Archive for October, 2012

There is only one thing abundantly clear in the polls right now: There is way too much money in politics. A new poll commissioned by the Corporate"Corporate Reform Coalition" poll "money and politics" Reform Coalition found that nine out of 10 Americans agree there is too much corporate money in elections, and 51 percent strongly agree with that statement. For all you poll junkies out there, you’ll be relieved to know nine out of ten is way outside the margin of error.

The poll found strong evidence that not only do Americans think there’s too much money in politics, they believe this money has a damaging effect on our democracy. A whopping 81 percent believe the secret flow of money in politics is bad for our democracy. And 84 percent believe that corporate political spending drowns out the voices of average Americans. The same percentage believes corporate political spending makes Congress more corrupt. The results clearly show that Americans are ready for a dramatic revamping of the campaign finance system.

On that front, Americans broadly support commonsense reforms that have been stonewalled by this Congress. When it comes to the issue of disclosure, 85 percent of Americans believe prompt disclosure of political spending would help voters, customers and shareholders hold companies accountable for their political spending. Congress had the opportunity to provide that accountability earlier this year by passing the DISCLOSE Act, but the bill met a Republican led-filibuster in the Senate. Congress also has yet to move on the Shareholder Protection Act despite the fact that 73 percent of Republicans and Democrats support requiring corporations to get approval from their shareholders before spending in elections. Shedding light on corporate political spending enjoys the bipartisan support our presidential candidates could only dream of.

 

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Birthday cake, party hats, boxes of presents, and protest signs calling for an end to the corporate takeover of our elections.

These, along with scores of activists who gathered to deliver birthday messages urging disclosure and accountability to one of the nation’s biggest dark money groups, were the main ingredients of the rally organized by Public Citizen and our partners in the Corporate Reform Coalition on Friday, Oct. 19.

Held in mock celebration of the U.S. Chamber of Commerce’s 100th “birthday,” the demonstration occurred outside of the U.S. Chamber’s headquarters in Washington, D.C., where activists held up signs with messages like “Democracy is NOT 4 sale!” and “End Corporate Rule.”

The Chamber, which has pledged to spend as much as $100 million in corporate money to influence elections across the country,  bears a significant portion of the responsibility for keeping our TV screens clear of useful information and facts, like who really paid for its pro-corporate ads (hint: corporations).

You’ve never seen a political ad that said, “Paid for by Chevron” or “I’m Dow Chemical and I approve this message,” right? But that doesn’t mean these corporations aren’t spending millions to influence our votes. That’s because the Chamber uses its 506(c) trade association status to accept millions from its massive corporate sponsors and spend unlimited corporate funds in elections without disclosing which corporations are actually paying for the ads.

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"Bart Naylor" "Financial policy reform"With a simple albeit ambitious decision, Wall Street regulators have a way to all but guarantee that there will be no more financial sector bailouts: require substantial at-risk equity investment.

On Monday, October 22, federal banking regulators will close the public comment period for proposed reforms of so-called capital requirements. Capital rules are the shorthand for the proportional amount of shareholder money that banks must add to any of its loans and other activities. This money joins borrowed money from depositors and other creditors to the bank. Together, stockholder and depositor money is loaned to businesses, home buyers, and other bank clients. If a client can’t repay the whole loan, that loss should come out of the pocket of the stock investor, not the depositor or taxpayer.

Going into the financial crisis, large banks had effectively loaned out $33 for every $1 in stockholder money. When the housing bubble burst, when complex special purpose vehicles exploded, when speculation deals vaporized, that $1 in shareholder investment was not nearly enough to keep these large banks solvent. American taxpayers were forced to invest $700 billion into bank capital accounts through the bailout, with the Federal Reserve shoveling trillions more in cheap credit for the banks.

In order to avoid a repeat of this disaster, the required investment from shareholders must be substantially increased.

Federal bank regulators now propose to improve the capital rules, as part of harmonizing with an accord negotiated in Basel, Switzerland. The regulators’ proposal spans 1,000 pages. The text contains more mathematical formulas than a calculus textbook. By comparison, the Volcker Rule, designed to terminate high risk bank speculation and much maligned for its complexity, is a Reader’s Digest at 300 pages.

These 1,000 of pages represent a lot of trees, both literally and figuratively, but the regulators fail to evince a view of the forest. Most problematic, the regulators essentially leave basic capital levels untouched, at about the same 33-1 level that prevailed during the crash. That upsets leading Washington policy-makers, both Republican and Democrat.

