CONSUMER FINANCIAL PROTECTION BUREAU REGULATIONS HURT JOB CREATION

Ask most business owners and they’ll tell you: complicated, burdensome regulations are one of the biggest impediments to job growth. But instead of cutting through this job-killing red tape, employers are only getting entangled in it further.

Nowhere is this more evident than with the regulations created by the Dodd-Frank Act and its centerpiece, the Consumer Financial Protection Bureau (CFPB). Last month marked the fifth anniversary of Dodd-Frank, and so far its rules have imposed more than $24 billion in regulatory costs and 61 million paperwork burden hours on businesses.

At the same time, the CFPB, a federal agency tasked with going after “bad actors” in the financial services industry and protecting consumers from “unfair, deceptive, or abusive acts or practices,” has shown a willingness to zealously enforce its goals regardless of whether it has solid data or the necessary statutory authority to carry out its actions.

Consider how it’s gone after racial discrimination in auto lending. Lenders who provide car loans can’t ask a borrower’s race, so the CFPB can’t simply look at loan document to determine whether a lender may potentially be offering higher rates or less favorable terms to minority borrowers. To get around this, the CFPB created a system in which it estimates borrowers’ races based on zip codes and last name.

That methodology has been seriously questioned—a study commissioned by the American Financial Services Commission compared the agency’s data with data collected on mortgage applications (which do allow applicants to self-report race and ethnicity). The study found that the CFPB only correctly identified a borrower as African-American 24% of the time. These measurement errors mean it’s very likely the agency significantly inflated the number of cases of illegal discrimination.

Such flawed data hasn’t stopped the agency from going after auto lenders for racial discrimination. Ally Financial, for instance, paid nearly $100 million to settle such charges. Ironically, CFPB regulations like these have their heaviest impact on small lenders, which disproportionately provide minorities with loans, exacerbating the lack of financial capital already available to minorities.

Using bad data to fine businesses is bad enough, but now consumer-focused non-profits want the CFPB to flex its regulatory muscles and go above and beyond the powers Congress gave the agency.

In a recent op-ed, a director at the Pew Charitable Trusts wrote, “Can the CFPB effectively move beyond areas where it was specifically instructed to take action… The bureau’s long-term reputation — and perhaps the overall success of Dodd-Frank — may well be judged on whether the answer is ‘yes.’”

The op-ed goes on to call on the agency to limit the amount financial institutions can charge for services without squeezing consumer access to credit. Essentially, he’s calling for the agency to breed unicorns.

Businesses have to have a way to earn a profit for the services they provide. Rules issued by CFPB (and other federal agencies) limiting the amount companies can charge for products force them to either find new ways to make that money or offer fewer services to fewer consumers. That means businesses have less credit available to expand and consumers have less money to spend on our products.

Dodd-Frank and the CFPB were supposed improve things for consumers and businesses, but imposing byzantine rules restricting credit simply isn’t a way to create the well-paying jobs Americans need.

Alfredo Ortiz is President and CEO Of Job Creators Network.

Via: Breitbart

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GOP Candidates Bash Tax Code, ObamaCare, Dodd-Frank

Reforming the tax code and repealing two of President Obama’s signature pieces of legislation – ObamaCare and the Dodd-Frank banking reform bill – would promote economic growth and are key priorities for the top Republican candidates for president.

In a wide-ranging debate in Cleveland sponsored by Fox News, several of the ten candidates who participated said repealing ObamaCare and Dodd-Frank would benefit U.S. businesses by lowering expenses and easing regulations that have created costly obstacles for business owners.

Florida Senator Marco Rubio said the U.S. economy has “radically transformed” in the last five years and that many categories of good paying jobs “are gone.”

“The economy we live in today is dramatically different than it was five years ago,” Rubio said, and small businesses in particular are struggling under the regulatory burdens of ObamaCare, Obama’s signature health care reform legislation, and the Dodd-Frank banking legislation passed in the wake of the 2008 financial crisis.

