Archive for the ‘Financial Reform’ Category

Bart Naylor at Too Big launchOn June 22, Public Citizen was joined by U.S. Senator Jeff Merkley from Oregon, former congressman Brad Miller of North Carolina, MIT Professor Simon Johnson, University of Maryland Professor Rena Steinzor, and Marcus Stanley of Americans for Financial Reform to celebrate the release of Public Citizen’s latest publication. Too Big: The Mega-Banks Are Too Big to Fail, Too Big to Jail, and Too Big to Manage lays out the reasons why the current regulatory system has allowed mega-banks to remain too large.

Too Big immediately pinpoints the threat to American citizens’ interests as big banks continue to operate without adequate regulation:

“Americans suffered from the financial crisis of the 2008. Adding insult to injury, Americans were compelled to finance bailouts of banks responsible for the crash on the theory that permitting any to fail would cause a cascade of bankruptcies and inflict cataclysmic damage to the economy.

Yet today, the largest banks are even bigger than they were then.”

The book, by Bart Naylor, Public Citizen’s Congress Watch division’s financial policy advocate, focuses on commonsense solutions, in the form of regulatory and legislative reforms, to stem the unencumbered power and greed of the mega-banks.

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Public Citizen has been working to combat Wall Street recklessness alongside Senator Elizabeth Warren since the 2008 financial collapse, including as a leader of the Americans for Financial Reform coalition. We fought for the Dodd-Frank Wall Street Reform and Consumer Protection Act, which went a long way toward better protecting consumers from the sorts of risky banking practices that caused the economic meltdown. However, Dodd-Frank did not go nearly far enough.

kindergartenv2That’s why last week Public Citizen joined Sen. Warren and more than three dozen other organizations to launch the Take on Wall Street campaign.

The campaign is calling on Congress to make five policy changes that will help rein in some of the worst of Wall Street’s greed and excesses. We plan to highlight each of these planks in turn.

Today, we highlight one of the proposals that would put Wall Street on a more level playing field with  the American taxpayers that have shouldered the burden for the industry’s past mistakes — closing the “carried interest” loophole.

What is the carried interest loophole?

Money you are paid for the work you do and money you earn from investments are taxed differently. This should not be the case when the work being done is managing investments. However, some wealthy investment bankers have figured out they can nearly cut their tax bill in half by getting paid through investment income, rather than their taxed salaries — leaving average Americans to take up the slack. This loophole in our tax code is called “carried interest.”

How big of a problem is this?

According to one expert, closing this loophole could mean up to $180 billion over the next decade.

That’s real money that can be used to help families still struggling to recover from the recession caused by Wall Street recklessness. Even conservative estimates say it would mean at least $1.5 billion a year, which would be paid by those who could most easily afford it.

What can I do?

Take action at TakeOnWallSt.com to support closing the carried interest tax loophole. While you’re at it, you’ll also have the opportunity to sign up for campaign updates and you can find a printable one pager on the carried interest loophole and other resources to get engaged in this important campaign.

We hope that you’ll join with Public Citizen and our partners in the next phase of Wall Street reform!

Bret Thompson is the online director of Public Citizen’s Congress Watch division.

As improbable as it may seem, the nation’s largest banks are even larger now than they were before the 2008 financial crisis, meaning they are still a “too big to fail” risk for our economy. Income inequality is growing with hedge fund managers and corporate CEOs abusing loopholes in our tax code to further enrich themselves. Funding for government services is being slashed when sources of revenue are going untapped like taxing Wall Street trades. Some communities lack even access to basic banking services, leaving them to rely on predatory, high-fee financial services like check cashers.

popeAgainst this backdrop, Sen. Elizabeth Warren (D-Mass.), Rep. Nydia Velázquez (D-NY), and Rep. Keith Ellison (DFL-MN) led the launch of the Take on Wall Street campaign on Tuesday.

Nearly 40 organizations including Public Citizen, Americans for Financial Reform, the AFL-CIO and Communications Workers of America  have signed on to the new campaign, which seeks to bring much-needed reforms to Wall Street’s seemingly unchecked power and greed.

The five point plan at the center of the campaign would, in the words of AFL-CIO President Richard Trumka, “Make Wall Street work for Main Street, instead of the other way around.”

Here are the proposed reforms:

  1. Close the carried interest loophole that lets billionaire Wall Street money managers pay lower tax rates than nurses or construction workers.
  2. Create a Wall Street speculation tax that would discourage short-term bets and generate billions in new revenue to make college affordable, invest in our infrastructure, and create jobs in our cities.
  3. End “Too Big to Fail” by breaking up the big banks – making them smaller, simpler, and safer.
  4. Stop subsidizing million dollar CEO bonuses by ending the CEO pay tax loophole.
  5. End predatory lending and also expand access to fair consumer banking services through a public option for financial services like postal banking.

