Financial Regulation

  • March 7, 2013
    Lawless Capitalism
    The Subprime Crisis and the Case for an Economic Rule of Law
    Steven A. Ramirez

    by Steven A. Ramirez, Professor of Law, Loyola University Chicago, School of Law

    Too much power in too few hands presents dangers of despotism.

    Americans traditionally deemed concentrated and unaccountable political power suspect. The United States Constitution reflects this suspicion by splitting sovereign power among state and federal governments, and then dividing it again between three co-equal branches that provide checks and balances against overreaching by any government official.

    Yet, the Constitution fails to splinter concentrated economic power. While Congress may act to check economic concentration, in the end, brakes on economic concentration rise or fall based upon political negotiation. Congress cannot legislate a King; it may, however, permit financial consolidation to such an extent that big finance holds an unlimited claim on government resources.

    Since 1978, bipartisan legislation created unprecedented economic concentration.  Tax cuts led to the highest income inequality on record. Financial deregulation birthed the largest financial behemoths ever. Restraints governing managers of public corporations vanished, and CEO compensation soared. Predictably, as more wealth became concentrated in fewer hands, costs to organize to lobby lawmakers plunged.

  • January 7, 2013

    by Jeremy Leaming

    It can be difficult to follow with great interest the machinations in the nation’s capital, especially with divisive, often ridiculous debates that unfold and then are taken to a whole new level by loud pundits dominating airwaves. But when cynicism sets in, as it has within parts of my family, there’s almost no room for serious, calm conversation about policy that is actually being advanced in the confines of the beltway.

    Over the winter break I had the great fortune of seeing three of my brothers, two of whom I rarely get to see anymore. One brother, who has veered from libertarianism to socialism, has written off the entire political process. President Obama is a tool of Wall Street, it would not have mattered had Mitt Romney won the White House, they both represent the same interests, he would say. He scoffed at the Affordable Care Act – no public option, no expansion of health care to the needy – and at the extension of unemployment benefits that has occurred under the Obama administration’s watch. In my brother’s mind the entire system was bought by big corporations a long time ago and they pull all the strings of both major political parties. But I wasn’t all that surprised – he’s been regurgitating the late comedian George Carlin’s stinging, though simplistic, lines about a broken American government for many years now.

    The reality is that the American political process is messy, incredibly divisive and often terribly exhaustive and inadequate. But the constant carping about how bad politicians are is also tiring and irrelevant. When hasn’t our democracy been a messy, maddening affair? Sure there have been respites, but they often don’t last long. It’s a fairly large country, and regardless of Carlin’s jabs, we do and have had some remarkable politicians and heroic leaders for equality and civil rights.

    And regarding the Obama administration’s first term, a little research would reveal that it is wildly over-the-top to blast it as a tool of big business. As The American Prospect’s Jamelle Bouie notes, Obama’s first two years in office “are a good case study of what happens when Democrats have control of the federal government – they try to expand it. In those two years, Democrats greatly expanded the welfare state with a new, quasi-universal health-care program, funneled hundreds of billions of dollars to infrastructure and clean energy research, and implemented a host of new financial regulations. There’s a reason Time correspondent Michael Grunwald called his book on the stimulus The New New Deal – in both size and scope, the activity of Obama and the 111th Congress resembled that of FDR’s first term.”

  • August 1, 2012
    Guest Post

    By Kent Greenfield. Greenfield is a Professor of Law, and Law Fund Research Scholar at Boston College Law School.

    Before the end of the latest SCOTUS term, flush with the excitement of the right’s anticipated victory in the ACA case, a small bank in Texas and a few additional plaintiffs sued to contest the constitutionality of the Consumer Financial Protection Bureau (CFPB) and the Financial Stability Oversight Council (FSOB), two new agencies created by the Dodd-Frank legislation in 2010. 