Both pieces of legislation need to be repealed, Rubio said. In addition, the tax code needs to be reformed such that the tax rates for small business is lowered to 25%. “We need to make America fair for all businesses but especially for small biz,” he said.

Former Florida Governor Jeb Bush has said he would promote policies that would lift economic growth to a 4% growth rate (or GDP), well above the current 2% to 3% range anticipated for 2015.

Bush said that a higher growth rate is possible if better quality jobs are created and the U.S. fixes a “convoluted tax code.” He also called for repealing ObamaCare, saying it raises costs for business owners.

Former Arkansas Governor Mike Huckabee said the IRS should be eliminated.

Ohio Governor John Kasich was asked how Republicans can differentiate themselves from a Democratic challenger who argued Republicans are only out to help the rich. Kasich said Republican policies promote economic growth and “economic growth is the key to everything.”

Businessman Donald Trump, speaking broadly on the U.S. economy, said, “We don’t win any more, we lose to China, we lose to Mexico. We need to turn it around.” Trump also said he would repeal ObamaCare.

Responding to a question targeting the four times Trump companies filed for bankruptcy protection, Trump said he only availed himself of U.S. law as any good businessman would.

Wisconsin Governor Scott Walker defended his record of job creation in his state, saying he dramatically lowered the state’s unemployment rate. He also called for reforming the tax code and easing regulations on businesses.

“I think most of us understand that people, not the government creates jobs,” Walker said.

On the hot button issue of immigration, Walker said the issue impacted the broader economy and that the U.S. needs an immigration policy that “gives priority to American working families” and keeps wages high.

New Jersey Governor Chris Christie, facing a question about his handling of the struggling New Jersey economy, said the state is now creating jobs under his administration, a dramatic turnaround from his predecessor.

Neurosurgeon Ben Carson said he would scrap the current tax system and replace it with a system of tithing, the religious practice of donating a percentage of a household’s earnings. “We need a significantly changed tax system,” he said.

Via: Fox Business

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OBAMA WEEKLY ADDRESS: Wall Street Reform is Working

WASHINGTON, DC — In this week's address, the President spoke to the progress we have made in making our financial system stronger, safer, and more fair in the years since financial crisis. Five years ago this week our country enacted theDodd-Frank Wall Street Reform and Consumer Protection Act, rules that have substantially reduced recklessness and abuse in our financial system that predated the crisis.  As a result of Wall Street reform, our banks are less reliant on unstable funding and less likely to engage in risky behavior, the independent Consumer Financial Protection Bureau works to protect American consumers, and our financial system is significantly better-regulated.  Dodd-Frank is working, and the President emphasized that he will continue to fight any challenges to the law and veto any effort to unravel the new rules governing Wall Street.

The audio of the address and video of the address will be available online atwww.whitehouse.gov at 6:00 a.m. EDT, July 25, 2015.

VIA: WHITEHOUSE

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After Five Years, Dodd-Frank Is a Failure

by VERONIQUE DE RUGY July 20, 2015 2:13 PM 

When the Dodd-Frank Act took effect on July 21, 2010, critics were fast to predict that the 2,300 page-long legislation, which passed the House without a single Republican vote and received only three GOP votes in the Senate would fail. Tomorrow will mark the five-year anniversary of Dodd-Frank and its unfortunate distorting effects. Just as when it was passed, the legislation remains unable to address the problems it was intended to. 

  The legislation has overwhelmed the regulatory system, stifled the financial industry, impaired economic growth, and done nothing to correct the pernicious effects of “too big to fail.” But that’s only the beginning: Many more of its regulations still need to be written, some several years down the road, all of which injects massive uncertainty into the financial industry. Here is a round-up of interesting articles to read before this sad anniversary. First, we have a great piece by Chairman Hensarling in the Wall Street Journal (“After Five Years, Dodd-Frank is a Failure.”). Thankfully for us, the chairman is as committed to getting rid of Dodd-Frank as he was to getting rid of the Ex-Im Bank. I wish him the same success and more. The whole thing is worth a read, but here are a few paragraphs: Dodd-Frank was supposedly aimed at Wall Street, but it hit Main Street hard. 

