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Financial reform law offers look at lobbyists’

Having failed to block financial reform, Wall Street is now focused on the next best thing: ensuring that the law is loosely interpreted and weakly enforced.

Lobbyists for banks, hedge funds and other firms have logged hundreds of meetings with federal regulators since the reform bill was signed into law July 21. The lobbyists are often pushing for exemptions to the bill’s key provisions, including measures that would limit risky Wall Street trading and shield consumers from excessive bank fees, records and interviews show.

In an Aug. 18 meeting with Federal Reserve officials, for instance, Citigroup lobbyists warned that new rules restricting trading by hedge funds “may have a significant impact on the competitiveness of U.S. firms,” according to a summary released by the Fed.

The incessant appeals — there were 18 separate meetings between lobbyists and government officials Sept. 28 alone — have become a sore spot with some regulators.

“I want to be professional and polite and courteous, and I’ll let them say their peace,” said Bart Chilton, a member of the Commodity Futures Trading Commission. “But I don’t think it’s a very valuable use of their time or mine, because that is not the direction we were instructed to go by Congress.”

The meetings would normally be cloaked in secrecy. But in keeping with the spirit of financial reform, the Fed, the CFTC and two other agencies have begun disclosing their contacts with lobbyists on the new reform law, providing a rare glimpse behind the curtain.

That glimpse frequently shows companies arguing that their operations shouldn’t be covered by the new regulations, or that the regulations should be narrowly written, according to summaries posted by the federal agencies on their websites.

For example, lawyers for investment firm BlackRock met with CFTC officials Sept. 23 to seek an exemption from new restrictions on the trading of derivatives — or investments whose value is tied to an underlying asset. Otherwise, BlackRock warned, it would “be forced to curtail our client-service activities” according to a document posted in connection with the meeting.

Not all of the meetings involve Wall Street firms. Four executives of Ford’s consumer finance division met with Fed officials Aug. 14, asking that its vehicle loans “be exempt” from rules that are designed to rein in risky lending, according to documents released by the agency.

And the American Petroleum Institute met with Securities and Exchange Commission officials Sept. 27 to argue that new rules forcing oil and mining firms to report payments made to foreign governments “raises significant practicality and cost-benefit concerns by vastly increasing the amount of data that must be reported.”

The names listed most frequently in the logs are Goldman Sachs, with 21 meetings with regulators, and JPMorgan Chase, with 23. Jamie Dimon, chairman and chief executive of JPMorgan, was among those in attendance when a bank contingent met Oct. 8 with Federal Deposit Insurance Corp. Chairwoman Sheila Bair, records show.

In all, regulators have had at least 510 meetings with lobbyists representing 325 organizations since July, according to a Times analysis of meeting logs. That’s when the Fed, the SEC, the FDIC and the CFTC first began keeping the logs on their websites, in the spirit of transparency that was a driving factor for the financial reform law.

Despite taking up 2,319 pages, the Wall Street Reform and Consumer Protection Act left key details to regulatory agencies. Consumer groups applauded the decision to release details of the meetings, saying it provides a rare window into the rule-making process.

“It helps to alleviate the sense that all the important decisions are being made behind closed doors,” said Barbara Roper, the director of investor protection for the Consumer Federation of America.

Regulators, lobbyists and consumer groups could not recall another instance of government agencies listing such meetings. But the lists appear to have attracted scant public notice — and do not appear to have influenced the rule-making process.

“The meetings recently have been like the meetings we have always had,” said Elisse Walter, a member of the SEC.

At the same time, the logs show that consumer interests are heavily outnumbered by Wall Street.

More than 90% of the groups that appear in the meeting logs are banks, hedge funds and other big companies that rely on the financial industry, according to The Times’ analysis. Some worry that the imbalance could affect the rules regulators are drafting to implement the law.

“Clearly the big banks have a ton of money to put toward this battle, and the people who are fighting for reform just don’t have the resources or the people,” said Heather Slavkin, a policy advisor for theAFL-CIO who has attended several meetings with regulators.

