Our most recent testimony on overdraft fees is here.

A new U.S. PIRG report called Who Slows the Pace of Tax Reforms? profiles a dozen powerful corporations that have signed onto one or more letters from the PACE coalition, a group that stridently opposes international tax reform. The report shows how this “dirty dozen” benefits from lucrative federal contracts, yet do not pay their fair share of taxes and spend heavily to block tax reform. (Here is the release)

Highlights include these facts:
• The corporations profiled are twelve of the 100 largest publicly traded U.S. contractors and they received over $10 billion in government contracts in 2008 alone.
• The “dirty dozen” maintain over 440 subsidiaries in tax haven countries or financial privacy jurisdictions.
• The same dozen corporations spent a collective $37 million for 2008, over $100,000 a day, and over $33 million so far for 2009, on lobbying, while also spending over $6 million (in 2008) in campaign contributions from their political action committees to candidates and parties.

The report is by Nicole Tichon, our tax reform advocate, and Lisa Gilbert, our democracy advocate.

Because, they are phishing scams seeking to take your information, then take your money. The FDIC says:

E-mail Claiming to Be From the FDIC – October 26, 2009 The Federal Deposit Insurance Corporation (FDIC) has received numerous reports of a fraudulent e-mail that has the appearance of being sent from the FDIC. The subject line of the e-mail states: “check your Bank Deposit Insurance Coverage.” [...]This e-mail and associated Web site are fraudulent.

FULL EMAIL
E-mail Claiming to Be From the FDIC – October 26, 2009

The Federal Deposit Insurance Corporation (FDIC) has received numerous reports of a fraudulent e-mail that has the appearance of being sent from the FDIC.

The subject line of the e-mail states: “check your Bank Deposit Insurance Coverage.” The e-mail tells recipients that, "You have received this message because you are a holder of a FDIC-insured bank account. Recently FDIC has officially named the bank you have opened your account with as a failed bank, thus, taking control of its assets.”

The e-mail then asks recipients to “visit the official FDIC website and perform the following steps to check your Deposit Insurance Coverage” (a fraudulent link is provided). It then instructs recipients to “download and open your personal FDIC Insurance File to check your Deposit Insurance Coverage.”

This e-mail and associated Web site are fraudulent. Recipients should consider the intent of this e-mail as an attempt to collect personal or confidential information, some of which may be used to gain unauthorized access to on-line banking services or to conduct identity theft.

The FDIC does not issue unsolicited e-mails to consumers. Financial institutions and consumers should NOT follow the link in the fraudulent e-mail.

Privacy experts Joel Reidenberg and Jamela Debelak at Fordham Law School's Center on Law and Information Policy have released (their release, their report) an important new study. From Nick Anderson's Washington Post lede in his story States mismanage student information, study concludes:

States often collect far more information about students than necessary and fail to take adequate steps to protect their privacy, a national study concludes. The dossiers go far beyond test scores, including Social Security numbers, poverty data, health information and disciplinary incidents.

"Even so, House Bill 3221, or the Student Aid and Fiscal Responsibility Act, contains a section that calls for the expansion and further integration of these databases without addressing these privacy concerns. A Senate version of the bill is expected to be released from committee shortly."

“The CLIP study meticulously documents the states’ disregard for safeguarding children’s most personal data,” said Barmak Nassirian, Associate Executive Director, American Association of Collegiate Registrars and Admissions Officers. “And yet Congress is poised to fund an ill-thought-through expansion of these systems to include data ranging from pre-birth medical information to education, employment, military, and criminal records.”

Top House and Senate Democrats have offered new legislation on tax dodges (AP via New York Times). Statement from U.S. PIRG Tax and Budget Reform Advocate Nicole Tichon:
New Tax Reform Legislation is a Good First Step Toward Ending Bank Secrecy That Hurts Taxpayers

“The Foreign Account Tax Compliance Act of 2009 is a step in the right direction to reform a broken system where tax dodging individuals and corporations offload their burden on ordinary taxpayers.

“Holding foreign banks and corporations accountable for their clients can only help the process of ending bank secrecy. However, the bill can certainly be improved by giving the U.S. government even stronger enforcement mechanisms and by taking bold action against offshore shell companies.”

Energy and Commerce Committee Chairman Henry Waxman (D-CA) has announced a markup vote on the Consumer Financial Protection Agency for Thursday at 10 am. The committee has not released a base text or proposed amendments yet. E&C has the right to consider FTC-related matters and matters related to governance of the new agency. Industry opponents are seeking members to offer amendments to weaken both the CFPA and FTC's authority to conduct rulemakings and -- of course -- to preempt stronger state laws.

We're asking Congress and the FTC to investigate reports first broken by Evan Hendricks and his Privacy Times newsletter that, as professor Brian Wolfman notes in his Public Citizen Law and Policy blog entry, "the fact that a consumer has disputed her credit report can undermine her ability to get a home loan, even when the consumer was correct in the dispute."

As Ken Harney, a syndicated columnist and longtime critic of credit scoring and reporting mistakes explains in his Washington Post followup to Privacy Times:

Fannie Mae's automated underwriting system won't accept any application in which there is a notation in the credit report that a consumer has disputed an account or "tradeline." [...] Evan Hendricks, author of the book "Credit Scores and Credit Reports" and publisher of Privacy Times, a newsletter that outlined Fannie Mae's policy in a recent report, calls it "extremely unfair to honest consumers who are simply doing what they should -- challenging misinformation."

From Senator Chris Dodd, chairman of the Senate Banking Committee:

Today Senate Banking Committee Chairman Chris Dodd (D-CT) will introduce a bill to immediately freeze credit card interest rates, fees and finance charges on existing balances. The Credit Card Accountability, Responsibility, and Disclosure (CARD) Act enacted in May prevents arbitrary interest rate, fee and finance charge increases on a customer’s existing balance. Unfortunately, credit card companies have been jacking up rates in a last ditch effort to squeeze customers before all of the bill’s provisions can take effect.