Community financial institutions, which make the bulk of small business loans, are overwhelmed by the law’s complexity. Government figures indicate that the country is losing on average one community bank or credit union a day. Before Dodd-Frank, 75% of banks offered free checking. Two years after it passed, only 39% did so—a trend various scholars have attributed to Dodd-Frank’s “Durbin amendment,” which imposed price controls on the fee paid by retailers when consumers use a debit card. Bank fees have also increased due to Dodd-Frank, leading to a rise of the unbanked and underbanked among low- and moderate-income Americans. Has Dodd-Frank nevertheless made the financial system more secure? Many of the threats to financial stability identified in thelatest report of Dodd-Frank’s Financial Stability Oversight Council are primarily the result of the law itself, along with other government policies. There’s also a new report by John Berlau at CEI that shows how Dodd-Frank has stifled competition among the banks even more so than before the financial crisis.

 A failure to approve new banks, for instance, means that those “too big to fail” banks are now more entrenched than ever. In the last five years, regulators have approved only one new bank, as opposed to an average of 170 new banks per year before 2010. As Berlau notes: “This lack of new bank competitors is one important reason why a large bank failure could severely curtail the supply of credit and availability of financial services. That in turn sets the stage for a continuing cycle of bailouts.”  The New York Times has an interesting piece (“Fannie and Freddie are Back, Bigger and Badder Than Ever“) by Bethany McLean. It’s must read recap of the promises of what Freddie and Fannie would achieve vs. actually happened, along with the failure to reform two agencies in the aftermath of the financial crisis.    The proposed solutions for this mess? Among other things,

 Senator Warren believes it’s time to bring back the Glass-Steagall Act, a law that would require big banks to divide commercial and investment banking. Most economists and Federal Reserve policymakers disagree that the repeal of Glass-Steagall had anything to do with the financial crisis but, Democratic presidential candidates Bernie Sanders Martin O’Malley support the idea nonetheless. Hillary Clinton hasn’t said yet what she thinks of the proposal. However, according to Kevin Cirilli at The Hill, the White House is distancing itself from this push: The White House wants to keep its distance from a liberal push to re-implement legislation that would break up big banks… “At this point, we believe that the kind of implementation of Wall Street reform is the most effective way to protect our economy and middle-class taxpayers,” White House press secretary Josh Earnest told reporters at a press briefing Friday when asked whether President Obama supports it. … Earnest said the administration is still focused on implementing the 2010 Dodd-Frank Wall Street Reform law.   “Wall Street reform has been incredibly effective at reforming our financial system in a way that looks our for the interests of middle-class families and taxpayers,” Earnest said.

Via: National Review

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Weekly Republican Address: Chairman Jeb Hensarling (R-TX), Saturday July 18, 2015

House Financial Services Committee Chairman Jeb Hensarling talked about the fifth anniversary of the "job-destroying" Dodd-Frank law and the GOP's goal of purging it from Washington's books in the latest GOP weekly address.

"If we want strong economic growth, more freedom and an end to bailouts, it's time we commit to making sure this anniversary is Dodd-Frank's last," the Texas Republican said. "House Republicans are working to do just that. Together, we can end Wall Street bailouts, have a healthier economy, and protect consumer choice."

Via: You Tube

Forget Obamacare. Get Worried About ObamaLoans.

Pete Souza

The U.S. government is simultaneously trying to shut down a legitimate industry and replace it with a taxpayer backed version. Pretty much everyone has heard of Obamacare by now, but what about ObamaLoans? No, this is not a joke.

Section 1205 of Dodd-Frank included a provision that turned a local San Francisco program (Bank On USA) into a national program by making Community Development Financial Institutions (CDFIs) eligible to compete with payday lenders.  This competition will come at the expense of taxpayers because CDFIs receive nearly $300 million in taxpayer subsidies each year, all in the name of promoting economic growth in low-income areas.

