Banks have disliked Warren since her Harvard days, when she agitated against predatory lending, credit card fees, and other bank practices. And as her national profile grew through her work with TARP oversight and the Consumer Financial Protection Bureau, the watchdog agency she helped create, their arm’s-length opposition became a full-on war. Banks lobbied to keep her from being nominated to head the CFPB, then poured big donations into the campaign of Scott Brown, her Senate race opponent.
After her convincing victory in November, her appointment to the powerful Senate Banking Committee, where she would have actual oversight of the financial sector, is seen by many on Wall Street as a fait accompli.
What scares Wall Street most is that, unlike many industry detractors, Warren can stand toe-to-toe with industry lobbyists on the nuances of regulation and the nature of complex financial products. She is also skilled at boiling esoteric points about Wall Street’s excesses down to a pure, potent narrative of intentional malpractice. In her speech at the Democratic National Convention, Warren took on banks using the kind of brusque language you don’t hear all that often on Capitol Hill.
"People feel like the system is rigged against them," she said. "And here’s the painful part: they’re right. The system is rigged. Look around. Oil companies guzzle down billions in subsidies. Billionaires pay lower tax rates than their secretaries. Wall Street CEOs — the same ones who wrecked our economy and destroyed millions of jobs — still strut around Congress, no shame, demanding favors, and acting like we should thank them."
The speech was booed by Republicans and mocked by Wall Street, but it was a hit everywhere else, even among legislators not traditionally known for their anti-bank rhetoric.
“I can’t stop thinking about Elizabeth Warren’s speech,” New York Senator Kristen Gillibrand wrote in an e-mail to supporters the next day. “You could hear it in her voice and see it in her eyes: Elizabeth will never give up on the middle class. She’ll be relentless in making sure everyone gets a fair shot.”
That kind of contagion scares some senior Wall Street types, who fear that with a seat on the banking committee and her media-darling status, Warren’s views could spread to other senators in short order.
Still, Warren’s most powerful argument, and the one that has caught on among her fellow Senate Democrats, is not really about specific businesses or products. It’s about tone, and the basic failure of Wall Street firms to properly acknowledge their roles in the financial crisis, display sufficient gratitude for having been bailed out by taxpayers, and change their practices accordingly.
In attempt to ingratiate themselves with Warren and avoid the brunt of her newfound power, firms in the senator-elect’s home state are already distancing themselves from their bulge-bracket brethren.
“We don’t consider ourselves Wall Street, honestly,” Tracey Flaherty, an executive at Boston-based asset manager Natixis Global Asset Management, told the Boston Globe last week.
But without that card to play, Wall Street megabanks are left to hope that the Senate will sand down some of Warren’s sharp edges. Several financial firms and lobbying groups said they expected to meet with Warren and her transition staff in the coming weeks to try to curry favor at the start of a six-year term. But few have high hopes for turning her into a friend of the financial sector.
"She has a way of getting what she wants," another bank executive said with a sigh.
The Rolling Jubilee could influence economic policy as a model for a very different kind of bailout in response to the next financial crisis. The problem of unpayable debts bedevils every corner of our financial system – public, corporate, and personal. So far, the response of the monetary and fiscal authorities to nearly every financial crisis has been to bail out the creditors but not the debtors. Governments and central banks purchase all kinds of shoddy loans from the private sector, but rather than reduce interest or principal on those loans, they merely become the new creditor. The underwater homeowner, the indebted university graduate, the laid-off worker juggling credit cards … they get no relief at all.
The Rolling Jubilee brings a different kind of solution into the public consciousness. The next time a systemic crisis breaks, central banks can rescue the banking system by once again buying the delinquent loans – and then cancel them or reduce the amount borrowers owe. Central banks, with their unlimited capacity to print money, have the power to do this at no cost to the taxpayer. The result would be a release of pent-up consumer purchasing power that had been stuck in debt service. Rising demand would fuel employment, wages, and a broad-based economic expansion.
Would this solution be inflationary? Yes. But a little inflation isn’t necessarily a bad thing, as long as wages rise as fast as prices. Then it is an equalizer of wealth, as the relative value of hoarded wealth shrinks.
