Bartlett Naylor co-authored this blog post with Amit Narang.
After two years of studying the proposed Volcker Rule, with 20,000 comments from bankers and the public, hundreds of meetings with Wall Street lobbyists, and 18 months past the rule’s congressionally mandated deadline for enactment, we’re now being told by the American Action Forum (AAF) — a self-described “center right policy institute” — that this was a rush job.
The Volcker Rule figures as a hallmark in the 2010 Dodd-Frank Wall Street Reform Act. It prohibits proprietary trading — gambling — by federally insured financial institutions.
The Volcker rule is about the worst example AAF could have come up with of a so-called rushed rulemaking. The simple and demonstrable truth is that our current regulatory process is far too slow and unwieldy to work effectively for the American public, and the Volcker Rule is the case in point.
Financial agencies missed deadline after deadline as they crafted the Volcker rule. Part of the delay was that they faced an unprecedented lobbying barrage from Wall Street to weaken the rule with loopholes or block it completely. So it is pretty incredible to see AAF try to re-write history and trick the public into believing that the regulators rushed this rule. AAF can distort the record and cherry-pick facts, but it doesn’t change the fact that, although the public and our economy are both far better off with the Volcker rule now in place, it took far too long.
The AAF adds that a new “administration” study reveals “annual” costs could approach $4.3 billion, proof that the regulators didn’t appreciate the ramifications of what they approved.
That $4.3 billion “annual” cost detailed in the administration study largely stems from the high end of losses the biggest banks might suffer shedding some of their high-risk assets, largely hedge funds. It is, in fact, a one-time cost, and the Office of the Comptroller of the Currency (OCC) estimates the cost in a range of $0 to $3.6 billion. The high end of the compliance estimate makes up the balance of the $4.3 billion.
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Congress passed – unanimously in the Senate and without debate – and President Obama will sign, H.R. 2019, the “Gabriella Miller Kids First Research Act” (named after a 10-year old child who died last year of brain cancer). If the legislation actually did what it touts – to finance pediatric research – it would be a noble bill for a noble cause.
But it is a fig-leaf bill. Its real purpose is to begin dismantling the presidential public financing system, and is very unlikely to produce any revenues for pediatric research.
The bill was originally introduced in the U.S. House of Representatives by U.S. Rep. Gregg Harper (R-Miss.), a longtime opponent of campaign finance reform. After Harper was unable to persuade Congress to approve earlier legislation that would have entirely defunded the public financing program, Harper re-worked the bill into what it is known now.
The legislation transfers public funds used to pay for the nominating conventions into the general treasury, then states that those funds may be used for pediatric research, if Congress ever decides to appropriate the funds for that purpose.
This same Congress slashed National Institute of Health (NIH) funding by $1.55 billion, which finances the pediatric research program, in the appropriations bills, and then placed caps on any further spending by NIH. The Kids First Research Act, if ever implemented, would transfer from the presidential public financing system to pediatric research, a pittance of what Congress slashed from the research budget. And even that pittance is not likely to happen. Given current spending caps on governmental agencies, Congress also would have to pass legislation lifting the spending ceiling for the National Institutes of Health to carry through with this appropriation, something that this Congress is very unlikely to do.
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Recently, the Senate Judiciary Committee held a hearing titled “The Federal Arbitration Act and Access to Justice: Will Recent Supreme Court Decisions Undermine the Rights of Consumers, Workers, and Small Businesses?”
So, will recent U.S. Supreme Court decisions undermine the rights of consumers, workers and small businesses? The answer is a resounding yes.
In fact, the court’s rulings already have begun to have an impact. Thousands of consumer and employment disputes with corporations have and will be dismissed and disregarded because of language buried in the fine print of take-it-or-leave-it terms in everyday consumer and employment contracts.
These provisions, called forced arbitration clauses, require consumers and employees to resolve their disputes in secret, costly arbitration proceedings instead of in court. (See a PDF list of selected cases in which forced arbitration clauses and class-action bans were enforced as a result of recent Supreme Court rulings.)
The Senate hearing highlighted a handful of recent harmful Supreme Court decisions, including AT&T Mobility v. Concepcion and American Express v. Italian Colors. These cases have expanded corporations’ ability to deny consumers their legal remedies. Big businesses can now use forced arbitration clauses to prohibit participation in class actions, even if class actions are the only economically viable way for consumers to pursue their cases.
The evidence has long been clear that forced arbitration is not a legitimate alternative method to resolve disputes, despite what the U.S. Chamber of Commerce and other business entities contend. In practice, forced arbitration is used to squash valid legal claims from ever going forward. As a result, companies are repeatedly let off the hook for egregious and illegal conduct, including discriminatory acts in the workplace, faulty home building, illegal charges and fees on cell phone bills, abusive treatment of the elderly in nursing homes, and other misconduct.