Sunday's Washington Post will feature a column 5 myths about Wall Street pay days by Professor Roy Smith. Key line:

Myth #1: The Wall Street bonus culture led to the financial crisis. There is absolutely no evidence to support this.

And as Americans for Financial Security points out, the notion that these are completely publicly-accountable firms already is false. Shareholders need greater rights, including a "say on pay:"

See page 37 of our comprehensive AFR financial markets reform platform:

Corporate compensation policies that encourage short-term risk-taking at the expense of long-term corporate health and reward managers regardless of corporate performance have contributed to our current economic crisis. Shareholders should have the opportunity to vote for or against senior executive compensation packages in order to ensure managers have an interest in longterm growth and in helping build real economic prosperity. So-called shareholder “say on pay” is established practice in the United Kingdom, and currently is in place at 74 publicly traded corporations in the United States. “Say on pay” proposals were introduced at over 90 companies in 2008 and received an average support of over 40 percent, receiving majority support at 11 out of 74 annual meetings, as of Nov. 12, 2008. Say on pay legislation was introduced in the 110th Congress by President Osama when he was a Senator from Illinois. Now is the time for the 111th Congress to reconsider say on pay legislation and include it as part of needed reforms to encourage executive accountability.

The Paris Accord II conference linking creators of content with consumers continues with a workshop today on film, video and art. Here is a long-distance Flip video snap of media futurist Gerd Leonhard presenting. Other panelists listed here on the agenda. Previous blog on yesterday's action at the event. Participants twitter at #tacd. Excerpt from the working draft of the Paris Accord document regarding film, video and art:

1.It is vital to ensure that both content makers and consumers have unimpeded, but fair, access to communicate and engage in transactions with each other. Access to audiovisual content is essential to help ensure the public can readily obtain diverse sources of information, including cultural products.

2.The growing availability of a multiplatform digital distribution systems, such as the broadband Internet, Internet Protocol TV (IPTV), and mobile services, provides an important opportunity for both audiovisual content creators and consumers. For example, media makers can now sell content directly to consumers using broadband connections. Consumers also have the ability to view and acquire a diverse array of audiovisual content.

NYPIRG's long and tough Bigger, Better Bottle Bill campaign to expand recycling in New York State to include the massive stream of plastic water bottles should finally achieve success on Halloween. From the AP via the New York Times:

A federal judge issued an order on Friday lifting an injunction on an expansion of the state’s bottle bill, meaning that nickel deposits will be imposed on bottled water starting Oct. 31. All containers of water under a gallon will have a 5-cent refundable deposit, as beer and soda containers have had for years.[...] Laura Haight, a senior environmental associate at the New York Public Interest Research Group, praised the ruling, by Judge Deborah A. Batts of United States District Court, saying the new deposits would result in more recycling and less litter.

While Congress has been considering the Consumer Financial Protection Agency, action on unfair overdraft fees has not slowed. Earlier this week, Senate Banking Committee Chairman Chris Dodd (D-CT) (his statement) and Senators and fellow committee members Jeff Merkley (D-OR), Sherrod Brown (D-OH), Chuck Schumer (D-NY) and Jack Reed (D-RI) introduced overdraft fee reform legislation (statement from PIRG and others). Also, Reps. Carolyn Maloney (D-NY) and Barney Frank (D-MA) introduced a new version of their overdraft reforms. Story from syndicated columnist Kathy Kristof. My most recent testimony to Congress, earlier this year. Since banks are allowed by their regulators (no CFPA yet!) to manipulate both the timing that consumer deposits are made available and the order that checks and debits are withdrawn, and have the technology to decline debits at point of sale that would cause an overdraft but no longer choose to use it, consumer groups believe that overdraft practices need stricter regulation. Among our key reforms: no one should be enrolled in so-called overdraft protection automatically, they should have to affirmatively say yes, or opt-in. Even the Federal Reserve has proposed a regulation to address the problem, but it does not go as far as either bill. Oh, the latte: $4 for the latte, plus a $35 average overdraft "protection" fee.

Over at Huffington Post, Ryan Grim has a nice post, Reorganize The Fed, explaining how the Federal Reserve's governance is anti-democratic. While the 7 Federal Reserve governors are in fact selected by the President and consented by the Senate, the regional Federal Reserve Banks are dominated by bank-selected directors and the Presidents of the regional fed banks -- chosen by those bankers -- actually rotate onto the Fed's Open Market Committee, which sets monetary policy for the country. As Grim explains, Senator Richard Shelby, ranking Republican on Senate Banking, is concerned:

"It's basically a case where the banks are choosing or having a big voice in choosing their regulator. It's unheard of. That is not widely known to the American people. It will be." It's the kind of situation, Shelby said, that doesn't withstand public scrutiny. "It's something I'm very interested in changing, and I think the more it is illuminated, when people see what it is, they will see because it goes right back to the failure of the Federal Reserve to be a first-class regulator, and the role they played in the debacle," he said.

The House Financial Services Committee has posted the full roster of amendments to the Consumer Financial Protection Agency Act and the Expedited CARD Reform for Consumers Act of 2009, which were both approved yesterday. I've already written extensively on the CFPA victory. The credit card bill implements remaining provisions of the Credit CARD Act of (May) 2009 as of December 1, instead of next year. Unfortunately, "small" credit card companies with fewer than 2 million (that's million, not thousand) cards in circulation and gift cards were both exempted from the new deadlines. I would be not be surprised to find that some predatory high-fee credit cards marketed to small numbers of consumers will be able to take advantage of the exception, but at least the big banks will not. Had the big banks not abused consumers with high fees and interest rates since the new Credit CARD Act passed, this legislation would not have necessary. We expect it to pass the floor quickly and move to the Senate.