    Few would have noticed except that the main lawyer for the plaintiffs is C. Boyden Gray, the White House counsel for George H.W. Bush. The Wall Street Journal printed an op-ed the day they filed suit, and several other right-leaning media outlets gave it mention. One commenter on the WSJ page said the lawsuit is more important for the future of the country than the presidential election.

    If the lawsuit were to be victorious, it would disembowel the most important innovations of the Dodd-Frank legislation, which, even with its numerous flaws, was an important legislative victory during Obama’s first term. [image of president signing legislation in summer 2010] 

    Should progressives worry? 

    I read through the complaint, and I don’t think we should. 

    If you separate out all the sturm und drang, the main focus of the constitutional claim is that Dodd-Frank created independent agencies that have too much discretion to regulate, especially using post-hoc adjudication. While the arguments against such independence, discretion, and post-hoc adjudication could occupy several hours of discussion in an introductory constitutional law class, they are hardly questions of first impression in the courts. On the contrary, the questions of whether administrative agencies (1) may be insulated from political control by the president, (2) may define operative regulatory terms, and (3) use adjudication to make law have been answered in the affirmative for decades. 

    So this lawsuit is not like the suits brought against the ACA that arguably raised new arguments about the scope of the commerce clause (action versus inaction, broccoli, and all that). This is a lawsuit wanting to re-litigate decades of settled law. 

  • June 27, 2012

    by Jeremy Leaming

    Up until the $2 billion trading loss debacle at JPMorgan Chase, right-wing lawmakers in Congress, primarily the House, were feverishly working to water down with new legislative measures Dodd-Frank, the financial reform law passed in the wake of the Great Recession.

    But, as CQ Today reported, House Republicans halted their efforts “at least for now” to undercut the law aimed at ending the shady tactics employed by financial industry giants that led to the financial meltdown of 2008. Part of Dodd-Frank created the Consumer Financial Protection Bureau or CFPB, which is tasked with trying to bring some sanity to the financial industry.

    As CFPB Director Richard Cordray (pictured) said during the ACS 2012 Convention the agency is the first ever “created with the sole purpose of protecting consumers in the financial marketplace. It is not an easy task, but it is crucial because the financial marketplace is no easy place for our fellow citizens as they seek to manage their affairs.

    Cordray continued, “Our task is so crucial because, as we saw with the recent financial crisis, unregulated or poorly regulated financial markets can undermine the stability of the economy and with it the promotion of the general welfare that, as specified in the preamble to the Constitution, stands as one of the basic purposes of the federal government. For that reason, the new Consumer Bureau was also created to help ensure that the recent financial panic and economic meltdown does not repeat itself.”

    But government efforts to help the nation’s less fortunate or vulnerable run counter to the interests of the nation’s super wealthy. Columbia University business school professor Joseph Stiglitz, author of Freefall, has noted that the nation’ top one percent has the greatest sway in the nation’s capital, and that it is largely not interested in progressive legislation.

    So like the efforts to reform the nation’s health care system, which includes tens of millions of uninsured, the Right is turning to the federal bench to try stymie progress. And as noted by the Constitutional Accountability Center’s Simon Lazarus the Right and libertarians have proven their acumen in advancing their views of a radically cramped Constitution and selling wobbly legal claims to the public. 

    Media Matters’ David Lyle in a post for the organization’s County Fair blog called “First Health Care, Now Dodd-Frank: The Tea Party Constitution Rises Again,” urges progressives to be better prepared.

    “Although the legal arguments made in the suit [lawsuit lodged in federal court last week challenging the constitutionality of Dodd-Frank] are questionable, the case should not be dismissed as harmless,” Lyle writes. “The right-wing media’s proven ability to move dubious legal claims into mainstream debate combined with a conservative federal judiciary sympathetic to corporate interests mean the CFPB suit bears close scrutiny.”

    Lyle notes experts doubt the challengers have standing to lodge the lawsuit, and that at least one “financial services regulatory lawyer” has concluded it doubtful “that a court would find significant provisions of Dodd-Frank unconstitutional because of ‘general vagueness considerations.’”

  • 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.