Debt cancellation, whether a “people’s bailout” or government policy, is only part of the solution to our economic woes. Deep systemic reforms are necessary, especially given the reality that we are operating a growth-dependent system on a finite planet. But right now, debt is the issue staring us in the face. As always, the most innovative solutions rise from the margins. The Rolling Jubilee may be showing us a glimpse of what is to come.
Warren to nab powerful committee seat? According to several Senate sources, Senator-elect and populist hero Elizabeth Warren has a good chance of getting a seat on the powerful Senate Banking Committee. This is a logical fit for Warren, architect of the Consumer Financial Protection Bureau, and would give her great power in her efforts to curb deceptive and unscrupulous practices on the part of financial institutions. “[G]iven her prominent work on those issues, she would certainly have a very good shot” at getting a spot on the committee, an aide tells Reuters. Having Warren on Banking is essentially the Republicans’ worst nightmare, but it’s worth noting that it’s a nightmare entirely of their own short-sited construction. source
Ben Protess of the New York Times:
“Federal prosecutors in New York sued Bank of America on Wednesday, accusing it of carrying out a mortgage scheme that defrauded the government during the depths of the financial crisis. In a civil complaint that seeks to collect $1 billion from the bank, the Justice Department took aim at a home loan program known as the ‘hustle,’ a venture that has become emblematic of the risk-fueled mortgage bubble. The complaint adds to a flurry of federal and private lawsuits facing Bank of America’s beleaguered mortgage business….
Prosecutors say the venture was a symbol of Wall Street’s slipshod standards during the mortgage bubble. According to the lawsuit, Countrywide rubber-stamped mortgage loans to risky borrowers and passed them on to Fannie Mae and Freddie Mac, the two government-controlled mortgage financial giants that guaranteed the loans. The two entities were ultimately stuck with heavy losses and a glut of foreclosed properties.
Ooooh so this is awesome news.
During the housing boom, Wells Fargo hired thousands of temporary staff and paid them overwhelmingly in commission to crank out as many mortgages as possible and pointedly didn’t check how secure those mortgages were but then turned around and told the federal government there was no chance that any of them would go under so could they please have insurance. And then when all the mortgages went under the Wells Fargo execs were all “oh goodness me how ever could that have happened”.
Anyway the Federal Housing Authority had to pay out the insurance claims on Wells Fargo’s defaulted subprime mortgages but now finally they’re suing to get the money back. Hopefully this goes well? Most likely they will end up settling for a very large sum of money rather than have all their information laid out in court.
Cast your mind back to February. Five of the nation’s big banks, including Chase and Bank of America, agreed to pay $25 billion to settle state and federal claims over questionable mortgage practices and promised to work harder to help borrowers who were in trouble. To prod the banks, the government said it would give them credits against the amounts they agreed to pay.
So, to the ire of customers who couldn’t get banks to work with them before, banks are now forgiving debts that no longer exist.
It’s bad enough that these letters are inaccurate. But even worse are the tax problems that they may create for people like Ms. Esposito. In most cases, the Internal Revenue Service considers debt that is forgiven to be taxable income. One exception occurs in bankruptcy; when a debt is discharged, it is not taxable.
But the letters sent by Chase and Bank of America clearly warn that the forgiveness will be reported to the I.R.S. If so, these borrowers may have to prove that the banks erred in claiming to have forgiven the debts.
At this point, we have no choice but to conclude that the Mitt Romney campaign is just trolling whiny journalists who have complained about the lack of detail in his plans.
Yesterday evening (a Friday evening!) the campaign revealed a whitepaper titled Securing the American Dream and The Future of Housing Policy that’s so unsubstantial, we half-suspect the timing was done so that nobody would see it amid the release of the 2011 tax documents, which came out about 20 minutes earlier.
This is honestly a sentence in his whitepaper on The Future Of Housing Policy:
The Romney-Ryan plan will completely end “too-big-to-fail” by reforming the GSEs.
