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 Detroit News, the Guardian, the American Prospect, and TomDispatch.com, where he's an associate editor. Email him at akroll (at) motherjones (dot) com. He tweets at @AndrewKroll.

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Can Consumers Trust Treasury?

| Mon Mar. 1, 2010 4:45 AM PST

By proposing a Bureau of Financial Protection within the Treasury Department as opposed to an independent Consumer Financial Protection Agency, is Sen. Chris Dodd (D-Conn.), the Senate's architect of financial reform, dooming the future of consumer protection? As a leaked outline of his watered-down plan for consumer protection (PDF) shows, Dodd plans to give more power to the Treasury, whose internal agencies already regulate national banks (the Office of the Comptroller of the Currency) and thrifts at the state and federal levels that were at the forefront of the mortgage meltdown (the Office of Thrift Supervision). The OCC and OTS, both at the center of the regulatory lapses before the crisis, offer a glimpse of why Dodd's plan could spell disaster for consumer advocates lobbying for tougher reforms and better regulation.

The much-maligned OCC and OTS, you'll remember, sided with lenders in the run-up to the meltdown, kept lowering the regulatory bar for the institutions they monitored, and let countless cases of fraud and wrongdoing occur under their watch, as numerous media reports have shown. Under the OTS' watch, three of the biggest banks its was supposed to be regulating were shut down in 2008, including Washington Mutual—the largest bank failure in history. An OTS regulator was even demoted for approving backdated documents from IndyMac making the bank look healthier than it was. (IndyMac failed two months later.)

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Dodd Guts Consumer Protection

| Sat Feb. 27, 2010 4:19 PM PST

UPDATE: Mother Jones has obtained a copy of Dodd's consumer financial protection plan.

Sen. Chris Dodd (D-CT) has dealt the death blow to consumer protection. The silver-haired senator, who chairs the Senate banking committee, plans to announce this week the creation of a Bureau of Financial Protection inside the Treasury—not unlike the Food and Drug Administration’s placement with the Health and Human Services Department—instead of an independent, standalone Consumer Financial Protection Agency, according to a leaked document obtained by the New York Times. The fate of consumer protection has been a chronic migraine for Dodd; his initial Republican co-negotiator, Sen. Richard Shelby (R-AL), abandoned talks with Dodd over a dispute on the CFPA, and Dodd’s current dance partner, Sen. Bob Corker (R-TN), called an independent consumer agency a “non-starter.” If Dodd does indeed gut the CFPA, the decision sets the stage for a showdown with the Obama administration and the House, both of whom want the CFPA, and in particular Rep. Barney Frank (D-MA), who told Mother Jones the agency was a “dealbreaker” for him.

According to the leaked proposal, the president would appoint the Bureau of Financial Protection’s director and its responsibilities would include overseeing big banks as well as non-banks, like the subprime lenders who peddled millions of explosive mortgages and preyed on unwitting consumers. The agency, the Times reports, would also have the authority to implement new financial regulations, but would handle rule-making a lot like the SEC does now:

The Dodd proposal would require the bureau to consult with other regulators before issuing rules and to make public any objections raised by those regulators, along with an explanation of how the bureau addressed the concerns. Those regulators also could appeal the proposed rule to a new interagency council tasked with detecting systemic risks.

The proposal would exempt banks and credit unions with assets of $10 billion or less. It would give the bureau the power to enforce regulations on large banks and nonbank lenders, in conjunction with other regulators, but would largely have to defer to other regulators in the case of smaller banks.

Dodd’s decision to go with a Treasury-housed consumer-protection agency instead of an independent agency—which he claimed to have supported earlier this month—is undoubtedly a move to garner bipartisan support for financial reform in the Senate. The senior senator has stated on numerous occasions that he wants to pass a major financial-reform bill before he retires this fall, and ditching a tough, standalone Consumer Financial Protection Agency for a more bureaucratic solution is one way to win some Republican support, even though Dodd himself said last fall that "There needs to be an independent agency that looks out for people when they take out a loan, open a checking account or use a credit card."

Inside a Wall Street-inclined Treasury Department—the previous secretary was a former Goldman Sachs CEO; Geithner, while not a banking alum, relies on Wall Street’s advice more than anyone else; and plenty of other current staffers are former Big Finance types—it’s unclear whether consumer protection would actually be a priority or not. Elizabeth Warren, who initially concocted the idea of a CFPA and is a leading consumer advocate in Washington, certainly won’t be pleased with Dodd’s new plan, just as most consumer advocates lobbying for greater crackdowns on predatory practices will be left disappointed.

If there is a winner emerging from Dodd's new consumer plan, it's the lobbyists who lobbied to kill the CPFA. Chief among them is the US Chamber of Commerce, who went so far as to create an entire website, StoptheCFPA.com, to ensure the independent agency met its demise. Now, as Dodd and the banking committee roll out their bill this week, it looks like the lobbying onslaught by the Chamber and its allies paid off.

When Cities Battle Wall Street

| Fri Feb. 26, 2010 10:43 AM PST

Fed up with the predatory practices and utter absence of foreclosure help from Wall Street, local politicians, unions, and citizens in Los Angeles have decided to battle the big banks and financial services community themselves in LA's own version of "Move Your Money." While Washington stumbles its way toward financial reform, a bill in the Los Angeles city government right now would crack down on banks and lenders who hang out to dry beleaguered homeowners and would rein in unfair practices; the bill would also create a series of policies calling for the divestment of LA's funds now held by large banks to more consumer-friendly ones. The campaign, led in part by the union SEIU, will be voted on before LA's city council as early as next Friday, an SEIU rep says, and marks a major effort in the "Move Your Money" campaign to yank both consumers and cities' own dollars out of bailed out institutions that aren't helping consumers, and into smaller, often local banks or credit unions.