CDFI’s and their affiliates, such as the Center for Responsible Lending, have been arguing that payday lenders are predatory because they charge exorbitant rates of interest – nearly 400%, they claim – to people who simply don’t know any better and have no other options.  This sort of argument is wrong on many levels.

First, value is subjective so there’s no way to objectively state that consumers are harmed when they pay, for example, $15 to voluntarily borrow $100 for two weeks.  Second, it’sillegitimate to claim payday lenders are charging a 400% annual percentage rate (APR) on a two week loan – the APR represents the yearly interest cost over the term of the loan.  The interest cost really is 15 percent.

Naturally, payday lenders’ competitors don’t argue that these loans shouldn’t be made at all. Instead, they want to make the loans and use taxpayer funds to help them do it. To help speed the transition to a fully government-funded financial industry, the Obama administration instituted Operation Chokepoint, a program which aggressively investigates banks and payment processors that deal with payday lenders. These actions amount to an abuse of power, and Rep. Darrell Issa (R-CA) is investigating the matter.

The Justice Department surely knows it’s much less costly for banks to stop dealing with these companies than to submit to special audits, so the hope is that banks will stop dealing with payday lenders. All the while, the taxpayer-funded companies that will take the place of payday lenders are being supported financially as well as through legislation.  Aside from the CDFI grants, the President has asked for more than $100 million just to fund the ObamaLoan program.

Now, the US Postal service – an agency that has lost almost $50 billion since 2007 – wants in on the act. The only recent experience the Postal Service has with money is losing it, but now it insists it can step in and provide payday lending services for 90 percent of the cost that it currently takes private businesses to deliver.

In the span of five years, the Federal government has identified large financial institutions as too-big-to-fail, small financial companies as illegitimate businesses, and payment processing companies as public utilities.  Members of Congress have to dismantle ObmaLoans and Dodd-Frank before the entire financial industry is transformed into one large public utility.

Payday lenders should be applauded for filling a market niche that others don’t want to touch, not vilified for providing a service that others are happy to provide if they can use taxpayers’ money to do it.

Via: The Foundry

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AER Study: Dodd-Frank Regulations Will Harm Consumer & Business Protections Against Energy Price Volatility

WASHINGTON, Nov. 20, 2013 /PRNewswire/ -- With the 2010 passage of the Dodd-Frank Act, Congress set a course to damage one of the key tools used by energy suppliers and users to tamp down energy price volatility, according to a new study released today by the Abraham Energy Report. 

The study urges Congress to consider entirely exempting physical commodity businesses from financial regulation that was meant to address the players that caused the global financial crisis.  The study finds that unless Congress takes remedial action, the effects of energy price volatility will be felt throughout the entire economy.

The study, entitled "Dodd-Frank and Energy Price Stability: Time to Rein In Unintended Consequences," was written by Spencer Abraham and Mark P. Mills.  Abraham, former U.S. Secretary of Energy, is the Chairman & CEO of The Abraham Group, an energy consulting firm.  Mills is CEO of Digital Power Capital and a Senior Fellow at the Manhattan Institute.

"Congress has unintentionally set a course to damage one of the core tools used by energy suppliers and users to tamp down energy price volatility," the authors explained.  "When energy price volatility rears up again - as it inevitably will since no one has yet found a way to eliminate volatility - the effects this time will be more widely felt in the economy because energy companies will have been driven out of their traditional role as providers of risk management products to their energy-using customers."

Congressional passage of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act was intended to address the root causes of the 2008 financial collapse.  Swept into Dodd-Frank are the financial tools used by major energy producers and consumers to reduce business and consumer risks from the inherent volatility in the prices of primary energy commodities. The study notes that less than 0.3% of the total swaps market involves energy transactions.