Update: This was a great panel, with a lot of spirited debate between the musicians who sample from others' work and those who don't. Hank Shocklee: "I was sampling before they made up the word. Many of these laws were written because of me." Various ideas were discussed to compensate musicians whose work is sampled by others, as well as to address numerous other problems in compensating musical creators. As the Paris Accord process goes forward, the group may be able to propose solutions.

The Paris Accord II conference (previous blog) linking the creative community's interests to those of consumers continues. The current panel is discussing a variety of issues, from Napster and successors to the rise of re-mixing and new distribution systems and rights agreements, and trying to figure out a model that works for musicians to make a living by convincing consumers not to illegally download. From left, musician-composer Jonatha Brooke, musician-composer Hank Shocklee (known for his work with Public Enemy), Fred van Lohmann of Electronic Frontier Foundation, music copyright expert and consultant Ann Chaitovitz, Edouard Barreiro of the consumer group UFC-Que Choisir, manager-producer Peter Jenner (Pink Floyd, The Clash) and musician-composer Pia Raug. Participants are twittering at #tacd.

Update: It may be that out of a total of 1537 lobbyists registered, only 58 are consumer advocates, leaving a still astonishing 1,479 industry lobbyists, or a 25-1 ratio.

Bloomberg is reporting in a story Citigroup 34%-Taxpayer Ownership Doesn’t Preclude 46 Lobbyists by Jonathan Salant and Lizzie O'Leary that the banks have registered 1,537 lobbyists to oppose financial reform and consumer groups have just 58. When you are trying to preserve a financial system that failed to protect the public, and claiming that it wasn't your fault, you need to deploy a lot of suits out of plush K St. and Wall St. offices to make your claims. As the headline points out, taxpayers own one-third of Citibank. I can assure you, however, all 46 of their lobbyists are working against the interests of taxpayers and consumers. Our work is tough, against such a phalanx of opponents. I often say, as I did in this story, that, “We’re like Luke Skywalker and they’re like the empire.”

Today, Nicole Allen (pictured left), coordinator of the Student PIRG Maketextbooksaffordable.org campaign, and I are at the Institut national de l’histoire de l’art in Paris, where we are participating in an international conference of the PIRG-backed TransAtlantic Consumer Dialogue (tacd.org). The Paris Accord II is a followup to a 2006 event:

The Paris Accord is an ongoing effort to negotiate an agreement between creative communities and the public. Such an agreement would include recognition of (and suggestions for improving) (1) access to and (2) income for the knowledge goods produced by creative communities. Current copyright and patent systems on both sides of the Atlantic discourage innovation and prevent inventions and creations from entering the marketplace. A lack of dialogue between creators, rights holders, service providers and users continues to hamper development of legal methods of copyrighted content distribution.

Update: The committee will return at 2pm to pass the PIRG-backed H.R. 3639, Expedited CARD Reform for Consumers Act of 2009, to make credit card reforms already enacted happen this year, not next year, because banks have been behaving badly by raising fees and interest rates instead of preparing for the law as they promised they would if given extra time. We oppose all amendments to weaken the bill.

Statement of U.S. PIRG Consumer Program Director Ed Mierzwinski on Committee Passage of Landmark Consumer Financial Protection Agency Legislation

“Despite the efforts of a massive special interest lobby to convince Congress that the 2008 financial meltdown didn’t happen and, even if it did, wasn’t their fault, today the House Financial Services Committee approved landmark consumer protection legislation establishing an independent Consumer Financial Protection Agency. As the bill moves forward, we expect further battles to weaken the bill, especially attacks on its critical provision re-establishing federal law as a floor not ceiling of consumer protection. We also anticipate battles to fix a few troubling provisions snuck into the bill, especially exceptions for car dealers and credit life insurance firms. But the underlying bill is sound and today’s vote is the first step toward final action this year to establish a single agency that regulates all financial products to protect consumers from predatory lending.”

Groups seeking financial reform are holding a Showdown in Chicago from Oct 25-27 to coincide with the American Bankers Association conference. The website has info on logistics.

The same financial institutions that caused the economic crisis and took billions in taxpayer bailouts are back to earning incredible profits. Meanwhile, Americans face shrinking pensions, rising foreclosures and unemployment, state budget cuts, predatory lending, outrageous overdraft fees, and sky-high credit card interest rates.

When it returns this morning, the House Financial Services Committee should hold votes on remaining amendments to the proposed Consumer Financial Protection Agency bill. Most amendments expanding preemption of or eliminating state authority over national banks have dropped out or been delayed for consideration later or on the floor. But, that doesn't mean everything is in perfect shape. Among the most problematic remaining amendments for a committee vote is a Campbell (R-CA) proposal to eviscerate the bill's coverage of car dealers making loans or otherwise engaging in activity that should be under the CFPA. Campbell is apparently a former car dealer.

Yes, dear reader, in Washington, you can even patent your tax avoidance strategies, preventing other taxpayers from benefiting from the law. Who knew? U.S. Tax and Budget Reform Advocate Nicole Tichon has joined a coalition urging passage of reform legislation from Reps. Rick Boucher (D-VA) and Bob Goodlatte (R-VA), H.R. 2584. Excerpt from the coalition letter to the hill is here:

Barriers to compliance caused by these patents may also cause some taxpayers to pay more tax than Congress intended and may cause other taxpayers to pay more tax than others similarly situated. This is simply unfair. Not to mention, tax strategy patents complicate the provision of tax advice by professionals and create a new burdensome level of compliance and cost, ultimately borne by taxpayers. Finally, as you know, issuance of a patent is no guarantee that the underlying strategy is valid under our tax code.

