Dozens of Democrats are pushing back against an Obama administration effort to curb racial discrimination by car dealerships.
In late March, the Consumer Financial Protection Bureau—the consumer watchdog agency dreamt up by Sen. Elizabeth Warren (D-Mass.)—issued new, voluntary guidelines aimed at ensuring car dealerships are not illegally ripping off minorities. Since then, 13 Senate Democrats, including Sens. Heidi Heitkamp (D-N.D.) and Mary Landrieu (D-La.); and 22 House Dems, including Reps. Debbie Wasserman-Schultz (D-Florida) and Terri Sewell (D-Ala.), have joined 19 House and Senate Republicans insigningletterstotheagency objecting to the anti-discrimination measure. Consumer advocates and congressional aides say the lawmakers' backlash against the anti-discrimination rules is unjustified, and that Dems have backtracked on civil rights in this instance because of the colossal power of the car dealership lobby, which has spent millions lobbying Congress in the months since the CFPB issued these new guidelines.
Auto dealers "wield enormous amounts of power," one Democratic aide explains. "There's one in every district. They give a lot of money to charity. They're on a bunch of boards. They sponsor Little Leagues."
When a dealership makes a car loan, it often sells the loan to a bank or credit union, which, in return, allows the dealership to mark up the interest rate. Here's the problem: Some dealerships have been accused of charging higher rates to black and Hispanic customers, potentially costing consumers millions of dollars in overcharges. The CFPB's anti-discrimination guidance reminds lenders that they are liable under federal law if car dealerships they work with charge higher interest rates to minority borrowers. The guidance suggests that lenders help prevent discrimination by educating dealers, increasing oversight, and either capping dealership interest rates or requiring dealers to charge a flat fee.
Auto dealers are up in arms. If lenders follow the CFPB's advice, dealership profits could fall by hundreds of dollars per car sold, according to the Department of Justice. Car dealer trade groups claim that the CFPB has not adequately proved that discrimination is a problem in the industry. Dealerships have spent millions lobbying Congress over the past year, including on this very issue. Many Democrats have the auto dealers' back. In their letters to the CFPB, Dems claim that they appreciate the CFPB's goal of curbing discrimination by car dealerships. But they echo the dealers' arguments, and demand that the CFPB provide the detailed methodology it uses to determine that some dealers may be discriminating.
If lawmakers don't trust the feds' definition of discrimination, they can also look to the courts. In December, the DOJ and the CFPB reached a $98 million settlement with Ally Financial and Ally Bank over claims that Ally's markup policies resulted in illegal discrimination against over 235,000 minority borrowers. At least seven class-action lawsuits have been filed over the past 14 years that allege auto-dealers unfairly overcharged minorities. And "nothing has really changed in the marketplace" to force auto lenders and dealerships to change their practices, says Chris Kukla, the senior counsel for government affairs at the Center for Responsible Lending, a nonprofit consumer rights group.
Car dealers have also complained that regulating the interest rates dealerships can charge will increase costs for consumers. Consumer advocates disagree: "I don't believe…[dealers'] ability to mark up prices…in any way benefits consumers," says Stuart Rossman, director of litigation the National Consumer Law Center, an advocacy group. Jeff Sovern, a law professor and expert in consumer law at St. John's University in New York, adds that the low prices some customers have been paying may have been subsidized by the higher prices paid by minorities. "It's not usually considered a defense that the beneficiaries of racism should keep the lower prices that other groups pay for," he says.
So why the outcry amongst Democrats? Congressional aides and consumer advocates say that the auto dealer industry's lobbying efforts are intense. "Dealers are a powerful lobby," Kukla says. "These people sell things for a living. They're good at advocating."
"I'm not surprised that any politician" would cave to the dealerships, Rossman adds. The National Automobile Dealers Association (NADA), an industry trade group, hasspent$3.1 millionon lobbying in 2013, according to lobbying disclosure forms. "The dealerships made a very concerted push to get [members of Congress] to sign those letters" criticizing the guidance, Kukla says.
None of the 35 Democrats responded to requests for comment for this story, nor did the National Association of Minority Automobile Dealers, another industry trade group. NADA declined to comment.
The oddest aspect of Democrats' push back on the CFPB anti-discrimination measures, advocates say, is that in issuing the guidance, the CFPB didn't actually create any new regulation or law. "The funny thing is that… [the CFPB] is getting hit…because someone is actually enforcing rules already on the books," says the Dem aide.
On Wednesday, Sen. David Vitter (R-La.) introduced a bill that would force recipients of food stamps to show a valid photo ID to buy food. Anti-hunger advocates say that because many poor people cannot afford to purchase government IDs, the requirement would make it harder for low-income Americans to eat.
Vitter says the bill is designed to cut down on fraud. "Using a photo ID is standard in many day-to-day transactions, he said upon introducing the bill. "My bill will restore some accountability to the program so it's not ruined for people who use it appropriately."