Via: Digital Journal

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Businesses hire up to deal with more regs

A growing thicket of federal regulations under the Obama administration has contributed to an employment spike in at least one corner of the job market: the increasingly vital compliance industry.
 
ObamaCare, the Dodd-Frank Act and other large federal undertakings have led to an outpouring of new agency rules derided by business groups and defended by advocates.
 
But the regulations have also been a boon for professional compliance officers paid to help companies understand and adapt to the new requirements.  

“Staff to track compliance issues is on the rise, and it has been for the last several years,” said Richard Riese, senior vice president for regulatory compliance at the American Bankers Association. “And, at the moment, there’s no prospect it will decrease anytime soon.”
 
Data kept by the Bureau of Labor Statistics (BLS) shows an 18-percent increase in the number of compliance officers in the United States between 2009 and 2012, according to an analysis conducted by the conservative American Action Forum (AAF).
 
At last count, there were an estimated 227,500 compliance officers employed in the United States, according to the BLS. The bureau defines a compliance officer as an employee responsible for evaluating conformity with laws and regulations.
 
The agency estimates do not include professions like bank examiners, tax collectors, or Occupational Safety and Health Administration inspectors that are tasked to monitor companies for fraud and safety violations. 

Compliance officers make an average of just under $65,000 annually, a gross national labor cost of roughly $14.7 billion, according to the BLS data. 

Via: The Hill

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Examiner Editorial: Politically connected banks got bigger bailouts

It should come as no surprise that politically connected banks received larger bailout loans from the federal government during the 2007 financial crisis than banks that spent less on lobbying and campaign contributions. That's the conclusion of a new analysis by Prof. Benjamin Blau of Utah State University. His findings were based on data from the Federal Reserve and published by the Mercatus Center at George Mason University.

Blau noted it was “unlikely" that the Fed intended "to provide political favors to banks with the most political connections.” But whatever the motive, the pattern was stark. Banks that received bailout loans spent 72 times more on lobbying in the decade before the meltdown than banks that got no loans. Blau also found that 15 percent of the banks that received loans employed politically connected individuals. Only 1.5 percent of banks with politically connected employees got no loans.

There are three potential reasons for the skew, as Blau indicates:

1. The Fed may simply have had more information on the politically active banks, which would have made it easier to approve the loans.

2. The politically active banks were probably more likely to seek Fed loans.

3. Because of their political sophistication, these banks may have taken greater risks believing they would be rescued by the Fed if anything went wrong.

Following the 2007 crisis, Congress passed Dodd-Frank, a massive tome of a bill that Americans were told would prevent a repeat of the financial meltdown. In fact, Dodd-Frank all but guarantees that big banks stay big and small banks struggle to compete. “Dodd-Frank has not done enough to coral ‘too big to fail’ banks and, on balance, the act has made things worse, not better,” said Richard Fisher, president of the Federal Reserve Bank of Dallas.

Via: Washington Examiner

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When the Have Nots Become the Haves

All these transfer payments impoverish the working middle class who pay the biggest share of their income in taxes and empower those who receive the benefits

Saul Alinsky the political thinker who seems to have had more impact on President Obama than any other was very clear in his most important book about what his motives were and what he was aiming at, “What follows is for those who want to change the world from what it is to what they believe it should be. ‘The Prince’ was written by Machiavelli for the Haves on how to hold power. ‘Rules for Radicals’ is written for the Have-Nots on how to take it away.”

With the November Revolution of 2008, which gave us one party rule for two years, the Progressive Democrat party saw their chance and they took it. Within the two years it took for the people to realize they needed some balance the Progressives passed ObamaCare which effectively gives government control of 1/6 of the economy. They passed Dodd-Frank which gives them extensive control over the financialsector. When they couldn’t push Cap-N-Trade even through a rubber-stamp Congress the President imposed it by executive order. When they likewise failed to muster enough of their own hacks to pass the Dream Act once again it was imposed by fiat.

