Financial regulation

  • June 7, 2012
    So Rich, So Poor
    Why It's So Hard to End Poverty in the United States
    Peter Edelman

    By Peter Edelman a law professor at Georgetown University, co-director of the University’s Joint Degree in Law and Public Policy, and Faculty Director for the school’s Center on Poverty, Inequality and Public Policy. Edelman is also the chair of the American Constitution Society’s Board of Directors, and will be signing copies of his book at the ACS National Convention next week.

    It’s never hard to find a policy hook to discuss poverty in the United States, but one we have just now is the recent budget for FY 2013 proposed by Paul Ryan and the House Republicans which proposes to slash virtually every program that helps low-income people in our country.  My new book is called So Rich, So Poor: Why It’s So Hard to End Poverty in the United States. Paul Ryan and colleagues are definitely a policy hook for talking about my book.

    I could just say that people like Paul Ryan and the House Republicans are the reason why it’s so hard to end poverty in our nation. That’s not wrong, but the story is much more complicated than that. We have a long list of successful programs without which we’d have 40 million additional people in poverty over and above the 46 million we have now. Don’t let anybody tell you that nothing works. Paul Ryan’s line is that if we have 46 million people in poverty now, it’s because the programs are a failure – because social security, food stamps, the earned income tax credit, housing vouchers, and Medicare and Medicaid are failures. And some people – all too many -- take him seriously.    

    No, we have 46 million people in poverty and tens of millions more struggling every day to make ends meet for other reasons. There are two problems here, actually: the millions who work as hard as they can and can’t get out of poverty or near-poverty, and the smaller (but not small) group who are virtually destitute, with incomes below half the poverty line, or below $9,000 for a family of three. The first group – whose basic problem is the huge number of low-wage jobs now extant in our economy – now constitutes a third of the population, 103 million people who have incomes below twice the poverty line (below $36,000 for a family of three). The second – those in deep poverty – now number 20.5 million, up by almost 8 million since 2000. Both numbers are staggering, each in its own way.

  • May 24, 2012

    by Jeremy Leaming

    JPMorgan Chase CEO Jamie Dimon has been a loud, at times obnoxious, critic of serious efforts to strengthen regulations of the financial industry. Specifically he has fought the Volcker rule, which would bar federally insured banks from risky trading ventures, similar to the ones that Dimon’s bank engaged in that led to a multi-billion dollar loss.

    Dimon is also on the board of the Federal Reserve Bank of New York, which is instrumental in supervising and regulating financial institutions. A growing number of people, including Treasury Secretary Timothy Geithner, are suggesting that Dimon is unfit to serve on the board of an institution that is charged with checking the actions of JPMorgan, which as The New York Times has noted emerged from the Great Recession as “the nation’s biggest bank.”  

    Simon Johnson, former chief economist of the International Monetary Fund, is the latest influential voice to call for Dimon to go.

    Writing for The Baseline Scenario, Johnson noting that the NY Fed is a “key part of our regulatory and supervisory apparatus,” concludes that it makes no sense for Dimon to remain a part of the apparatus that “oversees his activities, decisions, and potential losses.” Johnson is asking others to join the effort urging Dimon to resign from the board.

    The JPMorgan debacle centers on a trader in London dubbed the “London Whale,” apparently for playing a central role in a risky hedging strategy that led to the announcement of a $2 billion, likely far higher, trading loss.

    In a post for his Rolling Stone blog, Matt Taibbi says, “If you’re wondering why you should care if some idiot trader (who apparently has been making $100 million a year at Chase, a company that has been the recipient of at least $390 billion in emergency Fed loans) loses $2 billion for Jamie Dimon, here’s why: because J.P. Morgan Chase is a federally-insured depository institution that has been and will continue to be the recipient of massive amounts of public assistance. If the bank fails, someone will reach into your pocket to pay for the cleanup. So when they gamble like drunken sailors, it’s everyone’s problem.”

  • February 1, 2012

    by Nicole Flatow

    In recess appointing Richard Cordray to the Consumer Financial Protection Bureau and three others to the National Labor Relations Board, President Obama has acted “sensibly and soundly to defend his own prerogatives,” UNC Chapel Hill constitutional law professor Michael Gerhardt said during a House Oversight and Government Reform Committee hearing Wednesday.

