Trump Wins: Judge Denies Obama Holdover"s Suit Against Mulvaney Running CFPB

In a somewhat unsurprising decision, President Trump won a legal fight over who gets to run the Consumer Financial Protection Bureau (at least for now).

As Bloomberg reports, Trump"s budget director Mick Mulvaney can remain as temporary head of the agency, a federal judge ruled in rejecting a request to block the move fromLeandra English, who was named to the role by the departing director.

U.S. District Judge Timothy Kelly in Washington rebuffed English, who sued to Nov. 26, contending she is entitled to the provisional post.

Kelly, who has been on the bench since only September, is a Trump nominee who previously worked for Senate Judiciary Committee Chairman Chuck Grassley, an Iowa Republican, and also served as a federal prosecutor.

The judge’s ruling came after hearing from both sides Tuesday.

 

A day earlier, attorneys for English and the Justice Department had spent about 40 minutes trying to persuade him.

 

Joining the fight on English’s behalf were about two dozen current and former members of Congress who told Kelly the president’s choice of his White House budget director to temporarily helm the CFPB threatened the agency’s ability to operate independently as designed.

 

Among those who joined in that filing, former U.S. Representative Barney Frank, a Massachusetts Democrat who co-authored the Dodd-Frank legislation with former Connecticut Senator Christopher Dodd.

As The Hill reports, the ruling clears the way for Mulvaney to run the CFPB until a permanent director is sworn in or English successfully appeals the decision.

Trump 1 - 0 Resistance.

Krieger Rages ""America First" Is A Joke. Wall Street Wins Again"

Authored by Mike Krieger via Liberty Blitzkrieg blog,

I know I must sound like a broken record by now, but Wall Street owns the U.S. economy and until that’s dealt with, the American public will continue to be preyed upon voraciously and lawlessly by some of the most unethical parasites the world has ever seen. Obama was a historical disaster on this issue, coddling and protecting banker oligarchs every step of the way. Trump’s no different.

The latest evidence that things are getting even worse came last evening when the U.S. Senate voted to deliver Wall Street another gift on a silver platter.

Rather than summarize what happened, let’s turn to two of the best resources on such topics, journalist David Dayen and finance focused website Wall Street on Parade.

First, here are a few excerpts from David’s latest article published at The Intercept, After Day of Feuding, Jeff Flake and Bob Corker Join Trump to Upend a Major Consumer Protection:

With national attention focused Tuesday morning on a mushrooming feud between President Trump and Sen. Bob Corker, R-Tenn., followed by a feud in the afternoon between Trump and Sen. Jeff Flake, R-Ariz., the Senate gift-wrapped the biggest present Congress has so far bestowed upon Wall Street in the Trump era.

 

With a razor-thin margin, the Senate passed a resolution to nullify a signature regulation from the Consumer Financial Protection Bureau, which banned forced arbitration provisions. Such clauses, tucked into the fine print of contracts that nobody reads, deny consumers the ability to contest claims through a class-action lawsuit, and can allow banks and other financial institutions to rip off their customers with virtual impunity.

 

Both Sens. Corker and Flake, along with Sen. John McCain, R-Ariz., joined in the effort to give Trump a major win, even if it will hurt many of his own voters. Consumer advocates had hoped that moderate Republicans Lisa Murkowski of Alaska and Susan Collins of Maine would block the GOP effort. They did not.

 

The vote was split 50-50, which required Vice President Mike Pence to break the tie.

How’s all that MAGA working out for you?

To secure his victory, Trump enlisted an ex-Wells Fargo attorney, Acting Comptroller of the Currency Keith Noreika, and  a former bank CEO, Treasury Secretary Steve Mnuchin, to do the dirty work. The Senate vote came a day after Treasury entered the fray with its guns blazing.

Reminder, Mnuchin was a Goldman Sachs partner.

The House passed its version of the resolution within just a couple weeks of CFPB finalizing the rule in July. But continuing reports of petty consumer fraud at Wells Fargo, and a data breach of over 140 million customer accounts at the credit reporting bureau Equifax, made it difficult for the Senate to proceed. Both Wells Fargo and Equifax have attempted to use arbitration clauses in their financial contracts to force victims out of class-action litigation.

