lost amid cries from opponents of strong consumer protection to remove Richard Cordray as Director of the Consumer Financial Protection Bureau (CFPB).

    By statute, the president may remove the CFPB’s Director only “for inefficiency, neglect of duty, or malfeasance in office,” the same standard that the Supreme Court held to be constitutional in Humphrey’s Executor (1935). In October, a D.C. Circuit panel ruled that the CFPB Director, as the single-head of an independent agency, could not be so protected. But that decision is now under review by the full D.C. Circuit, which could vacate the panel’s ruling in late December or early January by agreeing to hear further argument in the case.

    Assuming the CFPB director’s statutory protections against arbitrary removal remain in effect, history suggests that he will not be removed from office. We reviewed Steven Calabresi and Christopher Yoo's exhaustive history of the removal power, The Unitary Executive, and it does not identify a single for-cause removal in the post-Humphrey’s era.  

    In the handful of instances the courts declined to stop a removal, it was because the court held that the official did not enjoy protections against removal. For example, in Martin v. Tobin (9th Cir. 1971) and Morgan v. Tennessee Valley Authority (6th Cir. 1940), the courts of appeals held that the officers in question filled purely executive roles and therefore served at the pleasure of the president. Similarly, in Swan v. Clinton (D.C. Cir. 1996), the court held that the official challenging his removal did not have for-cause protections because his term had already expired. And in that case, despite ruling against Swan, the D.C. Circuit acknowledged that the case was justiciable and the court would have had the power to allow him to serve until his successor was confirmed if his removal were in fact illegal.  

  • July 31, 2015
    Video Interview

    by Nanya Springer

    In the current political climate, the idea that Congress should pass legislation redistributing wealth and resources is met with abhorrence by conservatives and, often, with apathy by liberals. This was not always the case, argues William Forbath, Associate Dean for Research and Lloyd M. Bentsen Chair in Law at the University of Texas School of Law. At one time, liberals widely viewed economic inequality as a constitutional issue and believed redistributive measures were not only permissible, but constitutionally required to ensure the equal protection of the laws and to promote the general welfare.

    In an interview with ACSblog, Forbath explains that today’s liberals have come to think the Constitution does not speak to the redistribution of resources. This contradicts the views of key historical lawmakers who discussed anti-trust, banking, currency and trade as constitutional issues and who viewed Congress as constitutionally obliged to promote the country’s broad economic wellbeing through redistributive policies. Forbath adds that even before the Equal Protection Clause appeared in the federal Constitution, state constitution guarantees of equal protection focused on protecting the poor from legislation that favored economic elites. “The Constitution needs safeguards against oligarchy,” he asserts. “Ours is an anti-oligarchy Constitution.”

    Noting America’s shrinking middle class and diminishing equality of opportunity, Forbath concludes that “these older generations were right . . . You can’t keep a constitutional democracy or a republican form of government with boundless inequality. You can’t keep it without a broad middle class. You can’t keep it alongside an oligarchic, entrenched economic elite.” Instead he, along with fellow University of Texas Law Professor Joseph Fishkin, promotes a return to the idea that we have a “Constitution of opportunity” ― one that supports a robust middle class and ensures opportunity for all, not just the privileged.

    Watch the full interview here or below.

     

  • May 1, 2015
    Guest Post

    by Rena Steinzor and Thomas McGarity, past presidents and founders of the Center for Progressive Reform. Steinzor is a professor at the University of Maryland Carey Law School, and McGarity is a professor at the University of Texas Law School. Steinzor is author of Why Not Jail? Industrial Catastrophes, Corporate Malfeasance, and Government Inaction. McGarity is author of Freedom to Harm: The Lasting Legacy of the Laissez Faire Revival.

    With the announcement that GM Chief Executive Officer Mary Barra received the outsized compensation of $16.2 million in 2014, what should have been a year of humiliation and soul-searching for that feckless automaker instead ended on a disturbingly self-satisfied note.  Purely from a public relations perspective, Barra worked hard for her money.  Appearing repentant, sincere, and downcast, she persuaded star-struck members of Congress that the company was committed to overhauling a culture characterized by what she called the “GM shrug,” loosely translated as avoiding individual accountability at all costs.  Even as she blinked in the television lights, GM fought bitter battles behind the scenes to block consumer damage cases and exploit corporate tax loopholes.

    Largely on the basis of her political adeptness, Barra has been taking victory laps in the business press, hailed as the rare (female) CEO who has led her corporation out of a morass that could happen to anyone.  This performance and the accolades it inspired provide a troubling coda to what was a destructive year for American drivers.  Dubbed “the year of the recall,” automakers recalled an unprecedented 64 million vehicles ‒ about one in five cars on the road; GM led with 26 million of this total.

    To restore justice to GM’s beleaguered customers – and the scores of families who lost loved ones in crashes caused by the defective switch – we can only hope that the Justice Department’s criminal investigation of the company and its senior executives results in prosecutions that could offset the unjust favors the legal system is already prepared to bestow.