Daily Archives: October 8, 2015

Wells Fargo under investigation over student loans

Wells Fargo (NYSE:WFC) is the country’s second-largest private student loan originator and services all of its private loans, so it should be no surprise the Consumer Financial Protection Bureau – which has been busy probing student loan servicers – has been investigating Wells since at least last year. reports the WSJ.

And in other news:

  • The exact issues aren’t known, but the CFPB typically focuses on payment processing and what steps lenders are taking to help out distressed borrowers.
  • Discover – the 3rd largest private student loan originator – settled with the CFPB in July, and Citigroup in August said it was facing an investigation.
  • Navient (NASDAQ:NAVI) – which was spun out of SLM Corp. last year – is also under probe by the CFPB as well as a number of state attorneys general.

Here’s what it would take to handle the debt ceiling the Ben Carson way

It proves that running a country is a lot more complicated than brain surgery. Somebody needs to tell the good doctor that Ronald Reagan raised the debt ceiling 18 times, eight times under Bill Clinton, seven times, under George W. Bush, and five times under Barack Obama. Debt ceiling has been raised 74 times since March 1962.

Marketwatch:

An interview Republican presidential candidate Ben Carson gave suggested he would prefer to cut spending rather than raise the debt ceiling.

The debt ceiling is projected to be met in November, at which time, the federal government would no longer be able to borrow. Potentially, the U.S. won’t have enough money on hand to meet all its obligations by the middle of November, the Bipartisan Policy Center projects. That’s called into question the ability for the U.S. to pay interest on the debt it’s incurred.

But Carson suggested a different path.
Asked repeatedly in an interview with Marketplace, the neurosurgeon who’s currently second in the polls to seek the Republican nomination said he would prefer to cut spending in that scenario.

Marketplace’s Kai Ryssdal asked: “To be clear, it’s increasing the debt limit, not the budget, but I want to make sure I understand you. You’d let the United States default rather than raise the debt limit.”

Carson replied, “No, I would provide the kind of leadership that says, ‘Get on the stick guys, and stop messing around, and cut where you need to cut, because we’re not raising any spending limits, period.’”

Hillary Clinton Reveals Her Plan To “Prevent The Next Crash” In Bloomberg Op-Ed

First published in Bloomberg View

My Plan to Prevent the Next Crash

Seven years after the financial crash, despite important new rules signed into law by President Barack Obama, there are risks in our financial system that could still cause another crisis. Banks have paid billions of dollars in fines, but few executives have been held personally accountable. “Too big to fail” is still too big a problem. Regulators don’t have all the tools and support they need to protect our economy. To prevent irresponsible behavior on Wall Street from ever again devastating Main Street, we need more accountability, tougher rules and stronger enforcement. I have a plan to build on the progress we’ve made under President Obama and do just that.

In the years before the crash, as financial firms piled risk upon risk, regulators in Washington either couldn’t or wouldn’t keep up. Top regulators under President George W. Bush posed for a picture literally taking a chain saw to banking rules. Before the crisis hit, as a senator from New York, I was alarmed by this gathering storm, and called for addressing the risks of derivatives, cracking down on abusive subprime mortgages and improving financial oversight. Unfortunately, the Bush administration and Republicans in Congress largely ignored calls for reform. The result cost 9 million Americans their jobs, drove 5 million families out of their homes and wiped out more than $13 trillion in household wealth.

Thanks to President Obama’s leadership and the determination and sacrifice of the American people, we’ve worked our way out of that ditch and put our economy on sounder footing. Now we have to keep going.

First, it’s time for more accountability on Wall Street. Stories of misconduct in the financial industry are shocking — like HSBC allowing drug cartels to launder money or five major banks pleading guilty to felony charges for conspiring to manipulate currency exchange rates. This is criminal behavior, yet the individuals responsible often get off with limited consequences — or none at all. I want to change that.

People who commit serious financial crimes should face serious consequences, including big fines, disbarment from working in the industry and the prospect of imprisonment. As president, I will seek to extend the statute of limitations for major financial crimes, enhance whistle-blower rewards, and increase resources for the Department of Justice and the Securities and Exchange Commission to investigate and prosecute individuals. We should also hold financial executives accountable for egregious misconduct by their subordinates. They need to lose their bonuses and, in some cases, their jobs.

Second, I will work with Congress and independent regulators to rein in the complexity and riskiness of major financial institutions. The Dodd-Frank Act that President Obama signed after the crisis has already made important reforms, but there’s more to do.

One serious approach being advocated is to pass an updated Glass-Steagall Act, separating commercial and investment banking, to reduce the size of the banks and the risk of a taxpayer bailout. I certainly share the goal of never having to bail out the big banks again, but I prefer the path of tackling the most dangerous risks in a different way.

