- Trying to pressure banks to cease tax refund anticipation lending, FDIC staff crossed several lines of impropriety [inspector general executive summary via Kevin Funnell]
- Consumer Financial Protection Bureau, class action lawyers’ best friend, aims to suppress arbitration [WSJ, The Hill, earlier here, here, here]
- When CEOs campaign for their view of social justice, do they disserve shareholders’ interest? To the point of incurring liability? [Kevin LaCroix]
- “Insider Trading: The Unknowable Crime” [Thaya Brook Knight and Ilya Shapiro on Cato amicus brief in Salman v. U.S.]
- “The Number of Publicly Traded Firms Has Halved” [Alex Tabarrok; Naomi LaChance, Inside Sources, on decline of IPOs] Does SEC Chairman Mary Jo White get it? [Hodak Value]
- Tax havens and tax competition serve vital policy function, to “curtail the greed of the political class” [Dan Mitchell] Related: “The War Against Cash, Part III”
Various federal laws, including the Americans with Disabilities Act and Fair Housing Act, prohibit discrimination against disabled persons, and mental illness is a disability. And so — say three professors — businesses may be violating these laws by dinging credit applicants for poor credit history unless they make allowance for persons whose poor financial choices were the result of mental illness. Bonus: citation to authority of “United Nations Convention on the Rights of Persons with Disabilities (which the United States has signed)” [Christopher Guzelian, Michael Ashley Stein, and H. S. Akiskal, SSRN via @tedfrank]
Hello, AP? The relevant “wanting” here is done by lawyers, not consumers. (“When consumers want to create or join a class-action lawsuit…”) And that’s kind of emblematic of how you miss the point on the Consumer Finance Protection Board’s big announcement of a rule yesterday rescuing many class action lawyers from the arbitration clauses to which their putative clients would otherwise have given legal consent.
The industry reaction was swift, with Wall Street and its advocates warning of unintended consequences of the rule within hours of the CFPB proposing it on Thursday.
The change likely will result in higher litigation costs for banks, which they will offset either by raising the costs of consumer-loan products or reducing services, said Nessa Feddis, senior vice president for consumer protection and payments at the American Bankers Association, an industry group.
House Financial Services Committee Chairman Jeb Hensarling (R., Texas) called the proposed rule “a big, wet kiss to trial attorneys.”
And: Omri Ben-Shahar, Forbes:
While the overall effect on consumers depends on the balance between meritorious and frivolous class actions, one prediction can be made with confidence. Firms will now take greater care in drafting even longer fine print agreements, where everything is fully “disclosed.” Since many class actions allege violations that can often be corrected through more comprehensive legal disclosures and warnings, firms will lawyer up and write longer and even less readable boilerplate. The “asterisk” will be the winner — the routine disclaimers that accompany advertisements, as in: “Footlong is an average; reasonable variations may apply.” In the end, the CFPB’s proposed regulation will not improve the value of financial services to consumers. It will instead lavish upon people even longer and more excruciating small print.
In a memo sent to the Washington Post and published on his website, presidential candidate Donald Trump has outlined his ideas for compelling Mexico to “pay for the wall” as promised by his campaign. The first item on his list is unilateral executive tightening of banking regulations:
The provision of the Patriot Act, Section 326 – the “know your customer” provision, compelling financial institutions to demand identity documents before opening accounts or conducting financial transactions is a fundamental element of the outline below. That section authorized the executive branch to issue detailed regulations on the subject, found at 31 CFR 130.120-121. It’s an easy decision for Mexico: make a one-time payment of $5-10 billion to ensure that $24 billion continues to flow into their country year after year.
The paper goes on to describe in more detail the regulations that would be proposed, then dropped in a deal with the Mexican government in exchange for a payment.
I’ve been writing for quite a while now about how “Know Your Customer” and anti-money-laundering rules, typically adopted on a rationale of combating terrorism and major organized crime, are susceptible to being turned by government to many other objectives not discussed when regulatory authority was originally being sought.
- Federal judge refuses to dismiss suit against prosecutor Preet Bharara, FBI agents by hedge funder David Ganek over treatment in now-dismissed Chiasson inside trading case [Peter Henning, New York Times “DealBook”; Business Insider] SEC agrees to return $21.5 million extracted from Ganek’s Level Global Investors [BNA via Ira Stoll]
- CFPB follies: “Government-Directed Lending Comes to America” [Ike Brannon, Cato] Agency casts its eye on marketplace, otherwise known as peer-to-peer, lending [Thaya Brook Knight, Cato]
- SEC inspector general sides with agency against allegations of undue sway over ALJs [Reuters, earlier here, here, etc.]
- Third party liability for crime: “HSBC Sued Over Drug Cartel Murders After Laundering Probe” [Bloomberg]
- Former Ally Bank CEO: administration extorted race-lending settlement by threatening to derail regulatory approvals [Paul Sperry/New York Post, more]
- Bellevue, Wash.: $213,000 award to complainant Leticia Lucero “could mean other cases where homeowners argue lenders [cause] emotional distress during negotiations.” [AP/Yakima Herald]
…despite the U.S. Department of Justice’s promise to stop seizing bank accounts in future in cases where violations of laws against bank deposit “structuring” (keeping them under the $10,000 reporting threshold) are not connected with any underlying crime, it continues to hold on to money already in the seizure pipeline. That includes the $107,000 grabbed from Lyndon McLellan, who runs L&M Convenience Mart in rural North Carolina, according to the New York Times. “You work for something for 13, 14 years, and they take it in 13, 14 minutes.”