The anti-capitalist programs of the Progressive Bush Administration’s final days were continued and amplified by the Obama Administration. TARP was followed by the Stimulus. The takeover of AIG was joined by the take-over of the auto industry and by force feeding money into the economy for years of quantitative easing as the casino we call the stock market soars.

Unemployment reporting has become totally unhinged from reality as the real rate stays at levels which would easily shine the light of truth on the fiction of a recovery.

According to the government’s own Bureau of Labor Statistics the real unemployment rate (U-6) has been continuously above 13% for the last year. This information is readily available (one click of the mouse) and yet the media (including Fox) have told us day-by-day that it is falling and is now down to 7.2. This typifies the manufactured reality the federal government and the Corporations Once Known as the Mainstream Media shovel into the public trough. If the plagiarized opinions I hear my fellow citizens share everyday are any indication the average person accepts the fiction as reality.

Via: Canada Free Press

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“I scared the crap out of them!”: Alan Grayson details how to work with the GOP

In Part 1 of my interview with Rep. Alan Grayson published on Monday, we talked about Syria and national security policy. In Part 2, we turn to domestic matters. Grayson is actually one of the only trained economists in Congress, graduating from Harvard with an economics degree.

We talked about whether Dodd-Frank stabilized the financial system, the role of the Federal Reserve in the economy, and his surprising view on the fears of a government shutdown. We also talked about his recent partnerships with House Republicans. Below is a transcript of our conversation.

With the five-year anniversary of the Lehman Brothers collapse upon us, everyone is talking about whether we remain vulnerable to another crisis. You were on the Financial Services Committee when Dodd-Frank passed in 2010. Has it worked to make the financial system safer, or has nothing much changed?

Yes, nothing has changed. The only thing that has changed is the passage of time. Sometimes time does not heal. We still have the problem of some institutions being too big to fail, and nothing has been done to make them smaller or less interconnected. Nothing has changed the fact that, because of the sense in the market that some institutions are too big to fail, the big get bigger and the small get smaller. The cost of capital is smaller for institutions perceived as government-backed, than for ones not as credit-worthy, with counter-party risk.

The one good thing that’s happened in the past five years, in the sense of making people hopeful that the economy might survive a collapse, is that the Federal Reserve’s unconventional monetary policy put us back on a low-level track toward growth. They showed that monetary policy in extremis can work to some degree.

Via: Salon

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Senate Dems propose increasing IRS budget for targeting Conservatives and Tea Party Groups

Senate Democrats on Tuesday proposed increasing the budget of the Internal Revenue Service and other financial agencies next year. 

The IRS would get $12.07 billion in funding under the Financial Services subcommittee bill reported to the full Senate Appropriations Committee on Tuesday, an increase of $276.5 million.

House Republicans, in contrast, have suggested cutting the IRS's budget by 24 percent.

Senate Republicans are not happy with the funding level proposed by Democrats, and subcommittee ranking member Sen. Mike Johanns (R-Neb.) took the rare step of recording a “no” vote against the bill.

“Count the IRS among the winners in the bill despite the political targeting that appalled all of us and eroded the public’s trust,” Johanns said. 

The IRS has been embroiled in controversy since May, when the administration admitted the agency had improperly handled requests for tax-exempt status by conservative and Tea Party groups.

Subcommittee Chairman Sen. Tom Udall (D-N.M.), in his first markup in his new role, said the bill contains language to force the IRS to improve its management. He called the House cuts “counterproductive,” arguing they would lead to personnel cuts and result in lost tax revenue. 

In total, the Senate bill contains $23.2 billion in discretionary spending, an increase from the $21.4 billion enacted in 2013 before automatic spending cuts under the sequester went into effect.

The bill increases funding for the implementation of the Dodd-Frank financial reform law. The Commodity Futures Trading Commission (CFTC) gets $110 million more and the Securities and Exchange Commission (SEC) gets $353 million in additional funds.

The bill heads to full committee on Thursday.

Via: The Hill

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