A representative for SEIU today sent me the latest details of LA's "Move Your Money" bill under discussion by an LA city government committee, which recently took the following actions:

  1. Adopted the standards for banking relationships based on foreclosure prevention, small business lending, neighborhood banking and send to the full Council for approval;
  2. Called for the creation of a “report card” to evaluate the track record of banks that want to do business with the City. This report would include data on the number of small business loans provided, evidence of working with homeowners facing foreclosure, the number and location of branches and ATMs and the use of federal TARP funds. It would also allow LA policymakers the opportunity to choose banks that are giving back to the community;
  3. Directed the Chief Legislative Analyst to mandate a system of periodic assessment in addition to the report card to evaluate whether financial institutions meet the standards of socially responsible investing. This would include an annual, public report to the Council and Treasurer. The city would then give preference to banks in the top two deciles and lead to possible divestment for those that do not;
  4. Instructed the City Administrative Officer (CAO), in coordination with the Treasurer, the Chief Legislative Analyst (CLA) and the City Attorney, to enforce a moratorium on any new swap deals, and renegotiate or cancel current interest rate swap transactions at no cost to the city. The city will not do any business with banks refusing to renegotiate or cancel swaps deals. The city is currently paying $10 million each year on swaps deals and would be forced to pay $29 million to exit them;
  5. Requested that pension funds and proprietary departments with their own investment pools create similar policies to the ones proposed by the committee.

SEIU is also trying to introduce similar legislation in Maryland, and hopes the city-wide "Move Your Money" campaign will catch on. It's an ambitious effort, without a doubt, and while a few hundred depositors moving their money from, say, Citigroup to Weequahic Credit Union is more symbolic than anything, convincing a half-dozen cities to do the same could have a sizeable impact.

Housing Recovery Hits Brick Wall

| Fri Feb. 26, 2010 10:14 AM PST

Is the housing recovery dead in the water?

The latest news from Foreclosureland sure seems to say that, dealing a death blow to projections that a recovery was imminent. In January, new data shows, new home sales plunged 11.3 percent to a record low, according to the Commerce Department. That drop brings home sales to their lowest point in nearly 50 years, and comes at a time when economists were predicting an increase of around 5 percent or so from December's totals. The budding recovery in the housing sector "has taken another big step back, even with the government aid," said Jennifer Lee, an economist at BMO Capital Markets, in a research note. That aid, including the Obama administration's multibillion-dollar Home Affordable Modification Program, its flagship relief effort, has done next to nothing to quell turmoil in the housing industry—turmoil showing little signs of abating.

Indeed, the housing industry appears to be at something of a crossroads right now. Just in the past week or so we've seen reports saying there are more "underwater" homeowners than ever before, at 11.3 million; that delinquencies (people late on their payments by 60 days or more) have been increasing for three years straight; but also that foreclosures are decreasing, according to recent data from the Mortgage Bankers Association, whose economist—perhaps prematurely—commented, "We are likely seeing the beginning of the end."

Well, if this is third and final act of the housing crisis, which began with subprime meltdown back in 2007, than you'd better get comfortable in your seats because this act apparently has quite a long way to go.

Fed Fighting Senate Power Grab

| Fri Feb. 26, 2010 9:12 AM PST

Federal Reserve chairman Ben Bernanke went on the offensive yesterday before the Senate committee in charge of crafting comprehensive financial reform, fighting criticisms of the Fed and telling senators they'd be making a "grave mistake" if they neutered the Fed by taking away its bank oversight powers. Bernanke, who's gone from Time Man of the Year to clawing together enough support to win renomination, made his latest comments to Congress come amidst a renewed push by the Fed to save some of its regulatory muscle, which now includes oversight of both smaller banks and larger, too-big-to-fail institutions; another powerful Fed chief, Thomas Hoenig of the Kansas City Fed, also met with Sen. Michael Bennet (D-CO), Bloomberg reported, to lobby for the Fed retaining its existing powers. "The Fed comes to this with an imperfect track record, which I think is widely acknowledged," Bennet told Bloomberg. "The more important question for me is, what are we going to do to make sure we’re never in a position again."

The Fed's regulatory gaffes and disregard for consumer protection in the run-up to the crisis has been well documented. For instance, the Fed ignored years' worth of pleading by Midwestern advocacy groups about the growing waves of subprime lending in low-income communities; the Fed also waited years to enact new rules on predatory practices by credit card companies like excessive overdraft charges and "hair-trigger" interest rate increases. (The recent Credit CARD Act, however, has clamped down on the practices.) Still, the Fed has fielded widespread criticism inside and outside Washington for its laissez faire attitude to regulation in the past decade and in the run-up to the financial crisis. Sen. Chris Dodd (D-CT), chairman of the banking committee, has long called for stripping the Fed of its bank oversight powers, leaving to deal mostly with monetary policy.

One way of doing that would be the creating of an independent, standalone Consumer Financial Protection Agency, a organization to monitor dangerous financial products and practices like the Consumer Product Safety Commission regulates dangerous kids toys. However, the fate of an independent CFPA remains up in the air, and the Fed, it seems, could still retain some of its powers when the dust settles around a new financial reform bill. For one, Sen. Evan Bayh (D-IN), who's set to retire this fall, remarked yesterday, "The Fed should retain a robust role in the supervisory area. My strong impression is that you and your team have learned from the recent past." I guess we'll have to wait and see if that's true or not.

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