To make matters worse, a “prosecutor wrote menacingly to McLellan’s lawyer about the publicity the case had been getting,” warning that press attention “ratchets up feelings within the agency.”
In June of last year the IRS agreed to drop the charges and return McLellan’s money, and now a federal judge has told the agency to pay the store owner $20,000 for his legal costs, according to my Cato colleague Adam Bates, who has other links and thoughts on the case: “If the government cannot prove beyond a reasonable doubt that a person engaged in criminal activity, it should not be able to punish them as if they’re guilty.”
- “The business model of Wall Street is fraud” line is, well, vintage B.S. (that’s Bernie Sanders to you) [Steve Chapman/Chicago Tribune, Bret Stephens/WSJ. More: “Sorry Bernie, Wall Street Wasn’t Deregulated Pre-Crash” [Jared Meyer, Forbes]
- Auto lender shakedowns by Obama CFPB and DoJ continue, latest is Toyota for $21.9 million [WSJ] “Obama bullied bank to pay racial settlement without proof: report” [Paul Sperry, New York Post]
- Delaware Chancery Court takes step toward countering plaintiff lawyers who sue on almost every deal, still has many miles to go [Ronald Barusch, WSJ “Dealpolitik”]
- New York Times endorses financial transactions tax with unconvincing regulatory rationale [Peter Van Doren/Cato, earlier]
- California insurance commissioner pushes politicized investing, which can actually complicate solvency risk by harming portfolio diversification [Business Insider]
- “Smaller community banks appear to have a valid concern that their compliance burden is rising and the playing field is becoming more uneven” [Preston Ash, Christoffer Koch and Thomas Siems, Dallas Fed via Kevin Funnell] Marshall Lux/Robert Greene study ties trend to Dodd-Frank law [Harvard Kennedy School via Todd Zywicki]
- Laws against money laundering hurt more good guys than bad guys, latest installment [Jeff Miron, Cato]
- Montgomery County, Maryland officials help plant letters praising speed cameras in local papers [The Newspaper] “Chicago issued $2.4 million in bogus traffic tickets from speed cameras” [David Kravets, ArsTechnica citing David Kidwell and Abraham Epton, Chicago Tribune]
- “DEA Promised TSA Agent a Cut of Passengers’ Seizable Cash” [Jacob Sullum, Reason]
- “Cops Seized Over $107,000 From Couple; Didn’t Charge Them With A Crime” [Rock Island, Ill.; Amy Alkon citing Quad Cities Dispatch-Argus]
- I was among those speaking at an Annapolis event unveiling a new bill to restrain and better control asset forfeiture [Frederick News-Post, WBAL, Scott Shackford/Reason, Grant Zeigenfuse/Maryland Reporter; earlier on South Mountain Creamery case; more on margarita machines as forfeiture perk]
- Texas: “Cops Getting Free License Plate Readers In Exchange For 25% Of The ‘Take’ And All The Driver Data Vigilant” [Tim Cushing, TechDirt]
- Cato podcast on asset forfeiture with Adam Bates. More: What the President should do;
- How does Manhattan District Attorney Cy Vance spend his $800 million slush fund from bank settlements? Any way he pleases? [Scott Greenfield]
- Bernie Sanders still rants and raves about Glass-Steagall Act. Who will break the news to him? [Catherine Rampell/WaPo, P.M. Carpenter (Krugman, Pearlstein in accord with Rampell), earlier] “Hillary Clinton vows to go ‘well beyond’ Dodd-Frank” [Housing Wire via Kevin Funnell]
- “In the past, ‘financial institutions were unwilling, for relationship reasons, to litigate against each other…That has changed dramatically.'” [Daniel Fisher quoting New York attorney Brian Fraser]
- “Government Thinks You’re Too Dumb To Try Crowdfunding” [Ben Weingarten, The Federalist]
- “If every bank behaved like Abacus, the financial crisis wouldn’t have occurred.” So guess which bank got prosecuted [Jiayang Fan, The New Yorker back in October]
- Billions in free money for consumers, just by regulating credit card fees! Sorry, it’s not that simple [Todd Zywicki]
- “The war against cash”: government vs. the cash economy [Daniel Mitchell, Cato, first and second post]
- New IRS authority to secure revocation of passports should give pause to everyone concerned about American liberty [Investors Business Daily]
- Trying to buy gift cards in bulk as an employee bonus, Coyote discovers anew that the government hates cash;
- Initial public offerings are drooping again, regulation one reason [Thaya Knight, Cato]
- A dissent from the lamentations, here and elsewhere, on the decline of small community banks [Ira Stoll] “Fed’s Tarullo says looking into smaller banks’ concerns” [Business Insider]
- Berned out? Financial transactions tax “one of the more overrated ideas in American Progressive political discourse” [Tyler Cowen, Wikipedia on Sweden’s experience via @aClassicLiberal on Twitter] And Sen. Sanders continues to express incredulity on Twitter about college loans’ carrying higher interest than home mortgages do, despite attempts to enlighten him on the whole topic of secured lending and collateral [@tedfrank]
- Video of Federalist Society convention panel on constitutionality of administrative law judges at SEC and elsewhere with John S. Baker, Jr., Stephen Crimmins, Todd Pettys, Tuan Samahon, moderated by F. Scott Kieff;
- Consumer Financial Protection Bureau ban on contractual arbitration will help class action lawyers, few others [Todd Zywicki, Mercatus]
- “How US policies to stop terrorist financing end up hurting innocent families abroad” [Dylan Matthews, Vox] Money laundering regs, “de-risking” result in many bank closures in U.S.-Mexico border areas, hassles result for local residents and businesses [Kevin Funnell]