“The Federal Reserve was tasked with creating a massive program to protect workers’ livelihoods during an intense economic and public health crisis. We should, at the very least, expect transparency about how the program is structured,” said Food & Water Action attorney Adam Carlesco. (Photo: Tony Webster/Flickr/cc)
The Federal Reserve has missed a deadline to release documents requested by environmental group Food & Water Action in May to reveal the extent to which the central bank has used one of its major Covid-19 lending programs to rescue the faltering oil and gas industry.
“The public has a right to know if the Fed created an oil and gas bailout at the behest of an industry that has wreaked havoc on our air, water, climate, and potentially the global financial system,” Food & Water Action attorney Adam Carlesco said in a statement. “As the climate crisis demands an abrupt shift away from fossil fuels, the federal government should not be creating programs to bail out these polluters.” Continue reading →
BlackRock, the largest asset management firm on the planet, has for years faced criticism and protests from progressives over its massive investments in fossil fuels, private prisons, and the arms industry—and now the financial behemoth is set to take on a leading role in the Federal Reserve’s sprawling coronavirus bailout program.
The Wall Street Journalreported Sunday that BlackRock—which manages over $7 trillion in assets—will in the coming days help the central bank funnel “money into both new and already-issued corporate bonds, assisting the Fed in its recently adopted role as lender of last resort for businesses.” Continue reading →
Through the Primary Market Corporate Credit Facility, the Fed will provide $500 billion to companies by buying bonds, but the companies will not be required to retain employees or limit executive pay. (Photo: Public Domain)
A Federal Reserve program approved by Congress and aimed at providing emergency relief to large companies contains a “catch” which will permit the corporations to lay off employees and spend the money on executive pay, according to a Washington Post report.
Through the Primary Market Corporate Credit Facility, the Fed will provide $500 billion to companies by buying bonds. The corporations will be required to pay the Fed back with interest. Continue reading →
Hundreds of cars waiting to receive food from the Greater Community Food Bank in Duquesne, Pennsylvania on March 30, 2020. Photo: The Mind Unleashed
Economists at the Federal Reserve Bank of St. Louis are warning that if the current rate of U.S. job losses continues, the country’s unemployment rate could reach a staggering 32.1% by the end of June as the coronavirus pandemic-induced downturn sparks mass layoffs across the nation.
Miguel Faria-e-Castro, an economist with the St. Louis Fed, wrote in an analysis last week that 47 million more workers could lose their jobs by the end of the second quarter of 2020, bringing the total number of unemployed people in the U.S. to 52.8 million. As CNBCnoted, that number would be “more than three times worse than the peak of the Great Recession.” Continue reading →
The stock market plunged 970 points Thursday, or 3.58%, as fears of the economic impact of the global coronavirus outbreak—and President Donald Trump’s mishandling of the crisis—continued to roil the world’s financial markets after last week’s panic sent markets into freefall.
“It’s kind of like an earthquake—there’s the earthquake, which is last week, and then there’s the aftershocks, which is this week,” MUFG Union Bank chief financial economist Chris Rupkey told the New York Post. Continue reading →
The Bank Policy Institute, a lobbying group for big banks, drew criticism for a policy memo suggesting financial deregulation as a response to the coronavirus outbreak. (Photo: Phillipp/Flickr/cc)
A lobbying group for big banks in the United States came under fire Tuesday from financial industry experts for pressuring federal officials to push through long-sought regulatory rollbacks in response to the worldwide economic concerns sparked by the global coronavirus outbreak.
Is the Fed reacting to market volatility or preparing for recession? (Public domain)
A number of financial experts and investors are sounding the alarm over the Federal Reserve’s recent infusion of cash into the market and warning that the actions by the central bank could be the precursor to economic crisis.
On October 22, the Fed pumped $99.9 billion in temporary liquidity into the market to ease stresses brought on by a tightening credit market. Two days later, on October 24, the bank upped that to $134 billion. Continue reading →
President Donald Trump said Friday he will nominate right-wing commentator Stephen Moore to the Federal Reserve board. (Photo: CBN)
Economists and progressive experts responded with exasperation and unease on Friday after President Donald Trump said he will nominate right-wing commentator Stephen Moore to the Federal Reserve, the gatekeeper of the nation’s economy.
“I will be nominating Mr. Moore for the Fed. You know who I’m talking about,” Trump told reporters while arriving in Florida for the weekend. “He’s going to be great on the Fed.” Continue reading →
So what would you miss if the agency suddenly disappeared or got gutted?