U.S. PIRG Takes on Another Front in the Fight Against Tax Abuses,
Joins Group in Sending Letter to Congress

WASHINGTON, Oct 20 – The U.S. Public Interest Research Group joined a coalition of consumer organizations, taxpayer rights groups and tax planners, including the American Institute of Certified Public Accountants, to send a letter in support of legislation banning patents on complex tax transactions and strategies used to avoid, reduce or defer taxes to the House Judiciary and Ways and Means Committees this Tuesday.

“Our government should not be in the business of rewarding tax lawyers who help clients dodge their taxes,” said Nicole Tichon, Tax and Budget Reform Advocate for U.S. PIRG. “There is no patent protection for finding new ways to steal cars, and there shouldn’t be protection for finding new ways to dodge taxes.”

The legislation, which currently has 27 co-sponsors, was passed in the House last year by a vote of 220 to 175 as part of larger patent reforms.

At the time of the letter’s writing, 82 tax strategy patents had been issued, with 133 pending.

“The on-going serious concerns associated with these types of patents pose a significant threat to taxpayers and their advisors, and we believe that quick legislative action to prohibit them is essential,” the organizations wrote in the letter, which was delivered to Congress today.
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Original post: I am in the Financial Services Committee overflow room. Two civil rights colleagues just walked in. That's good. Until then it was 45 industry lobbyists and me. Same thing downstairs in the main room -- where it is about 120 opponents of reform to maybe 4 public interest lobbyists. If you've seen the U.S. Chamber's lobby report, you'd know there's a lot of money on the table in opposing health care and financial reforms. They've spent $34.7 million in the last quarter themselves alone. Add in Wall Street, the big banks, small banks, credit unions, credit bureaus, rent-to-own stores, payday lenders and everyone else and as they say in Washington, "sooner or later, you're talking real money." So far, Chairman Frank has announced that votes will be tabled until the morning and we are now considering weakening amendments.

Mr. Watt (D-NC) is explaining to Republicans that the Constitution trumps 1864 National Bank Act preemption doctrine and reserves powers to the states. Now we are hearing a lot of uninformed debate from several members who think Abraham Lincoln paused the Civil War to preempt pesky state Attorneys General. Actually the NBA was passed as a funding mechanism for the war effort. Preemption was constructed out of whole cloth by federal regulators- in just the last ten years or so. More uninformed debate: Chairman Frank has just called "preposterous!" a claim that the CFPA will ban frequent flyer miles! Now, he rejects another claim: "No, that's the kind of thing you use to scare little children and I don't see any little children. There must not be any good arguments against the CFPA." Updates after the jump:

Update 3 Colleagues from CFA and AFR have recently completed a press call on the need to ensure that the bill protects consumers from auto financing scams.

Update 2: Yikes, Mr. Bachus is invoking OCC Comptroller John Dugan's letters to Professor Elizabeth Warren as arguments for preemption. His OCC agency's failures have been widely described in testimony before the Congress by authorities including Professors Patricia McCoy of UConn Law School and Art Wilmarth of GWU Law School and Illinois Attorney General Lisa Madigan. Google (or Bing, whichever) Here is Washington Post columnist Steve Pearlstein's op-ed last summer called "The Big Bank's Best Friend" for more. I am blogging from the crackberry on the slow Edge network so cannot add the link right now. Rep. Maxine Waters similarly weighs in that "we should be bold on consumer protection!"

Update 1: The patchwork and balkanization arguments are coming fast and furious, with no proof or examples that preemption enhances social welfare. The simple fact is this: Congress routinely preempts the states (or ignores preemption decisions by regulators that don't have the legal authority to do so) only because powerful interests extract it as a price.

I just received a promo to attend a local "Gold and Precious Metal Buying EVENT." Read Consumer Reports before you head on over.

Over at his Save The Internet blog, Tim Karr reports that AT&T Boss Asks Employees to Fake It:

The company’s top policy officer sent a memo to workers on Monday urging them to hide their company affiliation before posting anti-Net Neutrality comments to the FCC’s Web site.

Looks as if C-Span will cover today's continued consideration (markup) of the Consumer Financial Protection Agency bill by the House Financial Services Committee beginning at 2pm. If that link doesn't work, this one, which also is updated to list amendments that have been considered already, should run the hearing live. Some people think this markup will end today, others that it will take 3 more days (until Thursday). Among the bad amendments still to be considered is the Melissa Bean (D-IL) amendment to reinstate the OCC's draconian 2004 rules preempting all state authority over national banks and their subsidiaries. We oppose all weakening amendments, including an anticipated amendment to completely exempt credit unions from the agency's oversight. We support amendments to clarify that auto dealers making or backing loans as well as student loan companies will be covered by the agency.

Once again, one of the biggest collectors and sellers of confidential consumer information is paying a fine to the Federal Trade Commission for sloppy data handling. From the FTC release: "This failure left the door open to a data breach in 2008 that compromised the personal information of 13,750 people and put them at risk of identify theft." As powerful interests are wont to do (last week, it was Microsoft), ChoicePoint blamed someone else, a government customer, instead of taking full responsibility, as explained by Brian Krebs in the Washington Post, where he also notes that ChoicePoint flacks turned snippy over his characterization of the settlement. For those of you not keeping score, ChoicePoint was responsible in 2006 for one of the most embarrassing privacy debacles of the modern age: it agreed to a settlement for allegedly selling confidential consumer dossiers to identity thieves of no certain address, even after being notified of fraudulent activity by government agencies and even though the supposedly reputable businesses had disconnected phone numbers. For that mess, it paid $15 million, including restitution to victims; this fine of $275,000 seems like a parking ticket.

Congress is considering a variety of bills on data breaches and information security. Industry lobbyists are scurrying around the capitol demanding broad preemption over state authority to protect privacy and individual rights of action to recover damages as a condition of any new federal laws. Yet, without state data breach laws, we'd have never learned of the first ChoicePoint "breach."