The financial sector spends around $1.5 million a day on lobbying and contributions to congressional candidates.

Rep. Ellison recognized this in his remarks, saying, “We are the many and they are the money. We are going to win this fight if we stick to it.”

Join the fight—you can help us take on Wall Street and WIN!

Bret Thompson is the online director of Public Citizen’s Congress Watch division.

On May 11, JP Morgan CEO James Dimon called the president of the nation’s community bank trade association a “jerk” in a live interview. Dimon characterized Camden Fine of the Independent Bankers Association of America in this way following Fine’s assertion that the ill-regarded mega-banks hid behind better-regarded community banks for political cover when lobbying for deregulation.

chaseNOPublic Citizen has voiced critiques similar to Fine’s about the mega-banks. Indeed, Public Citizen urges JP Morgan’s break-up, and filed a shareholder resolution calling on a study of this idea.  So when I attended the May 17 annual meeting of JP Morgan, I expected to draw some colorful rejoinders from CEO Dimon. Instead, the meeting in New Orleans, LA, known to locals as NOLA, was a meeting of “no.”

There was no name calling. In fact, CEO Dimon declared in his prepared remarks that the bank should be less defensive with public criticism. And he declared his firm squarely on the path of moral rectitude, and that misconduct would not be tolerated. He also described the company’s record financial results.

His remarks, which he read at a pace similar to the TV advertisement legal disclaimer for Cialis’ side effects, were a synopsis of his 50-page defense that opens JPMorgan’s annual report.

The comforting words regarding conduct were dissonant with the lengthy rap sheet of recent settlements for claims of misconduct at JPMorgan. They were also dissonant with the meeting venue, which was New Orleans’ Bourbon St. Shareholders attending the meeting needed to slalom there through people sleeping on the sidewalk either because they couldn’t find their way home, or they didn’t have a home; passed strip clubs open for business at 9:30 a.m.; and under awnings advertising alcoholic beverages that you’re welcome to sip on the street.

There was also no victory for shareholders hoping for some basic reforms through six separate proposals that constituted the core of this annual meeting. Public Citizen advanced one of these—the break-up study—and I introduced four others as a courtesy to the proponents who wanted to spare themselves travel expenses. Voting shareholders turned down all these proposals. Partly this is explained by the fact that 13 percent of the shareholders didn’t vote. Most voters are institutions tied into JP Morgan and other banks. Of course it didn’t help that the company uses language that confuses– the ballot didn’t actually say “break-up study,” but “shareholder value committee,” which an institutional voter sifting through hundreds of annual meeting ballots might dismiss as another expensive, needless distraction. Andrew Ackerman of the Wall Street Journal has explored this clever dodge.

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About a month ago, the Panama Papers scandal broke onto the international news scene, shining sunlight on the vast numbers of shell companies the Panamanian law firm, Mossack Fonseca, used to hide assets for wealthy individuals and companies.

The leaker (hacker?) behind the Panama Papers revelations , dubbed John Doe , dumped a tsunami of data on German journalists, who then enlisted the assistance of the International Consortium of Investigative Journalists (ICIJ) to wade through the 11.5 million documents. Because of the vast amount of data, the ICIJ is now turning to crowd-sourcing analysis by publishing a searchable database to allow the public to access the trove of information on secret treasures hidden within shell companies.

Careers are already ending as the exposé shines a light on the dirty little secrets public figures have camouflaged through the use of anonymous shell companies. The Prime Minister of Iceland was forced to step down when his name was associated with the Panama Papers files. The surge of stories has yet to ebb and will likely continue to flood us with information as citizen sleuths uncover additional instances of the rich and famous using Mossack Fonseca’s services to arrange the harboring of their assets from tax authorities, journalists, and other probing eyes.

Many of the world’s elite stash their riches offshore in lush tropical locales like the Bahamas or the British Virgin Islands, but a large number are also buried in companies formed in the deserts of Nevada. The state ranks on the list of top 10 places used by the Panamanian law firm to create shell companies for their clients.

Though flush with famous foreigners’ names like Emma Watson, the actress that played Harry Potter’s Hermione Granger, Americans are conspicuously underrepresented in the 14,000 plus names on Mossack Fonseca client list. That shouldn’t be surprising, though, since the U.S. is already well-established as a tax haven.

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