- The Department of Justice cuts a settlement deal with Bank of America under which the bank agrees to give millions to liberal groups [Sean Higgins/Washington Examiner, Federalist Society blog rounding up criticisms]
- Seizures under bank structuring law have hit small business owners who deposited cash in under-$10,000 amounts because their insurance policies wouldn’t cover cash-on-hand holdings above that amount [Ali Meyer/Free Beacon, earlier and generally]
- “It is hereby enacted that Smith wins his lawsuit” statutes and the Bank Markazi (Iran funds) case [Michael Greve, Liberty and Law]
- Second Circuit panel throws out $1.2 billion verdict against B of A over Countrywide mortgage lending, saying government didn’t prove fraud [Daniel Fisher, more]
- “The crowdfunding catch: government regulations” [Thaya Brook Knight, Newsweek/Cato]
- Too left-wing to get tenure at Harvard Law in era of the Crits. Now, to banks, “he’s judge and jury and everything else.” [Wall Street Journal profile of Fed governor Daniel Tarullo]
The Oklahoma Highway Patrol has become the latest law enforcement body to begin using “ERAD readers,” devices that allow police to freeze and seize any funds on pre-paid debit and credit cards, now used by many poorer and younger persons as a favored financial vehicle. The devices also allow police to obtain some data about conventional credit and ATM cards, but not, it appears from coverage, to freeze and seize funds in those accounts on the spot. “If you can prove can prove that you have a legitimate reason to have that money it will be given back to you,” said a police spokesman. Oklahoma “is paying ERAD Group Inc., $5,000 for the software and scanners, then 7.7 percent of all the cash the highway patrol seizes.” [Aaron Brilbeck/News 9 Oklahoma, Clifton Adcock/Oklahoma Watchdog, Scott Greenfield (highway patrol’s views of what is and is not suspicious confer a great deal of arbitrary power), Justin Gardner/Free Thought Project last October on Arizona use]
Plus: “New Mexico Ended Civil Asset Forfeiture. Why Then Is It Still Happening?” [NPR] A car is stopped for “swerving,” and soon police have confiscated the $18,000 its owner was carrying for payroll and other expenses of her southern California janitorial business [ACLU of San Diego, p. 7, “It happened to me: Janitorial business”]
I’ve got a new post at Cato at Liberty noting that Justices Samuel Alito and Clarence Thomas, in a concurrence this spring, appear to be inviting a constitutional challenge to states’ administration of escheat (unclaimed property) law on due process grounds. [More on Taylor et al. v. Yee from Daniel Fisher at Forbes] While the immediate questions posed would likely be whether states are doing too little to notify owners and using too short a period of idleness (three years is becoming common), the fact patterns might conceivably implicate some of the other problems noted by businesses on the receiving end of these laws, which we discussed back in 2013 (more): creative redefinitions of unclaimed property and outside “auditors” incentivized by contingency fees to overreach in assessments.
Reflecting widespread business discontent, the U.S. Chamber has addressed the issue in a series of papers and its publications have covered problems in states like Illinois, as well as in California as well as profiling the firms that specialize in these collections, which in some cases have filed qui tam (bounty-hunting) suits for a share of the proceeds.
On Delaware in particular see the Wall Street Journal (more), Forbes, and Delaware State News. And the Wilmington News-Journal has published an extensive investigation of the escheat contractors’ ties to the Delaware political class.
- 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]