Back in December, Senator Elizabeth Warren, a Democrat, said that the big Wall Street banks should be broken up. Here are her remarks in the Senate:
Instead of passing laws that create new bailout opportunities for too-big-to-fail banks … let’s pass something — anything — that would help break up these giant banks. … Teddy Roosevelt said ‘we should break them up because they have too much political power.’ Teddy Roosevelt said ‘break them up because all that concentrated power threatens the very foundations of our democratic system.’
Proving her point exquisitely, Wall Street banks including Citigroup, JPMorgan, Goldman Sachs, and Bank of America are apparently considering withdrawing their campaign contributions to Senate Democrats as a form of protest. According to Reuters, the banks are also getting together to “discuss ways to urge Democrats … to soften their party’s tone toward Wall Street.”
While there are a lot of people you can blame for the state of the US economy, government regulators are at the top of the list. So it’s satisfying that someone has finally taken them to task. Elizabeth Warren, finally on the Senate Banking Committee where she belongs, had some hard questions for banking regulators yesterday, specifically on why they are happy to accept pennies on the dollar to settle claims against banks.
What she got in response was a lot of hemming and hawing by the spineless regulators in question, none of whom seemed to know the last time anyone took a bank to trial.
I’m a little concerned that too big to fail has become too big for trial.
Twice now, New York U.S. District Court Judge Jed Rakoff has refused to approve a settlement reached by the Securities & Exchange Commission. In the first case, Bank of America agreed to pay a $33 million fine without admitting it did anything wrong in hiding bonuses of $3.6 billion promised prior to its merger with Merrill Lynch. Judge Rakoff eventually approved a $150 million settlement, calling it “half-baked justice at best.”
“Banks also have benefited from the large increase during the recession in unemployment insurance. Increasingly, banks offer debit cards to the unemployed to collect their government benefits. These debit cards carry a range of fees that bolster banks’ bottom lines. What’s more, states — with their budgets shattered by the financial crisis and recession — have increasingly been moving to enroll new employees into Wall Street-run retirement accounts rather than government pension programs. That’s potentially more lucrative for Wall Street, which can charge fees for managing the savings of individual retirees.”
According to the Atlantic Wire, financial services professionals (i.e., Wall Street) make up only about 14% of the top 1% of wage earners. Executives and managers make up 31%, and doctors 16%. But wait, when did we decide the 1% referred to wages? I thought it was net worth.
Citigroup agreed to pay $285 million to settle a fraud lawsuit filed by its investors, who were understandably irate that Citigroup was selling them toxic assets while betting against those same assets. The lawsuit was not related to all the damage Citigroup did to honest, hardworking Americans with that same fraud. Nobody sues for that kind of thing in this country.
I’ve always liked the introduction to the Fair Debt Collection Practices Act.
There is abundant evidence of the use of abusive, deceptive, and unfair debt collection practices by many debt collectors. Abusive debt collection practices contribute to the number of personal bankruptcies, to marital instability, to the loss of jobs, and to invasions of individual privacy.
I don’t think it goes far enough, though. Abusive debt collection practices also spread depression and contribute to the number of suicides. That’s true for the current foreclosure crisis, as well, according to Martin Andelman, who blogs at the Mortgage Lending Implode-O-Meter. He thinks homeowners are showing signs of Legal Abuse Syndrome, a type of Post-Traumatic Stress Disorder.
As shocking as this chart is ($361,330 was the average salary on Wall Street last year), salary is probably the wrong way to measure disparity for a group that makes most of its money from capital gains. Comically large paychecks aren’t really the reason Wall Street is on the hot seat. (Hat tip to BoingBoing!)
The Consumer Financial Protection Bureau is charged with eliminating fraud and deceptive practices by lenders. This has Wall Street worried, since it would much rather continue with business as usual, which depends on a fair amount of fraud and deception.
Alan Kaplinsky at CFPB Monitor has got Wall Street’s back, and thinks the CFPB is too powerful to be trusted with a single leader. His justification is impressive for its silliness.