 

The scandals put a human face on the practice of companies forcing customer disputes through a secret, non-judicial process.

 

And consumers typically don’t fare well in arbitration. An Economic Policy Institute report showed that consumers only win 9 percent of arbitration cases, and banks almost always win when they issue counter-claims, with the consumer paying $7,725 on average.

 

This is why corporations like the arbitration process – it prevents those wronged from pursuing their legal rights and in practice alters the law by making small claims virtually unenforceable. In other words, arbitration clauses are a license to steal. And it contributes to a fundamental breakdown of the justice system, where complaints can only be heard in a privatized setting.

 

So in July, in a rare instance of government using an outright ban instead of requiring disclosure or some other half-measure, CFPB finished a rule preventing arbitration agreements in financial contracts from stopping consumers who band together with other victims in a class-action lawsuit. But Republicans managed to twist the issue into one where corporations needed to be protected from greedy trial lawyers.

 

First, Office of the Comptroller of the Currency head Keith Noreika, himself a former defense lawyer for Wells Fargo who tried to push class-action suits into arbitration, argued the rule posed “safety and soundness” concerns for banks and would raise the cost of credit. Then this week, the Treasury Department, relying heavily on a discredited claim that plaintiff attorneys routinely shake down corporations with meritless claims, published a 17-page report attacking the CFPB rule.

Yes, because clearly the big problem in American society is corporations being shaken down. Have you looked at corporate profit margins lately?

The attacks from Trump’s executive agencies on a fellow regulator gave Senators the cover they needed to side with Wells Fargo and Equifax over their customers. The Senate first tried to sneak in a vote on the resolution when the political world was distracted by the health care debate, but that didn’t work. It took shifting the framing of the rule from being about victims to  being about trial lawyers for Senate Republicans to succeed.

 

Supporters of the CFPB rule like Public Citizen’s Robert Weissman called the vote a choice “between corporate donors and constituents.” Amanda Werner, who gained notoriety for dressing as the Monopoly Man during Senate hearings on Wells Fargo and Equifax, notes that lawmakers opposing the arbitration rule received over $100 million in campaign contributions from the financial industry during their careers. “These contributions help explain why lawmakers are willing to aid and abet big banks in ripping off their own constituents despite overwhelming bipartisan support for the rule,” Werner said in a statement to The Intercept.

 

The Chamber of Commerce and other financial lobbyists had joined together to sue CFPB over the rule, but with the Senate’s successful vote, that will no longer be necessary. President Trump is expected to sign the resolution. Not only would that nullify the arbitration rule, but CFPB would be unable to work on any “substantially similar” regulation without express consent from Congress.

 

People say Congress does nothing. This is totally false.
When it comes to Wall Street interests, Congress always acts, and very quickly.

— Michael Krieger (@LibertyBlitz) October 25, 2017

 

 

Trump cheerleaders are making the same excuses Obama cheerleaders did for him.
This is why we can"t have nice things.

— Michael Krieger (@LibertyBlitz) October 25, 2017

As usual, there’s more. For that, let’s turn to Wall Street on Parade’s article, Mike Pence Secures the No Law Zone Around Wall Street:

Wall Street is the only industry in America that contractually bans both its customers and its employees from accessing the nation’s courts as a condition of opening an account or getting a job there. (That’s likely because it’s also the only industry that has the brazenness to let the top lawyers of the largest Wall Street banks meet in secret each year to plan their strategies for keeping their no law zone in force.)

 

Instead of being able to go to court with a claim of fraud (if you’re a customer), or a claim for labor law violations, like failure to pay overtime or sexual harassment (if you’re an employee), Wall Street makes its customers and employees sign an agreement to take all such claims into an industry-run or privately-run arbitration system.

 

These private justice systems are not cheaper and fairer as Wall Street’s shills (like the U.S. Chamber of Commerce) insist. Fees can run into tens of thousands of dollars as opposed to a few hundred dollars to file in court; and study after study has found that arbitrators most often rule in favor of the corporate interest over the consumer.