To start, I will propose a new fee on risk that would discourage the type of excessive leverage and short-term borrowing that could spark another crisis. We should also strengthen and enforce the Volcker Rule so banks can’t make risky and speculative trading bets with taxpayer-backed money. And if a bank suffers losses that threaten its overall financial health, senior managers should lose some or all of their bonus compensation. That will ensure that financial executives have skin in the game and a real incentive to avoid reckless risk-taking.

My plan would also give regulators the authority they need to reorganize, downsize or even break apart any financial institution that is too large and risky to be managed effectively. It is a comprehensive and flexible approach. It allows regulators to adapt to changing markets and help ensure that large financial firms never pose a danger to our entire economy.

We’ve learned the hard way that there’s no substitute for tough, empowered regulators with the resources and support to do their job. That’s why I’ve supported Wisconsin Senator Tammy Baldwin’s bill to restore trust in government and slow Wall Street’s revolving door. We need to find the best, most independent-minded people for these important regulatory jobs — people who will put consumers and everyday investors ahead of the industries and institutions they’re supposed to oversee.

Third, we need a comprehensive strategy to reduce risk everywhere in the financial system. After all, many of the firms at the heart of the crash in 2008, like Lehman Brothers, Bear Stearns and AIG, were not traditional banks. I’ll push for stronger oversight of the “shadow banking” sector, which includes certain activities of hedge funds, investment banks and other nonbank finance companies.

Fourth, we need to ensure that everyday investors and consumers can trust that our financial markets work for them — and not just for insiders with the most sophisticated, specialized and fastest connections. That is why we should impose a tax on the high-frequency trading that makes our markets less stable and less fair. And we should reform the rules that govern our stock markets to ensure equal access to markets and information, increase transparency, and minimize conflicts of interest.

Finally, I will veto any legislation that would weaken Dodd-Frank. We can’t go back to the days when Wall Street could write its own rules. I believe we can defend Dodd-Frank while easing burdens on community banks so they are able to lend responsibly to the hardworking families and small businesses they know and trust. We also have to defeat Republican attempts to gut the Consumer Financial Protection Bureau — an agency dedicated solely to protecting Americans from unfair and deceptive financial practices — and to exploit the upcoming budget and debt-ceiling negotiations for rollbacks in financial reforms.

The bottom line is that we can never allow what happened in 2008 to happen again. Just as important, we have to encourage Wall Street to live up to its proper role in our economy —helping Main Street grow and prosper. With strong rules of the road and smart incentives, the financial industry can help more young families buy that first home, make it possible for entrepreneurs to create new small businesses and support hardworking Americans saving for retirement. My plan will help us unlock that potential. We’ll create good-paying jobs, raise incomes and help families afford a middle-class life, with less speculation and more growth — growth that’s strong, fair and long-term. That’s what I’m fighting for in my campaign, and that’s what I’ll do as president.

Kevin McCarthy pulled out of House Speaker’s race. But why?

Huffington Post:

WASHINGTON — House Speaker John Boehner (R-Ohio) summed up the feelings of his soon-to-be-former colleagues in one line: “Well, that was a surprise.”

He then moved to adjourned the meeting that had been called to elect a new speaker, a vote that was presumed to be a lock for House Majority Leader Kevin McCarthy (R-Calif.). Instead, McCarthy had used his time before the GOP conference to say he was withdrawing his name.

“He asked for the floor, and it was a two-minute speech,” said Rep. Robert Pittinger (R-N.C.). “He said the country is asking for a new face, new leadership, and he said I’m going to pull out. I’m not the right person for this job. I think we’re all in shock.”

McCarthy would have easily defeated his challengers in the conference vote, but still needed 218 votes on the House floor. Typically, whomever a majority party nominates to be speaker gets the near-unanimous support of that party’s members.

Did McCarthy quit the House Speaker race of being exposed of an alleged affair?:

According to Washington insiders, Kevin McCarthy (R-CA) is having an affair with Renee Ellmers (R-NC). McCarthy dropped out of the Speaker race, and may have done so because an unknown insider is circulating a surveillance video on Capitol Hill, of him dining with Ellmers in an intimate setting.

Both McCarthy and Ellmers deny they are having an affair. Insiders claim the affair has been ongoing since 2011. McCarthy is married with two children, Ellmers is married with one child.

McCarthy’s withdrawal from the race comes just after Rep. Walter Jones, (R-NC) demanded that any person running for the speaker’s chair be free from “moral turpitude issues.”

Is a true or not? You decide. But, the about face from McCarthy to bail from the House Speaker job stating that the country needs a “new face” and Rep. Jones’ statement on wanting a House Speaker free from “moral turpitude issues” is suspicious.