In short, a lot. We base this conclusion on the work the three of us have done in recent decades. One of us (Sovern) has been writing about consumer law for more than 30 years, while the other two of us direct a legal clinic that represents elderly consumers. We’ve seen the worst of what financial companies can do, and we’ve also witnessed how the CFPB has begun to reverse the tide.
Life before CFPB
If you are one of the more than 29 million consumers who have collectively received nearly US$12 billion back from misbehaving financial institutions because of the CFPB’s efforts, you already know its value. But even if you are not, you have probably benefited from the bureau’s existence.
Before Congress created the bureau, there was no federal agency that made consumer financial protection its sole mission. Rather, consumer protection was rolled into the missions of a bunch of different agencies. And, as we saw during the financial crisis, regulators often gave it a back seat.
The Office of the Comptroller of the Currency regulates banks but was so preoccupied with ensuring lenders were safe that it failed to protect consumers from their predatory subprime mortgages – so much so that it prevented states from doing so too. And now President Trump has put a former bank lawyer in charge of it. The Federal Trade Commission, which is tasked with fighting deceptive business practices, lacked the power to prevent such dangerous lending.
This meant consumer protection on financial matters fell through the cracks.
But as early as 2010, before the CFPB was set up, regulators at the OCC were increasingly aware of what was happening at Wells Fargo thanks to hundreds of whistleblower complaints. The OCC even confronted the bank, yet failed to take any action despite many red flags, according to an internal audit.
Besides protecting consumers, however, Congress had a second motive in creating the bureau: to help prevent the kind of mortgage lending that helped cause the Great Recession.
To that end, the bureau has adopted rules that help consumers to understand their mortgages – something that often wasn’t possible under the previously misleading mortgage disclosures. It also issued regulations to prevent consumers from taking out mortgages that they couldn’t repay. And after borrowers take out a mortgage, CFPB servicing rules establish the procedures servicers must follow when communicating with borrowers, correcting errors, providing information and dealing with loan modification requests.
Two of us have personal experience with one of the bureau’s new mortgage rules, which powerfully illustrates the value of the CFPB.
In 2014, Alice, a client of our law school clinic, was struggling to pay the mortgage on her home – which she had refinanced a few years earlier – after a stroke forced her into retirement. Our clinic helped her apply for a modification of her loan.
But within weeks, instead of acknowledging Alice’s application, the loan servicer summoned her to court to begin foreclosure proceedings in violation of CFPB servicing rules. Fortunately, our clinic was able to rely on those rules in getting the foreclosure action dismissed. Alice got her loan modified and remains in her home.
Protecting the vulnerable
This reveals how the bureau is particularly important to protect vulnerable consumers, like the elderly, who are frequently targeted by fraudsters and predatory lenders because of their cognitive and other impairments and because they often have accumulated substantial assets. The CFPB is the only federal agency with an office specifically dedicated to protecting the financial well-being of older adults.
The House of Representatives has passed a bill that would cripple the CFPB by, for example, taking away the power it used to fine Wells Fargo for opening illegal accounts and concealing its complaint database from public view. In other words, it would force the bureau to sit idly by as financial institutions lie to consumers. Even if the bureau survives, it may be less protective of consumers when its current director, Richard Cordray, leaves. His term expires next summer, and he may step down even sooner. Then we might see a former banker or bank lawyer put in charge, just as has happened at the Treasury Department and comptroller’s office.
Nearly every American has or will have a loan or bank account, a prepaid card, credit card, a credit report or some combination of those, and so has dealings with a financial institution policed by the CFPB. But few of us read the fine print governing these things or can understand it when we do. That gives the companies that write these agreements the ability to draft them to suit their own interests at the expense of consumers.
Similarly, we do not always know when a financial institution takes advantage of us, just as Wells Fargo customers did not always know that it had opened unauthorized accounts that lowered their credit scores.
Consumers need protection from misbehaving companies. If the bureau is eliminated, significantly weakened or starts protecting banks rather than consumers, all consumers will suffer.
This is an updated version of an article originally published on July 10, 2017.
Along with three co-authors, Jeff Sovern received a $29,510 grant from the American Association for Justice Robert L. Habush Endowment and by a grant from the St. John’s University School of Law Hugh L. Carey Center for Dispute Resolution in 2014 to study arbitration. It resulted in an article. Along with Professor Kate Walton, he received a grant from the National Conference of Bankruptcy Judges Endowment for Education to study debt collection, resulting in another article. He is a member of the National Association of Consumer Advocates.
Ann L. Goldweber is affiliated with NACA as a member.
Gina M. Calabrese is affiliated with the National Association of Consumer Advocates, New Yorkers for Responsible Lending, and the Association of the Bar of the City of New York (former chair, Committee on the Civil Court).