On Thursday, the House Financial Services Committee completed action on an improved but still weak reform proposal, H.R. 3795, the Over-the-Counter Derivatives Markets Act of 2009. It then began heated debate on the discussion draft of HR 3126, the Consumer Financial Protection Agency Act. You can follow all the action here, where amendment language and votes that have occurred on both the derivatives bill and partially-completed CFPA bill are archived and where video links are provided for both the archived parts of the meeting and for the expected continuation of the debate Tuesday beginning at 2pm.

The derivatives bill purports to require these complex, murky instruments to be transparently traded on regulated exchanges. But, as we told the New York Times, the derivatives bill has “broad exceptions that swallow any rule it creates.” As law professor Michael Greenberger of the University of Maryland told Marketplace Radio, "Unfortunately, I think too many devilish hands worked on this, and the exemptions to the general regulatory requirement almost eat the exchange trading requirement away." The bill allows weaker, industry-controlled clearinghouses to handle much of the trading, including to determine whether certain transactions would "clear" on an exchange. As New York Times financial columnist Gretchen Morgenson said in her story Don’t Let Exceptions Kill the Rule:

"Gee, do you think the banks might be a tad hesitant to punt a very lucrative line of business onto less profitable exchanges? Do you think they might have an incentive to say that the most profitable swaps simply aren’t clearable?"

That story in the New York Times also explains the preliminary action on the CFPA bill and an amendment, which was approved, that exempts "98% of the nation's banks" from direct authority of the CFPA. This was a disappointing vote that weakens the agency but three things should be noted:

On left is Jim Guest, President, addressing today's annual meeting of Consumers Union, publisher of Consumer Reports magazine. I've just been privileged to be elected to the board and I look forward to working with the nation's leading independent consumer testing organization. Their work helps their member-subscribers get better priced deals and safer products. Also, by holding manufacturers and service providers more accountable to consumer-buyers, their work helps all consumers get better priced deals and safer products, too. I've worked for years with the Consumers Union advocacy staff in the states and on Capitol Hill; I look forward to learning more about the magazine (both print and online) and testing divisions. In addition to the tour of the test labs, another highlight has been meeting the staff of Consumers Union's newest division, my fellow bloggers at the Consumerist.com. The state PIRGs have also been longtime partners for health and prescription drug reform with Consumers Union-- see consumerreportshealth.org.

As the House Financial Services Committee today considers the industry-backed Bean (D-IL) amendment to roll back proposed legislation, the Consumer Financial Protection Agency Act, that would reinstate federal bank laws as a floor not ceiling of protection, a new study documents that nationally-regulated banks were -- despite their claims to the contrary -- at the center of the system that failed and that any claimed increased cost of multiple state laws is small. The new report released by the Center for Community Capital at the University of North Carolina documents the link between Federal preemption of state anti-predatory lending laws and the risky subprime mortgages that collapsed, triggering the foreclosure crisis. It also finds that national banks showed a marked increase in subprime lending following federal preemption which took full effect after 2004 actions of the federal Office of the Comptroller of the Currency (OCC). (Our archival OCCWatch pages.)

The House Financial Services Committee began debate today over the Obama-backed Consumer Financial Protection Agency that is opposed by the U.S. Chamber of Commerce and major bank associations. Votes may occur as early as Thursday. Meanwhile, state attorneys general joined advocates around the country in supporting the bill's central reform-- making federal law a floor not ceiling of protection. In Illinois, Attorney General Lisa Madigan, who also met with president Obama Friday, held a news conference (her release and a WGN video) urging Rep. Melissa Bean (D-IL) to drop her gutting amendment that would retain the preemption regime currently in place. Madigan's letter to Bean. Also, Ohio Attorney General Richard Cordray joined Ohio PIRG (story) to urge his delegation to support stronger state laws. Iowa Attorney General Tom Miller also weighed in. The National Governors Association led by California Republican Arnold Schwarzenegger and New Jersey Democrat Jon Corzine also weighed in on behalf of the states.

Today, the House Financial Services Committee begins marking up (voting on) two key pieces of the financial reform puzzle -- derivatives legislation and the CFPA.

This New York Times editorial today That Promised Financial Reform supports our views on both derivatives and the CFPA, then urges legislators to reject industry demands:

Time and again over the last year we have heard lawmakers vow to protect the American public. We suspect most of them even meant it. But the lobbying power — and contributions — of the banks and the rest of the financial industry can be hard to resist. The House Financial Services Committee and all of Congress must resist and deliver robust reform.

I just received a renewal credit card in the mail that required activation by calling an 800#. I don't mind that. It reduces fraud and trafficking in stolen cards. So, I called, and typed in my card # and part of my SSN and stuff. But then, the voice says:

"While we're waiting for activation of your new card to be completed, we have a great offer. For $1, you can look at your credit report and fight identity theft. Press ONE now."
[Long pause while I wait for better choices and options.]
"Are you still there? Are you sure you don't want to fight identity theft blah blah blah? Press ONE now."
[Another very long pause. I am not buying.]
"OK, dang, we give up. I guess you're not going to fall for our credit monitoring subscription scam. Your card is activated anyway. Goodbye."

Well, I made that "dang" sentence up, of course. But no one should ever sign up for over-priced, under-performing, extremely profitable credit monitoring services, whether from your bank or from the ubiquitous freecreditreport.com. Nothing stops identity theft, except the security freeze. Oh, and credit reports? They're available for free by federal law and some state laws give you more free reports. Don't press ONE. Don't press anything. Just wait. Just say no. Coincidentally, someone just sent me an interesting Wall Street Journal column by Julia Angwin, The Fallacy of Identity Theft. Excerpt after the jump:

It turns out that "identity theft" is one of the most brilliant linguistic constructs ever, with its terrifying specter of losing not just your money – but your soul. Maybe it's time that we renamed it what it is: a fear campaign designed to get us to buy expensive services that we don't need.