Many of the meetings involve arcane facets of the reform law, such as the structure of new trading exchanges that are designed to bring greater transparency to the market for complex securities such as credit default swaps.

Sheila Krumholz, the executive director of the Center for Responsive Politics, is concerned that Wall Street’s voice will be especially powerful in discussions on implementing these measures.

“As you get into the nitty-gritty details there aren’t a lot of people who can give a countervailing argument,” she said.

But what’s hammered out in the meetings probably will affect Main Street as well as Wall Street. The recent financial crisis underscored how even obscure activities can have a momentous effect on the pensions and pocketbooks of all Americans. The unregulated investments that banks made in complex, mortgage-based securities, for instance, eventually vaporized billions of dollars in retirement savings.

In addition, the regulators and lobbyists are discussing a wide variety of consumer-related topics such as debit card fees and retail investment brokers.

Industry officials declined to comment on specific meetings. But in general, finance executives say they are trying to educate regulators about the market segments that will be affected by the law, and they note that several of the meetings were convened at the request of regulators.

“The sheer volume of the number of rules that they need to write here is so much greater than in the past that you’ll see a lot more outreach — and lot more of these meetings and efforts to lobby,” said Robert Pickel, executive vice chairman of the International Swaps and Derivatives Assn.

Wall Street representatives say the risk is that financial reform will put the brakes on the financial recovery.

“The worst-case scenario for the banks is that … we end up with rules that constrain markets, which then impact the economy,” said Tim Ryan, CEO of the Securities Industry and Financial Markets Assn. “There is a big risk here of overshooting the mark.”

The SEC’s Walter said she was bothered by the fact that regulators were not usually good hosts, so she bought a coffee machine for her office for visitors.

“I grew up in a nice Jewish home in New York and if you don’t offer someone a cup of coffee you are kind of a jerk,” Walter said.

Chilton said he is not always so gracious. In one instance he grew frustrated after seeing the same law firm three times in two weeks — representing three different financial companies but making the same case each time.

“I have to say, the third time I had the meeting my attention span was dwindling,” Chilton said. “I want to know how to make this work, and get useful information about how to go forward — not fight battles that they’ve already lost on Capitol Hill.”

nathaniel.popper@latimes.com

30 Reasons why Corporations should vote in America’s Elections

Is our Constitution correct – Are (American) people “endowed by their Creator with certain unalienable Rights” OR is it for judges to decide?

• A U.S. Appeals ruled the prisoners in Cuba – are not U.S. citizens and, technically, not imprisoned in the U.S. — were not legally “persons” and, therefore, had no rights to violate.
• April 2007 decision by Federal Judge Paul Barbadoro engaged in a different form of judicial activism — granting human rights to corporations

• 2010 Corporate Citizens United v. Federal Election Commission is a landmark First Amendment case overturning decades of overly-restrictive campaign finance law on the grounds it is prejudice against corporations and in America, prejudice is illegal.

30 REASONS CORPORATIONS SHOULD VOTE

1. Decisions are organized
2. Decisions seek input
3. Decisions consider financing
4. Decisions made by professionals
5. Decisions are well-organized
6. Corporations replace senile thinkers
7. Corporations hide political spending
8. Corporations are educated
9. Corporations are answerable
10. Corporations are born qualified
11. Corporations have more experience
12. Corporations are eternal
13. Corporations receive tax advantages
14. Corporations receive more write offs
15. Corporations sustain our economy
16. Corporations never get sick
17. Corporations don’t take vacations
18. Corporations do not kill people; people do
19. Corporations spin; people lie
20. Corporations can be a charity
21. Corporations do not war; people do
22. Corporations are the entire media
23. Corporations make all voting machines
24. Corporations are more socially responsible
25.  Corporations must prove themselves
26. Corporate ethics are developed
27. Corporations must balance their books
28. Corporations can grow
29. Corporations can be multinational
30. Corporations must be rational

Consumers’ right to file class actions is in danger

If AT&T has its way before the Supreme Court, any business that issues a contract to customers would be able to prevent them from joining class-action lawsuits, taking away arguably the most powerful legal tool available to the little guy.

