Andy Kroll

Andy Kroll

Senior Reporter

Andy Kroll is Mother Jones' Dark Money reporter. He is based in the DC bureau. His work has also appeared at the Wall Street Journal, the Guardian, Men's Journal, the American Prospect, and TomDispatch.com, where he's an associate editor. Email him at akroll (at) motherjones (dot) com. He tweets at @AndyKroll.

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Really Rich Back to Being...Rich

| Tue Jun. 22, 2010 11:26 AM EDT

The housing market is still a mess; foreclosures are mounting; unemployment hovers near 10 percent; and, as Treasury Secretary Tim Geithner said just today, "Our economy is still going through an incredibly difficult period." All of this stems from one of the worst financial crises in US history, a meltdown of epic proportions from which the country and the world has yet to fully recover.

That is, unless you're really, really rich. Bloomberg reports today that the super wealthy's riches have all but returned to their swollen, pre-meltdown levels, according to a report by Capgemini SA and Merrill Lynch. Of the 10 million people globally with $1 million or more to invest in whatever they want, their wealth rose nearly 19 percent in 2009, to $39 trillion. In 2007, just before the train sped off the cliff, that wealth was $40.7 trillion spread among 10.1 million really rich people. (Let's not mention 2008—these 10 million people's wealth amounted to only $32.8 trillion. A down year, there.)

Here's more from Bloomberg:

The U.S. had 2.87 million millionaires, more than triple second-ranked Germany with 861,500, the report said. The number of millionaires in China soared 31 percent to 477,400, keeping the country ahead of the U.K. with 448,100.

Ultra-high net worth individuals with more than $30 million to invest saw their wealth rise by 21.5 percent in 2009, faster than other millionaires, according to the report, which attributed the gain to a "more effective re-allocation of assets."

Huzzah! Now here's a recovery you can believe in.

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Crackdown Looming for Subprime Student Lenders

| Tue Jun. 22, 2010 10:11 AM EDT

Last month, I reported on a glaring omission in the Senate's 1,500-page financial reform bill: private student lenders, once described by New York Attorney General Andrew Cuomo as the "Wild West" of lending. These lenders, like juggernaut Sallie Mae, who often cater to subprime borrowers, saw the dollar amount of their loans grow from $7.2 billion to $15 billion between the 2003-04 and 2007-08 academic years. Over that same period, the percentage of students with private loans climbed from 5 percent (935,000 borrowers) to 14 percent in 2007-08 (nearly 3 million). Accompanying that growth, though, have been rampant predatory lending complaints, from peddling usurious interest rates to targeting the homeless and other people obviously without the means to pay off tens of thousands of dollars in debt.

Last night, top House lawmakers announced that private student lenders' exemption is all but dead. The House's conferees, who together with top sentators are trying to merge the chambers' two financial reform bills, offered new rules that would subject private student lenders—along with payday lenders, check cashers, and money remitters, among others—to oversight under a new Consumer Financial Protection Bureau. What's more, House conferees want to mandate that private student lenders get certification from a student's college before giving that student a private loan. This certification ensures that students are actually eligible for loans of any kind, and if so, that they've exhausted all options for receiving federal loan money, which carries lower interest rates and is generally safer than private loans.

These changes proposed by the House would go a long way toward to cracking down on abuses in the private student loan business, while letting the honest lenders who provide a necessary service to students go about their business. Now, it's up to the Senate, who left these lenders off the hook in the first round, to get on board.

House Reps Shill for Car Salesmen

| Tue Jun. 22, 2010 9:49 AM EDT

[UPDATE]: The Senate today accepted the House's exemption for car dealers from oversight by a new Consumer Financial Protection Bureau. The two leaders of the House-Senate conference process—Rep. Barney Frank (D-Mass.) and Sen. Chris Dodd (D-Conn.)—opposed the exemption, but acceded to colleagues who had pushed hard for the exemption.

Of all the special interest groups swarming Washington's financial reform debate, you could argue that the award for Most Pesky belongs to the auto dealer lobby. For the past year, auto dealers and their water-carriers on Capitol Hill have vehemently opposed new oversight and regulation under the proposed Consumer Financial Protection Bureau, whose jurisdiction would include mortgage brokers, payday lenders, and other businesses that lend money to consumers. Auto dealers make up 80 percent of the nation's automotive loans. Nevertheless, in the House's reform bill, they succeeded in winning an exemption from the bureau's oversight. (The Senate did not exempt them.) Now, in the latest announcement by top House members trying to reconcile the House and Senate's respective bills, the House is offering an amendment that would ensure dealers are exempt from oversight in the final bill.