In a release yesterday, U.S. PIRG Health Care Advocate Larry McNeely called the health insurance lobby's claims that reform would cost too much "futile" and cited instead reports that refute their self-serving claims: The report is flawed because, McNeely noted, it explicitly excludes many provisions in the bill that would bring down the cost of care, like delivery reforms, affordability tax credits, and increased competition in insurance exchanges. A recent report from U.S. PIRG came to a conclusion that stands in stark opposition to the health insurance industry-funded document. The Three Trillion Dollar Question identified $2.8 trillion in potential economic savings from robust health reform. In addition, the Commonwealth Fund and the non-partisan Congressional Budget Office (PDF) have concluded separately that health reform could generate real reductions in national health spending.

The Sunlight Foundation has ranked FIRE (Finance, Insurance and Real Estate) campaign donations to members of the House Financial Services Committee. Leader of the "PAC" is Rep. Melissa Bean (D-IL), with $269,800 of FIRE donations in 2009 out of a total of $634,535. Bean is expected to offer the worst gutting amendment to the Consumer Financial Protection Agency Act. The Bean amendment - as it is widely understood although not yet circulated - would eviscerate the bill's reinstatement of the longstanding policy that federal law serve as a floor but state laws could go higher. Under Bean, we would roll back to the recent system of federal preemption of stronger state consumer laws. Somnolent federal regulators that ignored, or aided and abetted, the growth of unfair and abusive practices leading to the crisis, would stay in charge, if you call it that. As I told the AP a few days ago: "That's the system we have now. That's the system that failed." The picture above links to the full picture at Sunlight.

Just saw an incredible piece supporting the Consumer Financial Protection Agency by New York Times columnist Joe Nocera Have Banks No Shame?. It ran Saturday, in case you missed it.

"Whenever you talk to bankers or their lobbyists about the proposed agency, you hear some variation of what I’ve come to think of as the party line. It’s not that they’re against consumer protection, they say. (Heaven forbid!) [...] What’s more — and this is the part that is really unbelievable — they insist that bankers weren’t the cause of the financial crisis.[...]"

"Who do you think was creating all those subprime mortgages that the brokers and originators were peddling? The banks, that’s who. I’ve had mortgage brokers tell me how bank salespeople put enormous pressure on them to ratchet up their sales of, say, option A.R.M., no-doc mortgages —mortgages the banks were offering, through the brokers — so they could make the loans and then bundle them to Wall Street for a hefty fee. Bankers were every bit as complicit in pushing mortgages on customers who lacked the means to pay them back. Even now, banks are engaged in practices that are, at best, dubious, and at worst deceptive. How about, for instance, those rapacious debit card overdraft fees?"

Hunh? In an article Some Users May Lose Data on a T-Mobile Smartphone in today's New York Times, Microsoft refuses to take responsibility for a glitch in T-Mobile Sidekick phones using Microsoft-owned Danger company software that "would probably result in some customers losing their personal information like contact names, phone numbers and digital photos." The story continues:

The situation has resulted in another black eye for Microsoft in the mobile phone market. [...] Microsoft stressed that its own technology was not to blame for the T-Mobile service issues. Danger had its own technology, which has remained in use after Microsoft’s acquisition.

We were among reform advocates who joined President Obama and several victims of financial chicanery at the White House Friday for an event urging swift passage of the Consumer Financial Protection Agency Act. President Obama singled out the U.S. Chamber of Commerce for special scorn in a strongly worded speech (video and full transcript and also, a new White House reform page). Excerpt:

"In a financial system that's never been more complicated, it has never been more important to have a watchdog function like the one we've proposed. And yet, predictably, a lot of the banks and big financial firms don't like the idea of a consumer agency very much. In fact, the U.S. Chamber of Commerce is spending millions on an ad campaign to kill it. You might have seen some of these ads -- the ones that claim that local butchers and other small businesses somehow will be harmed by this agency. This is, of course, completely false --..."

Nice video interview A Heroine of "Capitalism" by Lois Romano of the Washington Post with professor Elizabeth Warren, Chair of the Congressional Oversight Panel. It's a play on Elizabeth's star turn in the new Michael Moore movie, "Capitalism: A Love Story." In the interview, Romano and Warren discuss the question: "Where did the TARP money go?" That's a darn good question that U.S. PIRG's Nicole Tichon is also trying to answer.

We testify Thursday morning (testimony is here for me and some witnesses) before the House Financial Services Committee at a 10 am hearing on two credit card reform bills. My testimony is primarily in support of interchange fee reform, H.R. 2382, the Credit Card Interchange Fees Act of 2009 (Peter Welch-D-VT). We also strongly support H.R. 3639, the Expedited CARD Reform for Consumers Act of 2009, to accelerate the implementation of the CARD Act from various times next year to December 1st this year, because the banks have been behaving badly since it was passed in May.

For every $100 spent on a credit or debit card, the Visa and Mastercard networks grab an average of $2, sometimes $3. Merchants have no ability to negotiate nor are these interchange fees or the fee rules governing them transparent. The merchants say that the card networks also restrict their ability to offer consumers lower-cost choices. All consumers pay more at the store and more at the pump, even if they are cash customers, due to these anti-competitive fees. The bi-partisan Welch (D-VT)-Shuster (R-PA) proposal addresses the worst practices of the industry. My testimony.

Great editorial How the banking lobby tries to undermine loan reform supporting the proposed Consumer Financial Protection Agency in Wednesday's USA Today. Excerpt: "One thing the industry doesn't have going for it are the facts." The proposed CFPA is a priority consumer reform for U.S. PIRG and other leading civil rights, labor, consumer and community organizations allied together as Americans for Financial Reform. A vote is expected next week in House Financial Services. Among the key issues: Whether we reinstate the states as laboratories of democracy and put state attorneys general back onto the corporate crime beat, or whether the banks and U.S. Chamber of Commerce succeed in gutting the bill's critical provision re-establishing federal laws as a floor not a ceiling of protection.