But it's not that simple. Vitter's bill would also prevent many Americans from using the nutrition aid they're eligible for. "Many poor people do not have photo ID's, and it costs money they do not have to get them," Deborah Weinstein, executive director of the advocacy organization Coalition on Human Needs, told the Times-Picayune on Wednesday. "Senator Vitter's proposal will be especially tough on elderly and poor people who do not have the documents needed to get their photo ID, and who will struggle even to get to the necessary offices. They will wind up going without food."
This is just the latest assault in the long-running GOP war on the food stamp program, known as the Supplemental Nutrition Assistance Program (SNAP). Last year, Vitter drafted an amendment to the Senate farm bill—the five-year legislation that funds nutrition and agriculture programs—that would ban those convicted of certain violent crimes from ever getting food stamps. The amendment, which the Senate approved, would have "strongly racially discriminatory effects," according to the non-partisan Center on Budget and Policy Priorities.
In 2013, House Republicans passed a version of the farm bill that would cut $40 billion from the food stamps program. The House farm bill also contains GOP-backed provisions that would impose new work requirements on food stamp recipients, and that would give states financial incentives to kick people out of the program.
The final version of the farm bill, which is a compromise between the Senate and the House versions, is reported to contain $9 billion in cuts to SNAP.
Last week, Sen. Elizabeth Warren (D-Mass.) introduced a bill with Sen. Tom Coburn (R-Okla.) that aims to make government settlements with corporations more transparent and fair. It could end up saving taxpayers billions of dollars.
Warren's bill would discourage tax-deductible settlements by forcing federal agencies to explain why certain settlements are confidential, and to publicly disclose the terms of nonconfidential agreements so that taxpayers can see how much settlement tax-deductibility is costing them.
For a sense of how much Americans could save if Warren and Coburn's legislation passes, just take a look at how much taxpayers lost in each of these settlements over the past decade:
JPMorgan Chase CEO Jamie Dimon Steve Jurvetson/Flickr
Last year, the banking giant HSBC settled charges that it turned a blind eye to billions of dollars of money laundering by entering into a $1.9 billion settlement with the federal government. The DOJ has not yet disclosed whether the settlement is tax-deductible, but if it is, taxpayers will lose $700 million.
In 2005, the insurance brokerage firm Marsh & McLennan reached an $850 million settlement with New York state regulators over bid-rigging and conflicts of interest. The firm was eligible for up to a $298 million tax write-off, according to calculations by Francisco Enriquez, an expert on corporate taxation at US Public Interest Research Group, a consumer advocacy organization.
The economy added just 74,000 jobs in December, which was fewer than expected, according to new numbers released by the Labor Department on Friday. The unemployment rate dropped to 6.7 percent. But as has been the case in previous months, this drop is due largely to the fact that many Americans left the labor force, and thus were not officially counted as unemployed by the government.
The unemployment rate for adult men and whites declined last month to 6.3 percent and 5.9 percent, respectively. Meanwhile, the jobless rate for blacks and Hispanics remained disproportionately high at 11.9 percent and 8.3 percent. The unemployment rate for Asians remained at 4 percent. The rate for women held at 6 percent.
In December (as in November), 7.8 million Americans were employed in part-time work because they could not find full-time jobs.
As in previous months, employment increased in low-wage service jobs. Jobs in retail, including in restaurants, bars, and clothing stores, rose by 55,000 in December. Temp work gained 40,000 jobs.
Manufacturing added 9,000 jobs. Employment numbers in the healthcare industry held steady.
The number of long-term unemployed—those without a job for 27 weeks or more—remained at a whopping 37.7 percent of the unemployed last month. Federal unemployment benefits for the long-term jobless expired at the end of the year. The Senate recently voted to consider a bill renewing these benefits, but it is unclear if Republicans in the Senate and House will approve a final bill.
If Congress does not renew the benefits, we may see an even greater shrinkage in the labor force, as the long-term unemployed, who are some of the least employable Americans, no longer have the means to continue searching for jobs.
Among the more intriguing proposals in Sen. Marco Rubio (R-Florida)'s War on Poverty anniversary speech Wednesday was giving jobless people subsidies to move to low-unemployment areas. Sounds like a common-sense fix? Maybe—but Mike Konczal, a expert in unemployment and inequality at the Roosevelt Institute, says it would just move the problem around.
Here's why. Even though some states and localities have sunnier employment rates than others, Konczal tells Mother Jones, that doesn't mean there are more jobs available in those places. "States with low unemployment are often small states that are heavily agricultural," he says. "There is not a lot of dynamic turnover… There are already unemployed people there who want those jobs" that are open. Konczal had a deeper analysis of this type of proposal on the Washington Post's Wonkblog last August, noting that such relocation vouchers would also likely go to"people who are at the back of the job queue—long-term unemployed with low savings. These are populations that will have trouble finding work, and so it is likely that they’d just move to be at the end of the queue of another state."
Kevin Drum has more on Rubio's other proposals, including a government wage subsidy.