If any type of retailer and/or lender cries out for new oversight, it's auto dealers. In 2009, dealer-related complaints ranked fourth-highest among all types of consumer-based complaints, at 26,019, after cell phone service companies, TV companies, and—big surprise—banks. The Center for Responsible Lending has reported that dealers frequently peddle higher interest rates to customers than would a regular bank, and that these "markups" amount to an extra $20 billion a year for consumers.

Throughout the past year's reform fight, groups ranging from the Navy Marine Corps Relief Society and the National Consumer Law Center have pushed hard to include dealers in any new consumer bureau's purview. (The military is especially active on dealer regulation because, as Mother Jones' Stephanie Mencimer has reported, shady dealers often prey on vulnerable servicemen and -women.) In a May letter to Sen. Sam Brownback (R-Kan.), who had sought an exemption for dealers in the Senate's bill, military and consumer advocacy groups wrote:

For example, some car dealers engage in "powerbooking," a scam in which the victim does not have access to the documents the dealer submits to the finance company and therefore has no knowledge of the phantom add-ons the auto dealer claims are part of the vehicle. Some dealers falsify loan applications, in which case the victim does not have access to the loan documents that falsifies pay stubs and statements of income. In another scam, the auto dealer promises to pay off the lien on the victim’s trade-in at the time of sale, but does not, so the consumer is unknowingly left with the responsibility to pay off the new car as well as the car that was traded in. There is no way for the victim to know in advance that the dealer doesn’t intend to pay off the lien. Senator Brownback’s modified amendment would do nothing to stop these abuses.

The House and Senate's new consumer protection bureau was created, lawmakers have said, to reign practices like powerbooking and auto lien fraud. Even President Obama has personally stepped in to fend off an auto-dealer exemption, saying in May, "The fact is, auto dealer-lenders make nearly 80 percent of the automobile loans in our country, and these lenders should be subject to the same standards as any local or community bank that provides loans." The House conferees, who meet again this week to hash out differences in their reform bill, apparently don't agree.

Crist's Rogue Gamble Paying Off?

| Mon Jun. 21, 2010 10:20 AM EDT

Charlie Crist's own version of "going rogue," of ditching the Republican Party and running for US Senate as an independent candidate, looks more shrewd by the day. Pilloried for abandoning the GOP that helped elect him Florida governor, Crist has now jumped out to a double-digit lead in Florida's Senate race, pulling away from Democrat Kendrick Meek and Republican Marco Rubio, a Tea Party favorite. A new poll by the Florida Chamber of Commerce and Cherry Communications shows Crist with 42 percent backing, Rubio with 31 percent, and Meek with a measly 14 percent.

Crist's 11 percent lead over Rubio is by far his largest since ditching the GOP in late April. After declaring himself an independent, Crist has steadily built up his advantage over Rubio, who by contrast has slipped in the polls and was even named "Loser of the Week" by the St. Petersberg Times this weekend. A couple of financial ethics mini-scandals by Rubio, including double-billing taxpayers for travel costs, have contributed to the Tea Party rockstar's waning popularity.

Chamber Targeting Next Finance Battle

| Mon Jun. 21, 2010 8:20 AM EDT

As early as this week, top members of the House and Senate will hash out a final agreement on merging the two chambers' financial reform bills. Led by Rep. Barney Frank (D-Mass.) and Sen. Chris Dodd (D-Conn.), this "conference" process will soon produce a compromise—and, potentially, compromised—bill that seeks to prevent the kinds of abuses that brought the economy to it knees by rejiggering how Wall Street does business. But even before a conference compromise has been reached and a final bill sent to President Obama, lobbying powerhouses like the Chamber of Commerce are already plotting their attacks on the next phase of financial reform—making 1,600 pages of arcane law a reality.

Bloomberg reports that according to a Chamber analysis, the bill could require as many as 399 new rulemakings and 47 new studies, on everything from consumer protection to eliminating debit card "swipe" fees to making big banks cut off their riskiest investment outfits. Which is to say, once the bill passes, there's going to be a whole lot of jostling and lobbying and pressure on regulators, the ones implementing the bill, to weaken new reforms and spare banks the toughest changes. Even the subtlest of regulatory tweaks could mean billions of dollars kept or lost by the country's biggest banks. Here's Bloomberg:

The direction from Congress in the legislation is broad: The consumer agency is to police “covered persons,” or any person offering or providing a consumer financial product or service. Some of the “covered persons” are defined in the bill, while others aren’t.

For example, the agency would regulate mortgage brokers and anyone who is a “larger participant of a market for other consumer financial products or services.” In the rule-writing, the agency would have to determine exactly what a “larger participant” is.

"It’s all on-the-blackboard stuff until you get to the regs," said Wayne Abernathy, a former Treasury official who is now an executive vice president at the American Bankers Association. "That's when it becomes real life."

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