In Washington, the Big Lie works. You make a claim that is so outrageous, no one will think you are making it up. In this case, the U.S. Chamber is claiming (The Hill) that unless we encourage offshore tax cheats by widening a loophole that encourages companies to set up a chair on the beach of a tax haven country and call it your headquarters, we will be in violation of our treaties and other trade agreements. Meanwhile, U.S. PIRG's tax reform advocate Nicole Tichon continues her efforts to get the special interest loophole that could cost taxpayers billions out of a spending bill (previous blog has details.) Only in Washington.

UPDATE: AP Story on vote.

The Senate has voted 68-30 with YEA the public interest vote to pass the Franken-(D-MN)-Landrieu-(D-LA) PIRG-backed amendment that would prevent Department of Defense monies from going to certain government contractors who force their employees who are victims of sexual-assault or Title VII discrimination claims into forced arbitration as a dispute resolution. Previous blog. This is an important vote.

In a letter today to a Senate Appropriations Subcommittee, U.S. PIRG called for elimination of a corporate tax loophole slipped into the language of the 2010 Senate’s Appropriations bill for Financial Services and General Government that would benefit companies that do business in the U.S. but set up a shell company outside the country to avoid taxes. From the letter from U.S. PIRG tax expert Nicole Tichon:

Inverted companies are those who base their operations in the U.S. and establish a nominal presence in a foreign country for the purposes of avoiding U.S. taxes. Laws to close these tax haven loopholes have garnered bipartisan support and produced common-sense directives. Dismantling them allows profitable companies to legally skip out on their taxes and shifts that tax burden to taxpayers and responsible businesses already facing tough times in this economy.

When corporations first invert and then have the ability seek public contracts, taxpayers suffer a triple injury. First because the American companies at least nominally move overseas and transfer their tax burden to taxpayers. Secondly, taxpayer dollars would go overseas to pay public contracts paid to these reincorporated companies. And third, we lose when their American “subsidiaries” are able to strip their income down to a point where their U.S. tax is zero.

For Immediate Release Statement of Nicole Tichon
U.S. PIRG Tax & Budget Reform Advocate

U.S. Senate Must Remove Corporate Loophole from Appropriations Bill

WASHINGTON, Oct. 6 – If action is not taken immediately, a big corporate loophole will be slipped into the rules governing how and to whom U.S. government agencies contract out their work, the U.S. Public Interest Research Group (U.S. PIRG) discovered this week.

Each year, Congress must renew its commitment to prohibiting government agencies from awarding contracts to inverted corporations. (Inverted corporations are those that were once U.S.-based, that reincorporate in another country, but conduct very little substantial business in their new foreign base. For more information see U.S. PIRG’s Tax Shell Game.) This restriction began as part of the Homeland Security Act of 2002 and has been renewed by subsequent appropriations bills.

But this year, a loophole has been slipped into the language of the 2010 Senate’s Appropriations bill for Financial Services and General Government that would severely limit the scope of this law.

In Section 740 (d) of the 2010 bill, a sweeping exception is made to the current law, opening the door wide to inverted or “shell” corporations ­who do business in the U.S. but don’t pay U.S. taxes, costing taxpayers billions of dollars a year.

In reference to prohibitions against granting public contracts to inverted companies, the bill reads: “The prohibition… shall not apply to the extent that it is inconsistent with the United States obligations under an international agreement.”

“This bill undermines a bipartisan, commonsense law, undoing the good that’s been done,” explained Nicole Tichon, Tax and Budget Reform Advocate for U.S. PIRG. “The taxpayers, who’ve been carrying the financial rescue on their backs, will take on even more burden if this loophole becomes law.”

On Tuesday, Tichon and U.S. PIRG took immediate action, sending a letter to the Senate Appropriations Subcommittee on Financial Services and General Government leadership outlining its key concerns, which include the potential for any inverted company in a country with which the U.S. has any kind of “international agreement” to be exempt from the restriction on contracting with the U.S. government.

“Though ‘agreement’ is a nebulous term, it is presumed to mean the World Trade Organization’s Government Procurement Agreement, but could be interpreted as wide as Trade Agreements, Trade and Investment Agreements or even Tax Treaties,” Tichon’s letter reads.

“The original law does not provide for any preferential treatment of any particular country. The original law in no way impacts true foreign companies. Instead, it keeps contracts and tax dollars out of the hands of companies that have renounced their U.S. citizenship to avoid paying their fair share of taxes,” the letter continues. (Download the letter for full details.)

Tichon added, “The existing law provides for one of the few checks taxpayers have against blatant corporate greed and one of the few checks businesses that pay taxes have to help level the playing field.”

The bill has not yet been taken up on the floor of the U.S. Senate, but will be considered in the coming weeks.

###

U.S. PIRG, the federation of state Public Interest Research Groups,
is a non-profit, non-partisan public interest advocacy organization.

For more information on U.S. PIRG’s campaign to Close Corporate Tax Loopholes, click here.

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Senator Al Franken (D-Minn) is offering a PIRG-backed amendment, S.A. 2588, co-sponsored by Sen. Mary Landrieu (D-La), to the Department of Defense Appropriations Act (H.R. 3326), both expected to be considered Tuesday on the Senate floor. This amendment would bar defense contractors from forcing employees with sexual assault and discrimination claims into arbitration. It is a response to the shocking story of Jamie Leigh Jones, a military contractor who was allegedly gang-raped in Iraq by fellow employees of military contractor KBR, then confined to a guarded shipping container when she reported the incident. Ms. Jones and her employer, KBR, have been locked in a three year court battle just to determine whether Ms. Jones has the right to even bring a lawsuit at all. You can support the Franken amendment at this Public Citizen action page. Our previous blog on the Jones case.