    During a more than three-hour hearing that featured sharp questioning and a host of objections to President Obama’s actions by Sen. Mike Lee, Gerhardt explained the clear constitutionality of President Obama’s action, and praised the Office of Legal Counsel’s recent memorandum defending the legality of the action as a “perfectly good example” of the kind of nonpartisan legal analysis performed by the office.

    After dismissing arguments that President Obama did not act during an actual “recess” because the Senate held pro forma sessions every three days, Gerhardt went further to explain that Obama has an affirmative constitutional duty to enforce the laws faithfully, which he was aiming to effectuate in making recess appointments.

    “No doubt in this case the president considered that if he didn’t act there would be laws left unenforced --  laws that he’s obviously trying to do what he can to put into implementation,” Gerhardt said.

    Some of the other witnesses testified that the recess appointments have resulted in uncertainty for businesses, because decisions made by the NLRB and actions taken by the CFPB may be invalidated if legal challenges to Obama’s appointments are successful.

    But Gerhardt agreed with Rep. Danny Davis during questioning that all actions and major pieces of legislation are subject to legal challenge, and there is nothing unique about Obama’s recess appointments.

    “It’s sort of a false premise to say that recess appointments are likely to create litigation when the litigation is likely to take place in any event,” Davis said. “Whether these are recess appointees or any other kind of appointees, individuals still have the option to ask for judicial review.”

    Around the same time that this hearing was occurring, the Senate Banking Committee was also reviving the issue of Obama’s recess appointments during an oversight hearing involving Richard Cordray.

    As The National Law Journal’s Jenna Greene explains:

  • January 17, 2012
    Guest Post

    By Ann C. Hodges, a professor of law at the University of Richmond

    In the past 20 years the Supreme Court has interpreted the Federal Arbitration Act broadly, allowing businesses to require consumers and employees to arbitrate, rather than litigate, many legal claims. Businesses frequently use arbitration agreements to bar class actions, which can be costly and time-consuming. Just last term, in AT&T v. Concepcion, the Court enhanced this business tool, striking down a California law that prevented businesses from barring class actions in cases involving small claims brought by less powerful parties bound to arbitrate by contracts of adhesion. Although the case involved consumers, it offered employers a vehicle to restrict employee class actions.

    The NLRB’s decision in D.R. Horton, issued in early January, significantly limited the effectiveness of this tool for employers by invalidating an arbitration agreement that banned class actions. This case is likely to generate significant controversy, provoking even more attacks on the agency by its vocal critics, but experienced labor lawyers will recognize the case as an unremarkable application of long-settled legal principles.

    Class claims frequently offer the only vehicle for consumers or employees to challenge unlawful actions that cause limited damages to each individual while often reaping millions for the business. For each person injured, the cost of litigating a claim outweighs the potential benefit.  Without class actions, these claims often go unremedied. In the workplace, Fair Labor Standards Act cases seeking minimum wage or overtime payments are most likely to be abandoned on this basis and Horton involved such a claim, alleging that the nonunion employer misclassified employees as exempt from overtime pay.

  • January 16, 2012
    Guest Post

    By Cedric Ricks, Communications Associate, National Fair Housing Alliance

    Nearly 46 years ago, Dr. Martin Luther King Jr. led a 1966 summer march in Chicago's Marquette Park demanding fair housing. King protested a dual housing market, in which whites were free to reside wherever they could afford, but African-Americans were barred from many parts of Chicago and in other American cities because of restrictive covenants, social practice and discrimination in lending

    Before he left Chicago, King referred to the historic protest as "a first-step in a 1,000-mile journey." Since then real progress has been made with the passage of the federal Fair Housing Act of 1968 - passed one week after King's assassination - and the enactment of the Equal Credit Opportunity Act of 1974.

    But to achieve a broad affirmative vision of fair housing many additional steps are still needed. It's entirely fitting we consider what comes next as our nation honors Dr. King's birthday with a federal holiday.

    Congress took an important step forward toward equality and justice with the creation of the Consumer Financial Protection Bureau, and President Obama advanced even further this month by appointing former Ohio Attorney General Richard Cordray to lead the Bureau.  

    The CFPB has one central mission: to make the market for consumer financial products and services work for ALL consumers, responsible providers and the economy as a whole. To accomplish its mission, the Bureau seeks to promote transparency and consumer choice while preventing unfair, deceptive and discriminatory practices.