On Oct. 17, Sens. Sherrod Brown (D-Ohio), and David Vitter (R-La.) fired a letter to the regulators declaring that capital requirements must be strengthened. There is “bipartisan consensus among members of the Senate Banking Committee that it is appropriate to require banks to fund themselves with equity sufficient to withstand sufficient economic shocks,” the senators wrote.

Earlier this month, two dozen former regulators, both Republican and Democrat, led by former FDIC Chair Sheila Bair, and Federal Reserve Chairman Paul Volcker called for investor capital equal to 16 percent of the bank’s activities. Sitting FDIC Vice Chair Thomas Hoenig agrees that capital should be substantially higher than currently proposed. Other experts, such as MIT economist Simon Johnson and Stanford professor Anat Admati, call for 20 percent at-risk investment. Admati emphasizes that high capital won’t sit idly in a cookie jar, such as a rainy day fund. Other firms finance themselves entirely with at-risk equity capital, such as the computer company, Apple Inc.

With sound capital, the regulators can dispense with the second major problem with their proposal, namely risk-weighting. This counterproductive exercise allows banks to hold less capital for some activity. If implemented, JP Morgan would need less investor capital for a loan to a faltering big bank like Bank of America than a loan to a profitable, growing company like Apple Inc. Absurd.

The risk-weighting rules are complex, a “tower of Basel,” according to Bank of England director Andrew Haldane. In effect, the weights become “central planners’ determination of risks, which creates its own adverse incentives for banks making asset choices,” according to the FDIC’s Hoenig.

Banks want simplicity? Here you go: In Public Citizen’s comment letter, we call for a strict capital requirement of 20 percent, with no hall passes for risk weighting.

Bartlett Naylor is Public Citizen’s financial advocate. Follow him on Twitter @BartNaylor.

This Election Day, when voters across the country arrive at their polling place, many will simply be glad just to be done with what is almost certain to be the most expensive election campaign in U.S. history.

The unprecedented barrage of mudslinging, distortions and multimillion-dollar ad blitzes that has dominated the 2012 elections has made the need for campaign finance reform abundantly clear. And now, more than ever before, democracy activists across the country have an opportunity to answer the questions that this year’s campaign cycle has left burning in the hearts of Americans of every political persuasion: Why is our democracy going in this direction, and what can we do about it?

Let’s make sure that as they leave the polls, people have the opportunity to get involved with the movement for a constitutional amendment to overturn Citizens United v. Federal Election Commission, take democracy off the auction block and preserve constitutional rights for people – not corporations.

On Nov. 6, citizens just like you will be petitioning at polling places all across the country for a constitutional amendment. Fed up with the money corrupting our political process, they will be engaging their communities face-to-face, educating voters and building support for the remedy to the out-of control political spending that has left too many feeling discouraged about our political process as they cast their ballots.

American voters overwhelmingly agree that there is too much money in the political process. On Election Day, let’s come together to undertake the essential grassroots work of letting frustrated voters know why the floodgates have been opened to hundreds of millions of dollars of corporate cash and how we can band together to close them.

Of all the things voters could get involved in on Election Day, nothing is more fundamental to the future of our country than educating the electorate about the Citizens United ruling and building support for an amendment to ensure that future elections will be decided by the people, and not corporations.

Our democracy needs you. Will you join the movement on Election Day?

You can follow the campaign for a constitutional amendment to overturn Citizens United v. FEC and end our #Democracy4Sale on Twitter @RuleByUs. To sign up to petition on election day, you can click here.

PayPal logoPayPal is the latest corporation to join Public Citizen’s “rogues gallery,” a continually updated list of corporations that insert forced arbitration clauses in their terms of service with consumers.

These terms effectively force its customers to surrender their time-honored right to seek redress in court, and require them to resolve disputes in secret arbitration, where PayPal dictates the rules for the process.

PayPal’s new terms, which become effective on November 1, also deny users their right to band together in class actions, which are useful to seek accountability against companies who cheat large numbers of consumers out of individual small amounts of money. Most consumers are not going to seek to recover for small losses on their own. Meanwhile, by forbidding class actions, corporations can reap the benefit of their misconduct.

PayPal, however, gives users the ability to “opt-out” of the arbitration terms. Consumers must opt out by mail, which is quite ironic given the fact that every other consumer transaction with PayPal takes place online, with a simple click of a button.

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