Even though a court has recently ruled in Jones' favor on a motion to move forward, it took three years just to get that point, so the case actually proves the need for reform, not in any way that the system works. Our coalition site on arbitration reform for employees, small farmers, small businesses, nursing home residents and consumers is here at Fairarbitrationnow.org

From a news release hot off the presses of the Consumer Federation of America:

Announced changes to overdraft programs at the nation’s largest banks will not protect American consumers from exorbitantly expensive short-term loans or extend federal consumer protections to the most expensive loans banks make. “None of the largest banks reduced their overdraft fees, which average $35 per overdraft, or dropped sustained overdraft fees tacked on if consumers cannot repay in just days,” noted Jean Ann Fox, director of financial services for Consumer Federation of America.

Brave New Films has a new Youtube video worth watching. From the promo:

Netting $2.5 billion in profits last year wasn't enough for WellPoint, the nation's largest insurance company. Now, WellPoint's affiliate, Anthem Blue Cross and Blue Shield, is suing the state of Maine for refusing to guarantee it a profit margin in the midst of a painful recession. As if Mainers didn't have enough to worry about just struggling to put food on the table, WellPoint is intent on forcing them to cough up 18.5% higher premiums on their insurance policies.

Over at The Nation, publisher Katrina vanden Heuvel has posted an editorial The Fight For Financial Reforms promoting the Consumer Financial Protection Agency and other reforms. Also, Nation reporter Greg Kaufmann has a review of last week's CFPA hearing, called Do They Take Us for Schmucks? Meanwhile colleague Susan Weinstock of the Consumer Federation of America has a pro-CFPA op-ed in the Capitol Hill tabloid Roll Call: Public Demands Disclosure. But Roll Call also finds space for special-interest lobbyist Mike Oxley, former chair of the Financial Services Committee, to oppose the CFPA and a variety of other reforms. Most non-industry lobbyists would agree with me that Oxley actually opposed the core reforms in the most famous bill that bears his name, the Sarbanes-Oxley Corporate Reform Act, passed in the wake of the Enron debacle. Once former telecom giant WorldCom joined Enron on the breadline, however, both Oxley and former President Bush had no choice but to embrace it and seek its passage. Let's hope we don't have to have another economic collapse to get Oxley and others to recognize that yes, our financial system did collapse last year and, yes, the banks and the regulators both deserve blame (it wasn't some other guy) and that we need real reform. Instead, we have every K St lobbyist in town, from Oxley on down, looking for a contract to convince Congress that, no, the entire economy didn't collapse last year and even if they remember that it did, it certainly wasn't the banks' fault and let's not over-reach on the reforms. Only in Washington.

A drug maker is using free speech claims in an attempt to invalidate prohibitions on off-label marketing to doctors. Currently, doctors can prescribe a drug for anything, but firms cannot pitch untested, unapproved uses to them. The incentive to do so, however, is there because a drug for a rare disease, with a limited market, makes a lot more money if sold for other more common diseases. Experts believe that a bad outcome could invalidate the entire scheme of FDA drug safety regulation. From today's New York Times story Botox Maker’s Suit Cites Free Speech by Natasha Singer:

“This is the broadest attack on the constitutionality of F.D.A. restrictions on speech brought by an individual drug company. It’s a precedent-setting case,” said Jeffrey N. Gibbs, a lawyer in Washington who specializes in food and drug law. “They are seeking relief which would invalidate all of the F.D.A. regulations which restrict the promotion of drugs.”

“Allowing physicians to use drugs off-label, but at the same time prohibiting drug companies from proactively sharing relevant and truthful information with physicians regarding the risks and benefits and techniques for off-label uses does not serve the public health or patient care,” Douglas S. Ingram, the executive vice president of Allergan, said in a phone call with analysts Friday.

Off-label marketing is prohibited partly because a nonapproved use of a drug often lacks the kind of safety and efficacy data required for an approved use of a drug. “If you could get a drug approved for one narrow use and then market it for everything else, there would be no incentive or motivation for a company to prepare data to ensure that it meets the standard for safety and efficacy,” said Marc J. Scheineson, a lawyer specializing in food and drug regulation at Alston & Bird in Washington.

Daffy's Elixir Salutis for "colic and griping," Dr. Bateman's Pectoral Drops, and John Hooper's Female Pills were some of the first English patent medicines to arrive in North America with the first settlers. The medicines were sold by postmasters, goldsmiths, grocers, tailors and other local merchants. By the mid-19th century the manufacture of these products had become a major industry in America. Generally high in alcoholic content, the remedies were popular with people who found alcohol therapeutic. Many concoctions were fortified with morphine, opium, or cocaine. Sadly, some of these products were labeled for infants and children. Parents seeking relief for their babies from colic often gave these opiate remedies with fatal results. The remedies claimed to cure or prevent nearly every ailment known to man, including venereal diseases, tuberculosis, indigestion or dyspepsia, arthritis, baldness, and even cancer. "Female complaints" were often the target of such remedies, offering hope for women to find relief from monthly discomforts. Bust developers and manhood restorers were also promoted.

Bank of America CEO Ken Lewis, whose acquisition of failed investment bank Merrill Lynch plunged the firm deep into TARP and taxpayer wallets' to remain afloat, announced his resignation (New York Times) last night. The Merrill case may continue to trouble the firm, as New York Attorney General Andrew Cuomo and U.S. District Judge Jed Rakoff, now joined by Ohio Attorney General Richard Cordray, continue to question the apparent sweetheart settlement made between the SEC and BofA over whether the acquisition's costs were properly disclosed to shareholders.

Because Lewis and other would-be masters of the universe liked to be seen as Wall Street glitterati when they were on top, stories about their falls to earth will inevitably focus on high-dollar Wall Street deal-making. But, I encourage reporters and columnists to take a look at BofA as it looks to the average consumer:

Only a strong Consumer Financial Protection Agency can guarantee that Bank of America and other big banks will be fair to consumers and workers and won't be bad for America.