It hasn’t gotten a lot of press, but a case involving AT&T that goes before the U.S. Supreme Court next week has sweeping ramifications for potentially millions of consumers.

If a majority of the nine justices vote the telecom giant’s way, any business that issues a contract to customers — such as for credit cards, cellphones or cable TV — would be able to prevent them from joining class-action lawsuits.

This would take away in such cases arguably the most powerful legal tool available to the little guy, particularly in cases involving relatively small amounts of money. Class-action suits allow plaintiffs to band together in seeking compensation or redress, thus giving substantially more heft to their claims.
The ability to ban class actions would potentially also apply to employment agreements such as union contracts.

Consumer advocates say that without the threat of class-action lawsuits, many businesses would be free to engage in unfair or deceptive practices. Few people would litigate on their own to resolve a case involving, say, a hundred bucks.

“The marketplace is fairer for consumers and workers because there’s a deterrent out there,” said Deepak Gupta, an attorney for the advocacy group Public Citizen who will argue on consumers’ behalf before the Supreme Court on Tuesday.

“Companies are afraid of class actions,” he said. “This helps keep them honest.”

The case is AT&T Mobility vs. Concepcion. The basic question before the court is whether companies can bar class actions in the fine print of their take-it-or-leave-it contracts with customers and employees.

High courts in California and elsewhere have ruled that class-action bans are unconscionable and contrary to public policy.

At issue at next week’s court hearing is whether the Federal Arbitration Act of 1925 preempts state courts from striking down class-action bans. The federal law requires both sides in a dispute to take their grievance to an arbitrator, rather than a court, if both sides have agreed in advance to do so.

Vincent and Liza Concepcion sued AT&T in 2006 after signing up for wireless service that they’d been told included free cellphones. The Concepcions alleged that they and other Californians had been defrauded by the company because the phones actually came with various charges.

AT&T asked the U.S. District Court for the Southern District of California to dismiss the case because its contract forbade class actions. The court declined, ruling that a class-action ban violates state law and is not preempted by the federal law.

The U.S. 9th Circuit Court of Appeals upheld the lower-court ruling last year. AT&T subsequently petitioned the Supreme Court to hear the case.

William B. Gould IV, a professor emeritus at Stanford Law School and former chairman of the National Labor Relations Board under President Clinton, said the high court was clearly interested in extending the reach of the Federal Arbitration Act.

“This is a very important issue,” he said. “And this Supreme Court has indicated a measure of hostility toward class actions.”

Matthew Kaufman, a Los Angeles attorney who focuses on arbitration law, agreed with that perspective.

“This is a very conservative court that’s pro-business, and class actions are not good for business,” he said.

Marty Richter, an AT&T spokesman, said the company’s arbitration agreement “includes fair, easy-to-use provisions” that reflect “an innovative and highly consumer-friendly dispute resolution process.”

He noted that AT&T’s arbitration clause allows for at least $5,000 in compensation and double attorneys’ fees if the arbitrator awards the consumer more than AT&T offered to settle a dispute. “And we pay the entire cost of the arbitration, except the filing fee if a customer is claiming $75,000 or more,” Richter said.

Be that as it may, why is the company so intent on denying customers the choice of joining a class action? Shouldn’t consumers be allowed to decide what avenue to pursue in resolving a grievance?

“AT&T can offer the benefits of its consumer-friendly arbitration system only if the company is able to avoid the burdensome costs of lawyer-driven class actions, in which most of the money goes to lawyers — both plaintiff and defense lawyers — and class members get little,” Richter replied.

In other words, the company says the only way it can be generous in arbitration is if customers give up the right to join others in suing. Otherwise, those “burdensome” legal costs will force AT&T to be a more hard-nosed negotiator.

AT&T earned $12.5 billion in profit last year.

Public Citizen’s Gupta said consumers can expect similar treatment from other companies if the Supreme Court rules in AT&T’s favor.

“If the court decides that the federal law trumps state law in this case, there’s no limit to what companies could do,” Gupta said. “All companies and employers would be able to put arbitration clauses in contracts that prevent people from joining class actions.”

Briefs supporting the right to class actions have been filed by a number of consumer groups and civil rights organizations, including the Consumer Federation of America and the Lawyers’ Committee for Civil Rights Under Law.

On the opposing side — that is, backing AT&T’s case — are other telecom companies, as well as such well-heeled corporate interests as the American Bankers Assn., the Financial Services Roundtable and the U.S. Chamber of Commerce.

This is a case you’ll want to follow. You have a lot on the line.
by DAVID LAZARUS

Tax cuts during Bush’s administration

Now that the dust has settled from this year’s tax-filing scramble, here are a few facts to keep in mind as Congress moves closer to debating the expiring Bush tax cuts. By the end of 2010, those cuts, which began to take effect in 2001, will have cost our nation $2.5 trillion dollars.

To put that enormous loss of revenue into perspective, consider this: It’s twice as much as the combined cost of the wars in Iraq and Afghanistan. And it’s two-and-a-half times the cost of the recently passed health-care plan.

Nearly half of those costly Bush tax cuts went to the top 5 percent of households. But instead of the promised trickle-down growth, we got stagnant wages for middle-class Americans while many wealthy households grew even wealthier. Over the last decade, a record federal budget surplus–before the Bush tax cuts–has turned into a massive federal deficit.

I recently spoke on a radio show about the work of Responsible Wealth, a network of American millionaires speaking out in favor of higher taxes on the wealthy. These millionaires want to dial back the portion of Bush tax cuts that benefited the top 5 percent, which includes people like themselves, while preserving the tax cuts for low and middle-income families. What’s more ironic is that they’re pledging to give away their savings under the Bush tax cuts to groups that are working to end those and other tax breaks for the wealthy.

I shared a story about one of those millionaires–he has an income of over half a million dollars per year, but pays less than 15 percent of those earnings to the IRS. The host and callers were all outraged, and rightfully so. But, their initial instinct–to direct their outrage at this millionaire for “gaming the system”–was misguided. He’s not the one gaming the system. The Bush administration did it for him.

A lot of Americans look at the federal income tax, of which the top rate is 35 percent, and think that if someone like this millionaire is taxed at such a low rate, he must be cheating. Here’s how it’s possible: that 35 percent top rate only applies to earned income. While he’s well paid as a professor, three-fourths of his total income is in the form of capital gains and dividends from a sizable investment portfolio. (Some was inherited and some was built up during his days as an investment banker.) And the top rate for capital gains and dividends is only 15 percent.

In short, money earned through work is taxed at a higher rate than money made from, well, money.

The intense focus by the media and anti-tax groups on the federal income tax is preventing too many people from seeing the true size of the tax giveaways bestowed upon our nation’s wealthiest households. It’s like the ship’s crew pointing at the tip of the iceberg, but ignoring the hulking mass beneath.

For most Americans, wages and salaries account for roughly 80 percent of their total income, but that ratio starts dropping sharply for those earning over $200,000 per year. For many with incomes of $1 million or more per year, about 25 percent is from wages and salaries; the rest is primarily passive income, like capital gains and dividends. By taxing investment income at a lower rate than earned income, we’ve tilted the system heavily in favor of the rich.

For a country that prides itself on the hard work of its citizenry, we seem to have lost our way. It’s unacceptable that those who have gained the most from our society, and who have the most to give back, are actually paying taxes at a lower overall rate than most others. We need to start taxing money-from-money income at the same level as the earned income that most Americans depend on. Ending the Bush tax cuts for the wealthiest households, which includes restoring the top capital gains and dividends rates to their pre-Bush levels, is an essential first step.
Special thanks to Brian Miller

Brian Miller is the executive director of United for a Fair Economy (UFE), a national organization that raises awareness about the dangers of extreme inequality, and advocates for policies that foster a more broadly shared prosperity. http://www.FairEconomy.org.