 

What Wall Street and its army of lawyers like most about these private justice systems is that they are dark. Unlike a public courtroom, the press and the public are not allowed to attend the hearings. There are no publicly available transcripts of the hearings as there would be in court. Arbitrators are instructed that they do not have to follow legal precedent or case law but can rule from their gut; they are not required to write reasoned and detailed decisions so that an appeal of their findings can be made. In fact, it is next to impossible to bring a court appeal of an arbitration ruling because Wall Street’s biggest law firms have spent decades convincing the courts that these decisions must be permanently binding.

 

Another fatal flaw in these private justice systems is that there is no jury selection from a large public pool of random citizens but rather a repeat-player pool of highly compensated arbitrators.

 

Wall Street’s own industry-run arbitration system also makes good use of the repeat player advantage. On July 20, 2000 the Public Investors Arbitration Bar Association (PIABA) issued a press release accusing the National Association of Securities Dealers (NASD) of rigging its computerized system of selecting arbitrators.  The statement read: “In direct and flagrant violation of federal law, the NASD systematically evaded the Securities and Exchange Commission approved ‘Neutral List Selection System’ arbitration rule requiring arbitrators to be selected on a rotating basis.  Instead, the NASD secretly programmed its computers to select some arbitrators on a seniority basis – just what the rule was designed to prevent.”

 

PIABA discovered the manipulation when a team of its attorneys demanded a test of the selection system at an NASD/PIABA meeting in Chicago on June 27, 2000.  PIABA predicted that “this rule violation tainted hundreds or even thousands of compulsory securities arbitrations  –  many still ongoing.  In every such instance, the substantive rights of public investors to a neutral panel have been cynically violated.  Many public investors were thus twice cheated: first, by an NASD member firm that fraudulently conned them out of their life’s savings, and second by the NASD Arbitration Department’s rigged panels.”

I may not know much, but I know this won’t make America great.

*  *  *

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Obama Is Funding The Anti-Trump Movement With Sleazy Backdoor Policies And Taxpayer Money

Barack Obama is funding the anti-Trump movement through a series of backdoor deals and policies.  Wall Street may be surprised to learn that it is also helping bankroll the anti-Trump “resistance” whether they wanted to or not. Wall Street is fighting policies which would heavily favor it, including corporate tax cuts and the repeal of Obama-era banking and health-care regulations.

We have the Obama administration to thank for the harsh anti-Trump movement by far left groups, according to an article by the New York Post. 

The Obama administration’s massive shakedown of Big Banks over the mortgage crisis included unprecedented back-door funding for dozens of Democratic activist groups who were not even victims of the crisis. At least three liberal nonprofit organizations the Justice Department approved to receive funds from multibillion-dollar mortgage settlements were instrumental in killing the ObamaCare repeal bill and are now lobbying against GOP tax reform, as well as efforts to rein in illegal immigration. An estimated $640 million has been diverted into what critics say is an improper, if not unconstitutional, “slush fund” fed from government settlements with JPMorgan Chase and Co., Citigroup Inc. and Bank of America Corp., according to congressional sources.

The payola is potentially earmarked for third-party interest groups approved by the Justice Department and HUD without requiring any proof of how the funds will be spent. Many of the recipients so far are radical leftist organizations who solicited the settlement cash from the administration even though they were not parties to the lawsuits, records show.

“During the Obama administration, groups committed to ‘revolutionary social change’ sent proposals and met with high-level HUD and Justice Department officials to try to get their pieces of the settlement pie,” Cause of Action Institute vice president Julie Smith told The Post. –New York Post

It isn’t immediately clear how much money, in all, has been diverted from settlement funds to these and other hardcore left-wing organizations. Attorney General Jeff Sessions has ordered a full audit of the funds while discontinuing the practice of funneling Justice Department settlements to third-party groups, but not before the Obama administration doled out massive amounts of money to groups with “anti-Trump” sentiments. “Any settlement funds should go first to the victims and then to the American people [through the US Treasury] — not to bankroll third-party special interest groups or the political friends of whoever is in power,” Sessions said in a recent statement.

Which means that Obama himself didn’t fund the anti-Trump movement; the taxpayers did – whether they liked it or not.