Romney and Ryan believe that “too-big-to-fail”, which generally refers to the assumption that a collapse of a major Wall Street institution would be catastrophic to the overall economy, thus making a bailout imperative, would be solved by the reform of Fannie and Freddie. Or maybe Romney and Ryan believe that only Fannie and Freddie are too big to fail, and that the collapse of a mega-bank would be fine. Those are the only possible readings of that sentence.
As for Romney and Ryan’s plan to reform the GSEs, the plan is to… reform them.
The board of directors at the American Bankers Association, which represents about 5,000 U.S. banks, will vote on Thursday whether to launch a nonprofit advocacy group, which would join the scores of tax-exempts already pouring millions into the 2012 election without having to disclose donors.
"It’s a capability that most trade associations have," said ABA’s Chief Operating Officer Michael Hunter. "It’s been on the table for a while … In some ways this is just building out a capability that the ABA needs in the long term."
The group is expected to focus on changing the 2010 Dodd-Frank law that overhauled federal oversight of the financial system, Hunter said.
But it would be up to the nonprofit’s own board of directors - proposed to be made up of 14 bankers - to decide which House and Senate races the nonprofit would seek to influence, he said.
"They could decide to marshal resources for the 2013 election," Hunter said. "Nothing’s on the table an everything’s on the table."
The ABA’s traditional disclosed donations so far this campaign cycle stand at about $1.7 million, and have gone predominantly to Republican candidates in the House and Senate, according to a tally on the website of the Center for Responsive Politics.
See why you must vote?
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The media doesn’t seem to be covering this at all.
A global super-rich elite has exploited gaps in cross-border tax rules to hide an extraordinary £13 trillion ($21tn) of wealth offshore – as much as the American and Japanese GDPs put together – according to research commissioned by the campaign group Tax Justice Network.
James Henry, former chief economist at consultancy McKinsey and an expert on tax havens, has compiled the most detailed estimates yet of the size of the offshore economy in a new report, The Price of Offshore Revisited, released exclusively to the Observer.
He shows that at least £13tn – perhaps up to £20tn – has leaked out of scores of countries into secretive jurisdictions such as Switzerland and the Cayman Islands with the help of private banks, which vie to attract the assets of so-called high net-worth individuals. Their wealth is, as Henry puts it, “protected by a highly paid, industrious bevy of professional enablers in the private banking, legal, accounting and investment industries taking advantage of the increasingly borderless, frictionless global economy”. According to Henry’s research, the top 10 private banks, which include UBS and Credit Suisse in Switzerland, as well as the US investment bank Goldman Sachs, managed more than £4tn in 2010, a sharp rise from £1.5tn five years earlier.
The detailed analysis in the report, compiled using data from a range of sources, including the Bank of International Settlements and the International Monetary Fund, suggests that for many developing countries the cumulative value of the capital that has flowed out of their economies since the 1970s would be more than enough to pay off their debts to the rest of the world.
This is just one of many massive settlements between the lending industry and the government. The lenders did some really bad stuff leading up to the recession.
I’m sorry. Let me try that again. The lenders allegedly did some really bad stuff leading up to the recession. It’s just allegations and $175,000,000.
The United States also alleges that, between 2004 and 2009, Wells Fargo discriminated by charging approximately 30,000 African-American and Hispanic wholesale borrowers higher fees and rates than non-Hispanic white borrowers because of their race or national origin rather than the borrowers’ credit worthiness or other objective criteria related to borrower risk.
Here are two bits of background on this news:
- The sort of discriminatory lending at issue in this suit is one of the primary reasons that the median non-white family has approximately one seventh the net worth of the median white family.
- The Obama DoJ, in stark contrast with the Bush DoJ, cares about fair lending.
The report details how the process works. In most cases, companies like JPMorgan Chase and Bank of America buy tax liens from the city and eventually evict the original owners. The investors then resell the house for a hefty profit. A $200,000 home, for example, might be sold on tax lien sale for $1,200.
Nationally, NCLC reports annual tax lien sales total $15 billion and the elderly and disabled are the most vulnerable.