Why This Preschool Just Wrote Goldman Sachs A Check

The company helped fund a preschool program that’s working for the kids and paying off for the investors.

Goldman Sachs is getting a $267,000 check from an unlikely source: a United Way of Salt Lake public preschool program.

The payment is the initial return on an $7 million investment the bank, along with the hotel heir and philanthropist J.B. Pritzker, made in 2013. The funding is structured as a loan known as a social impact bond, where private investors put money to public programs with clear, measurable goals. Private investors do not get paid back unless programs meet certain criteria.

If the program continues its performance, the investors will receive 11 more annual payments, until their full investment, plus interest, is returned.

This is the first time in the U.S. that a social impact bond is returning money to investors.

The Salt Lake City program funded preschool for 595 low-income children. Without preschool, an estimated 110 of those kids would have needed special education when they entered first grade. Only one did. That standout success saved the state of Utah and local charities $281,550, according to Goldman Sachs. Under the terms of the investment, 95 percent of the savings are repaid to the lenders.

Read on.

The Color of Debt: How Collection Suits Squeeze Black Neighborhoods

Our first-of-its-kind analysis shows that the suits are far more common in black communities than white ones.

October 8, 2015

ON A RECENT SATURDAY AFTERNOON, the mayor of Jennings, a St. Louis suburb of about 15,000, settled in before a computer in the empty city council chambers. Yolonda Fountain Henderson, 50, was elected last spring as the city’s first black mayor.

On the screen was a list of every debt collection lawsuit against a resident of her city, at least 4,500 in just five years. Henderson asked to see her own street. On her block of 16 modest ranch-style homes, lawsuits had been filed against the occupants of eight. “That’s my neighbor across the street,” she said, pointing to one line on the screen.

And then she saw her own suit. Henderson, a single mother, fell behind on her sewer bill after losing her job a few years ago, and the utility successfully sued her. That judgment was listed, as well as how one day the company seized $382 from her credit union account — all she had, but not enough to pay off the debt.

As the lines of suits scrolled by on the screen, Henderson shook her head in disbelief, swinging her dangling, heart-shaped earrings.

“They’re just suing all of us,” she said.

That’s not only true in Jennings. The story is the same down the road in Normandy and in every other black community nearby. In fact, when ProPublica attempted to measure, for the first time, the prevalence of judgments stemming from these suits, a clear pattern emerged: they were massed in black neighborhoods.

Read on.

Hillary Clinton’s Wall Street Reform Plan Is A Rebuke To The Obama Administration

Hillary just released her plan to reform Wall Street…

But she stops well short of Bernie Sanders’ call to break up the banks.

WASHINGTON — Hillary Clinton on Thursday detailed her plans to crack down on risky Wall Street behavior, delivering a sharp rebuke to the Obama administration’s weak enforcement against financial misconduct. But the candidate stopped short of calling to break up big banks, drawing a clear contrast with Sen. Bernie Sanders (I-Vt.), her top rival for the Democratic presidential nomination.

The core of Clinton’s plan, provided to The Huffington Post by a campaign aide, involves closing loopholes in the 2010 Dodd-Frank Wall Street reform bill and strengthening enforcement against financial wrongdoing. Clinton does not call for the ambitious restructuring of the banking sector that many in the Democratic Party’s activist base are clamoring for. Nevertheless, her reform package draws a marked contrast with the Obama administration’s poor enforcement of financial fraud statutes and its general acquiescence to big banks on matters of policy. In at least one case, Clinton directly calls to roll back a major Obama administration concession to Wall Street.

“Clinton understands the financial crisis showed how irresponsible behavior in the financial sector can devastate the lives of Americans across the country,” the aide said in an emailed statement.

The plan would stiffen penalties for financial fraud and require financial executives to personally foot the bill for settlements and fines levied against their companies. Clinton would also curtail the use of so-called “deferred prosecution agreements,” in which the Department of Justice agrees to call off its investigation if a company makes important operational changes — effectively letting wrongdoers off the hook. No major Wall Street executive has been prosecuted for financial crime under President Barack Obama and his two attorneys general, Eric Holder and Loretta Lynch.

But the bulk of Clinton’s plan focuses on closing holes that bank lobbyists have drilled into the 2010 Dodd-Frank Wall Street reform package in the years since its original conception. The bill originally banned federal subsidies for risky derivatives trading, but Congress reinstated the Wall Street perks late last year as part of a government funding bill. When Sen. Elizabeth Warren (D-Mass.) attempted to bring down the funding bill over the subsidies, Obama and JPMorgan Chase CEO Jamie Dimon personally lobbied lawmakers to approve the provision. The plan Clinton announced Thursday would repeal the perks, returning to the original intent of Dodd-Frank.

Read on.

Sorry Hillary, the big banks who own more than 50% GDP in this country need to be broken up.