The Independent Community Bankers of America, a national voice for more than 5,700 large and small banks, said it opposes the government practice of providing back-door funding to unrelated groups. But it still hasn’t stopped regardless of Sessions’ attempts combined with those of the ICBA. “ICBA believes the funds should go towards affected victims,” a spokeswoman for the banking trade association told The Post.

The Post has learned that the Consumer Financial Protection Bureau continues to force financial institutions it prosecutes to donate to third-party community organizers. More, penalties in such cases are deposited into the Bureau’s now-$170 million-plus Civil Penalty Fund, which has, in turn, channeled almost $30 million to “consumer advocacy” groups. –The New York Post

CFPB director Richard Cordray is an Obama holdover, whose special five-year term doesn’t expire until 2018. It has also been suggested that the Trump administration fire Cordray. 

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Author: Mac Slavo
Views: Read by 8 people
Date: September 25th, 2017
Website: www.SHTFplan.com

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CFPB Makes It Easier For Customers To Sue Banks

The Consumer Financial Protection Bureau just made it easier for ordinary citizens to sue banks by restricting how they can use mandatory arbitration to block class-action lawsuits, according to Bloomberg. But the decision – inspired by a 2015 investigative series in the New York Times about how US companies, particularly credit card companies and payday lenders, abuse the practice – likely won’t stay on the books for long. As the LA Times writes:

It"s all but certain that Republican lawmakers in control of the House and Senate will move quickly to overturn the rule as part of their ongoing efforts to cripple the consumer-watchdog agency and create a more business-friendly regulatory landscape.”

Clauses requiring arbitration to settle disputes are inserted routinely in contracts for credit cards, payday loans and other financial products. They typically prevent consumers from filing lawsuits or banding together in class actions.

"Arbitration clauses in contracts for products like bank accounts and credit cards make it nearly impossible for people to take companies to court when things go wrong," CFPB Director Richard Cordray said in a statement.

“These clauses allow companies to avoid accountability by blocking group lawsuits and forcing people to go it alone or give up. Our new rule will stop companies from sidestepping the courts and ensure that people who are harmed together can take action together.”

From the time they formally receive the ruling, lawmakers have 60 legislative days to overturn the bureau’s decision. Republicans have been using the Congressional Review Act, a little-known provision, to undo more than a dozen Obama-era regulations during the closing days of his presidency, including the CFPB’s plans to implement tougher standards for prepaid debit cards.

“As a matter of principle, policy and process, this anti-consumer rule should be thoroughly rejected by Congress,” Representative Jeb Hensarling, the Texas Republican who leads the House Financial Services Committee, said in a statement.

Congress isn’t the only body that’s skeptical of the ruling: In an unusual move, the head of a key banking regulator wrote to Cordray to raise concerns about it. Keith Noreika, the acting Comptroller of the Currency, asked that the CFPB share data used to develop its arbitration rule, according to a letter dated Monday that was obtained by Bloomberg.

“We would like to work with you and your staff to address the potential safety and soundness implications of the CFPB’s arbitration proposal,” Noreika said in the letter. “That is why I am requesting the CFPB share its data.”

Noreika cited a section of the Dodd-Frank Act that gives the Financial Stability Oversight Council - a panel of regulators headed by the Treasury secretary - power to set aside any CFPB rule that can be shown to put the safety of the wider financial system at risk.

Our new rule ensures that groups of people harmed by the same financial products can take action together. pic.twitter.com/rXYzHz67ea

— consumerfinance.gov (@CFPB) July 10, 2017

However, studying the fairness of arbitration clauses appears to be well within the bureau’s remit: Dodd-Frank says the CFPB "may prohibit or impose conditions or limitations on the use" of arbitration clauses if it determines that restricting such provisions "is in the public interest and for the protection of consumers,” according to the LA Times.

During its study, the CFPB found that hundreds of millions of contracts include arbitration provisions and that companies have used the clauses to keep fights out of court almost two-thirds of the time. Very few consumers even consider bringing individual actions against financial-service providers in court or in arbitration.

Despite the rule’s near-certain erasure, Christine Hines, legislative director for the National Assn. of Consumer Advocates, told the LA Times that the CFPB isn’t thumbing its nose at Republican lawmakers who have insisted for years that the agency is a rabid regulatory pit bull in need of either a very short leash or a trip to a farm.

“The agency has to continue doing its job,” she said, “even though there are very anti-consumer people in power.”

Other consumer advocates echoed that sentiment.

“The rule will help to combat the culture of companies profiting from charging illegal fees and committing other crimes against their customers,” said Rohit Chopra, senior fellow at the Consumer Federation of America.

Said Lisa Donner, executive director of Americans for Financial Reform: “The consumer agency’s rule will stop Wall Street and predatory lenders from ripping people off with impunity, and make markets fairer and safer for ordinary Americans.”

The new rule will cover new agreements for products such as credit cards, auto loans, credit reports and even mobile phone services that provide third-party billing. Companies can still include arbitration clauses in contracts, but they must state that those can’t be used to stop individual consumers from joining class-action cases.

According to Bloomberg, it is also possible that industry groups will sue to overturn the CFPB rule. Groups including the US Chamber of Commerce have said arbitration is a valuable tool to prevent frivolous, expensive lawsuits that often don’t do much to benefit borrowers. Meanwhile, consumer advocates say restricting arbitration clauses will deter bad actors and force companies to reconsider certain activities because consumers will be more inclined to sue.

Hedge Fund Traders Return To Banking As Trump Promises To 'Make Prop Trading Great Again'

The hedge fund industry is finding itself in increasingly dire straits as persistently weak returns and the advent of low-cost investing have forced more and more funds to shut down. So, it"s unsurprising that, amid this steadily worsening backdrop, more traders are heading for the exits. But where are the heading? Increasingly, more traders are moving back from where they came - i.e. the big banks, which expect to see a boost in trading revenue as President Donald Trump has vowed to dial back postcrisis regulations that forced banks to wind down their prop desks.

In recent months, a number of high-profile hedge fund names have made the leap back to banking, according to Bloomberg.

“This month, Barclays Plc hired Chris Leonard, a founder of two hedge funds in the decade since he left JPMorgan Chase & Co., to turn around U.S. rates trading. At the end of last year, ex-bankers Roberto Hoornweg and Chris Rivelli, both of Brevan Howard Asset Management, left that London hedge fund for banks.

Recruiters say these moves and others aren’t just the usual attrition: banks in New York and London are interesting employers again a decade after the financial crisis, and may get involved in more proprietary trading if President Trump eases regulatory burdens. There’s also another factor: many macro funds just don’t make money anymore.

One recruiter says he expects defections to increase over the next nine months.

“In the last quarter of the year or first quarter of 2018, you will find more people leaving the hedge funds to join banks to run proprietary money,” said Jason Kennedy, chief executive officer of the Kennedy Group in London, which hires for banks and hedge funds. “The banks will become more attractive in terms of jobs and pay.”

The Trump administration has struggled to pass elements of its agenda - most notable its plan to repeal and replace Obamacare. And it only recently scored a partial victory on its immigration ban. Yet financial deregulation is one area where the Trump agenda is moving inexorably forward. On June 13, Treasury Secretary Steven Mnuchin issued a report – the first in a series that will detail how the administration plans to proceed with paring back post-crisis regulations.  Some of the more notable proposals in the highly-anticipated report include: adjusting the annual stress tests, easing trading rules (i.e., gutting the Volcker Rule), and paring back the power of the watchdogs - like the Consumer Financial Protection Bureau. Unlike the administration’s health-care plans, these measures enjoy broad support among Republicans.

Meanwhile, hedge funds are finding it increasingly difficult to compete for top talent.

"...the bar within the hedge-fund world has increased dramatically over the last year,” Kennedy said.

Hedge funds, stung by years of underperformance and revolts from investors, are increasingly under pressure to dump their traditional 2 percent management and 20 percent performance-fee model, curtailing their ability to hire and retain talent. Louis Bacon’s Moore Capital Management, Tudor Investment Corp., Och-Ziff Capital Management Group LLC, Canyon Capital Advisors and Brevan Howard were among money managers who cut fees last year. More hedge funds shuttered last year than started, a trend that continued in the first quarter of 2017, according to data from Hedge Fund Research Inc.

“It is not surprising that traders are looking for a safe haven, and if banks have more room to operate these moves could make sense,” said John Purcell of Purcell & Co., a London-based executive recruitment firm."

The unprecedented easy money policies adopted by the world"s largest central banks in the aftermath of the crisis have hurt macro funds" profits by suppressing two-way volatility.

“Tim Sharp made the move back to the sell side even earlier, and says banks now have attractive niche trading businesses and many are nearly done downsizing. He joined Credit Suisse Group AG in July 2015 after less than a year running money at BlueCrest Capital Management LLP, the firm led by Michael Platt. At the end of that year, Platt’s firm, once among Europe’s largest hedge funds, announced it would return about $7 billion of the $8 billion it managed.

“It’s very difficult for macro funds," Sharp said in an interview. “Central bank policies have crushed volatility and reduced opportunities, and also it’s survival of the fittest.”

Sharp, who is now a director at Credit Suisse, left BlueCrest a few months after the Swiss central bank’s shock decision to remove its currency cap, which caused losses at several firms.

"Macro as an overall strategy has recently experienced a prolonged phase of lackluster returns, triggering a number of unwinds at big shops," said Nicolas Roth, co-head of alternative assets at Geneva-based Reyl & Cie.”

As Bloomberg explains, the flow of traders back into banking is a reversal of a trend that began in 2008, when banks, reelingfrom the crisis, saw an exodus of traders move to the buy side as many hoped to cash in on the postcrisis recovery. The advent of the Volcker rule forced banks to wind down their prop trading desks, spurring even more defections. Another factor: the rising cost of regulatory compliance is making it increasingly expensive to start a hedge fund.

"Hedge funds were booming. In 2009, hedge funds gained almost 20 percent, their best yearly performance since 1999, according to the HFRI Fund Weighted Composite Index; a year later, they returned 10.3 percent.

While macro strategies raised $13.8 billion in the first five months of this year, the most of any trading strategy tracked by eVestment, investors are disappointed by their returns. Traders wagering on currencies and rates continue to struggle, even as peers are showing signs of recovering from their multi-year funk.

Andrew Law’s Caxton Associates lost 8 percent this year through May and told clients that it’s slashing performance and management fees. Paul Brewer’s hedge fund Rubicon Global Fund plunged about 27 percent this year, hurt by wrong-way currency wagers, people said earlier this month.

It’s also more expensive to start a hedge fund than it was, because of the difficult capital raising environment and rising cost of regulatory compliance.

“Some macro traders are returning to the sell side, maybe in a hope that a Dodd-Frank rollback will re-open proprietary trading activity,” Roth said."

Here’s a breakdown of other personnel moves, courtesy of Bloomberg.

• Anthony Kemp returned to Morgan Stanley at the beginning of May from Stone Milliner Asset Management, which he joined in summer 2015


• Alex Silverman left Citadel to join Morgan Stanley in New York at the end of March 2017


• Dipak Shah joined Citigroup Inc. as director in October 2016 from Capula Investment Services after previously working at Goldman Sachs Group Inc.
   

Collecting $1 Of Student Debt Costs American Taxpayers $38

Your government at work with your tax dollars.

Loan billions to brain dead teenagers so they can pretend to get smart in college. When they fail miserably due to the fact after twelve years of public school government indoctrination they can’t read, write or add, the government pays slimy collection agencies to get these unemployed dolts to pay up.

Not only has $600 billion of your tax dollars been pissed down the drain on loans to dumbasses, you now get to spend billions trying to collect the billions that will never be collected.

Clusterfuck is too kind of a word to use for this program Obama initiated to pump money into the economy and fake the true unemployment rate.

I bet you can’t wait until the government has full control of your healthcare.

While Congress originally approved the IDR plans in the 1990s and 2000s, Obama used executive actions, starting in 2010, to extend the most-generous terms to millions of borrowers which is precisely when loan volumes under the program started to skyrocket.

Congrats, taxpayers...you"ll soon have the privilege of repaying $137 billion worth of debt spent by entitled millennials on binge-drinking trips Cancun and drugs...life, after all, is just a little bit better when we spread the wealth around...

As Bloomberg"s Shahien Nasiripour reports, the federal government has, in recent years, paid debt collectors close to $1 billion annually to help distressed borrowers climb out of default and scrounge up regular monthly payments. New government figures suggest much of that money may have been wasted.

Nearly half of defaulted student-loan borrowers who worked with debt collectors to return to good standing on their loans defaulted again within three years, according to an analysis by the Consumer Financial Protection Bureau. For their work, debt collectors receive up to $1,710 in payment from the U.S. Department of Education each time a borrower makes good on soured debt through a process known as rehabilitation. They keep those funds even if borrowers subsequently default again, contracts show. The department has earmarked more than $4.2 billion for payments to its debt collectors since the start of the 2013 fiscal year, federal spending data show.

The findings, gleaned from the bureau’s analysis of about 600,000 borrower accounts, come as the Trump administration weighs a shakeup of the government’s student loan program. For years, defaults have mounted despite the improving U.S. economy and the money invested in collecting education debt. Education Secretary Betsy DeVos pledged earlier this year to “do a better job” than the Obama administration at managing the department’s loan contractors. Last week, DeVos suggested that the feds should “start afresh.”

Officials at the CFPB say the government should reexamine whether the loan program, and the lucrative contracts it bestows on private firms, is working for the millions of Americans struggling to repay their taxpayer-backed student debt.

“When student loan companies know that nearly half of their highest-risk customers will quickly fail, it’s time to fix the broken system that makes this possible,” said Seth Frotman, the consumer bureau’s top student-loan official.

Debt collectors aggressively angle for new business from the Education Department because the contracts are among the most lucrative in the industry. The government values the latest round at $2.8 billion.

The government often pays debt collectors nearly 40 times what they bring in, federal records show. Take the government’s rehabilitation program, which targets people who have defaulted on their debt—meaning they missed nine months of payments. If a borrower subsequently makes nine on-time monthly payments of as little as $5 during a 10-month period, their loans are returned to good standing and the default is supposed to be wiped from their credit reports. But the CFPB found that more than 40 percent of these borrowers defaulted again within three years.

Even when borrowers don’t default, debt collection efforts often yield little. Close to 80 percent of borrowers who rehabilitate their debt make the minimum $5 monthly payment, according to a 2015 estimate by the National Council of Higher Education Resources, a lobbying group that represents student debt collectors and servicers. That means the Education Department is paying its debt collectors up to $1,710 per borrower to collect around $45, regardless of whether the borrower continues to make her payments.

The arrangement means that debt collectors “have no ‘skin in the game,’” Frotman wrote in an October report.

The consumer bureau estimates that the vast majority of borrowers who rehabilitate their defaulted debt with $5 monthly payments are eligible for $0 payments after they exit default, under an income-based repayment plan. But about 90 percent of debtors who rehabilitated their debt failed to enroll in these programs, according to the CFPB’s analysis. All that’s needed to enroll is some paperwork that enables contracted loan servicers to confirm borrowers’ annual earnings, but experts inside and outside the government say they don’t know why this step isn’t completed, and distressed borrowers are left stuck in debt collectors’ sights. The Education Department, which rewards its loan servicers with more business if the loans they service remain in good standing, excludes rehabilitated loans when grading its servicers’ performance.

The consumer bureau says slipshod loan servicing—the business of counseling borrowers on their options and sending them monthly bills—is largely to blame. NCHER President James Bergeron said the feds need to simplify the various repayment plans they offer and “do a better job” helping previously defaulted borrowers get into repayment plans. Calls and emails to the Education Department weren’t returned.

“I don’t see how anyone wins from this system other than the collection industry,” said Adam S. Minsky, a Boston-based lawyer who represents student debtors.

"Is Trump About To Cause Another Crisis?": 2008 Could Be Eclipsed As Bank Restrictions Eliminated

Submitted by Mac Slavo via SHTFPlan.com,

Beware of what may be coming next. We already know the establishment has a plan to blame President Trump for the next financial crisis, and now there are moves being made that will support that narrative.

After the 2008 fiasco, a spotlight on Wall Street misbehavior and some weak, but better-than-nothing regulations were put on the industry in the hopes of preventing another string of bank failures and crippling economic disasters.

But as the system teeters on edge and prepares to endure the backlash of increased rates at the Fed, Trump is also taking off the shackles that have been put in place by the Dodd-Frank Act which instituted certain protections for consumers, including a requirement that pensioners don’t have their nest egg devoured, etc.

For the tens of millions of baby boomer retirees and aging pensioners, the social security net is all they’ve got to count on, apart from a few debt-saddled kids who have hardly been able to save a dime under eight years of Obama.

The 2008 economic crisis penalized everyone with an entire cycle of wage freezes, job starvation and crushing dependence upon government programs for assistance. Wall Street, and the banker class at large were spared from blame or reparations to a society that was robbed blind. Instead, eight years of quantitative easing sent a tidal wave of easy money to the financial sector that created a gorge of asset buy-up from the top – especially in housing, where soaring rates are forcing single households to become renters instead of mortgage debt-slave owners once again.

The election of President Trump created optimism about our collective financial prospects – with seemingly tangible promises of bringing home jobs and returning to American Greatness™. But the banksters also cheered his election; stock markets shot upwards in celebration. Key positions in the White House were offered to Goldman Sachs men and others of their ilk.

Now, President Trump has issued an executive order that has Wall Street once again self-congratulating for backing the right man. The order is expected to gut protections that currently require financial products sellers

As the London Independent reports:

Donald Trump is expected to order a review of the Dodd-Frank Act, which was implemented in the aftermath of the 2008 financial crisis to prevent a repeat of the worst financial crash since the Great Depression.

[…] council has the right to break up banks that it thinks could pose a systemic risk to the global financial order. It also has the ability to demand that banks hold higher reserves, or cash buffers, to minimise a squeeze. Separately, the Dodd-Frank Act also created the Consumer Financial Protection Bureau, to oversee consumer financial products, such as mortgages.

A key part of the Act is the Volcker Rule, which restricts the way that banks are allowed to invest and places restrictions on speculative trading. It also restricts banks from engaging in so-called proprietary trading, or trading for the firm’s direct gain, instead of on behalf of a client.

So in effect, the rule is designed to separate the investment and commercial businesses of banks.

It seems clear enough that this move benefits many of those at the top of the pyramid, but a Bloomberg report directly quoting from senior leadership on Wall Street, and now inside the Trump Administration, makes crystal clear that the intentions are quite self-interested:

Chief executives including Goldman Sachs Group Inc.’s Lloyd Blankfein and JPMorgan Chase & Co.’s Jamie Dimon have been pushing for changes for years, arguing that the industry has been too constrained by the system put in place by the 2010 Dodd-Frank Act. After Trump focused on limiting trade and immigration during his first two weeks in office — policies opposed by many in the financial industry — the president’s stroke of a pen unleashes a process to undo many of the rules they find most irksome.

“We’re going to attack all aspects of Dodd-Frank,” Gary Cohn, director of the White House National Economic Council, said Friday in an interview with Bloomberg Television. “We are going to engage the House, we’re going to engage the Senate. They are equally interested in reforming some of the regulatory processes as well. We can do quite a bit without them, but the more help we get from Congress the better off we’re all going to be.”

Not necessarily the brightest news for the people.

Though it isn’t immediately obvious that this change in the rules would cause immediate trouble, there is reason for concern. If the limitations – inadequate as they were – are lifted off the banks, specifically with investing in commercial banking and with pensions, things could once again take a turn for the worse.

If the same reckless behavior is repeated, it could not only bring the system to a halt, and crash the stock market, but it could potentially wipe out the holdings of those who need it most – pensioners.

Meanwhile, defaults and the burden of a debt-supercycle are also threatening to topple the system. One way or another, the next era will have to handle enormous risk of total economic crisis.

As the Independent notes:

Does this mean we’re at risk of facing another financial crisis? