The House on June 8 along partisan lines approved the deregulatory Financial CHOICE Act 233-186. It does away with many of the “onerous regulations” that Democrats passed in 2010 to prevent a repeat of the excesses that led to the financial crisis of 2007-08. Republicans would reduce federal scrutiny of big banks, such as Goldman Sachs, Bank of America and Wells Fargo, as well as other large financial institutions, such as Insurance companies.
Republicans have targeted the Consumer Financial Protection Bureau, a consumer watchdog agency created in the Dodd-Frank Act. The new bill would let the president hire and fire the head of the CFPB and it gives Congress authority over the CFPB’s budget, which is now funded by the Federal Reserve. It strips the CFPB’s authority to regulate “small-dollar credit,” including “payday loans, vehicle title loans, or other similar loans” that saddle borrowers with extremely high interest rates. The CFPB in 2016 proposed rules to curb abuses by predatory lenders, requiring them to ensure a borrower will be able to make payments on time, and making repeat lending to the same people more difficult.
The GOP bill also reduces the CFPB’s ability to levy hefty fines against financial institutions for “unfair” or “deceptive” practices, as it did last year when Wells Fargo was fined $100 million for opening two million accounts customers did not ask for or know about. And it reverses efforts by the CFPB to limit forced-arbitration clauses, which prohibit consumers from bringing traditional lawsuits against financial institutions, requiring them to participate in private, often expensive, proceedings to resolve disputes outside the regular court system.
The bill also repeals the Volcker Rule, which prohibits big banks from using depositors’ funds to participate in certain risky investment activities. It also eases annual “stress tests” measuring the ability of the largest banks that are considered “too big to fail” to withstand financial shock. It removes the government’s ability to restructure a failing financial institution and it repeals the limits set by the Fed on how much banks can charge consumers and retailers for using debit and credit cards.
The bill also would eliminate the Labor Department’s “fiduciary rule,” which requires brokers to act in the best interest of their clients when providing investment advice about retirement plans. After years of development the rule was completed last spring under the Obama administration and the first parts of the rule went into effect June 9. The Trump Labor Department could try to weaken the fiduciary rule before it takes full effect next January.
The CHOICE bill’s sponsor, Rep. Jeb Hensarling (R-Texas), who chairs the House Financial Services Committee, has argued that the bill will protect consumers and smaller community banks that are burdened by the cost of complying with Dodd-Frank’s regulatory structure. But Hannah Levintova noted at MotherJones.com that FDIC data on community banks contradicts Hensarling’s point: In 2016, community bank earnings grew by $507.9 million from the previous year, and they gave out small business loans at more than twice the rate of noncommunity banks.
“This is a dangerous piece of legislation,” Steny Hoyer, the House minority whip, said on the House floor.
Republicans, who have a 52-48 Senate majority, will need Democratic support to get the Financial CHOICE Act through the Senate, where 60 votes are needed under regular rules, unless Senate Majority Leader Mitch McConnell decides to nuke the filibuster for legislation the way he did in April to confirm right-wing Supreme Court nominee Neil Gorsuch. Republicans could try to pass a more limited version of the bill with a simple majority through the same reconciliation process they intend to use for the health care repeal bill. Senate Banking Chairman Mike Crapo (R-Idaho) has made overtures to ranking member Sen. Sherrod Brown (D-Ohio), but Brown is holding the line. “Democrats have shown we’re willing to work with Republicans to tailor the rules where it makes sense, but not if it means killing the reforms that have made the financial system safer and fairer,” Brown said before the House vote. Democrats and other progressive groups argue that banks need more oversight, not less. They noted that banks reported record profits last year, despite the Dodd-Frank rules, and Wall Street bonuses rose for the first time in three years.
Trump backed the deregulatory bill, but he has said he would “look at” a return to some of the features the old system under the Glass-Steagall Act of 1933, which prohibited traditional banks from doing the riskier work of investment banks. Nobody seems to know what he means. Sens. Elizabeth Warren (D-Mass.) and John McCain (R-Ariz.) have introduced a “21st Century Glass-Steagall” bill that would prevent banks from acting as both commercial lenders and investment banks, but Trump has brought in five former Goldman Sachs executives to look after his economic policies. Treasury Secretary Steven Mnuchin, a former Goldman Sachs executive, has told the Senate that a “bright line” between commercial and investment banking could hurt lending and capital markets activity that “support a robust economy.”
Gary Cohn, the former Goldman Sachs president who is now Trump’s top economic adviser, recently told Bloomberg that a “21st Century modern Glass-Steagall” could allow the US to better “tailor regulation” in a way that increases lending.
On the Republican effort to replace Obama’s Affordable Care Act, Senate Majority Leader McConnell has started the process to rush Trumpcare 2.1 through the Senate on a fast track with very little transparency. Republican senators have been working behind closed doors to craft a deal that could secure 50 votes they need to pass the bill under the budget reconciliation process. But the Senate bill apparently won’t be much improved from the House bill, which the Congressional Budget Office said would cut $834 billion from Medicaid and cause 23 million Americans to lose health coverage. Republicans need that $834 billion to pay for tax cuts for the rich, so you can expect those savage cuts to remain in the bill. Also look for provisions allowing states to waive essential health benefits, including coverage for pre-existing conditions at standard rates, and allowing insurance companies to charge older people — aged 50-64 —up to five times what they charge younger people.
Under Rule 14, McConnell can bypass committees and send the bill directly to the Senate floor as soon as he thinks he has the votes. Senate Republicans have no plans to publicly release the bill before it goes to the floor, because they know the public won’t like it.
Topher Spiro, health policy expert at the Center for American Progress, has been keeping whip counts in both the House and Senate on Trumpcare. He hears that McConnell has written off Sens. Susan Collins (Maine) and Lisa Murkowski (Alaska) as no’s, and he’s ready to bring in Vice President Mike Pence for the tiebreaker. So call your own senators to urge a no vote on Trumpcare, and focus not only on firming up Collins’ and Murkowski’s opposition, but also work on vulnerable Sens. Jeff Flake (Arizona) and particularly Dean Heller (Nevada). And potential wild cards such as Ted Cruz, Mike Lee and Rand Paul could derail the bill because they think it’s still not harsh enough on the working poor.
Call your senators at 202-224-3121 and tell them the only replacement for Obamacare should be Medicare For All. — JMC
From The Progressive Populist, July 1-15, 2017
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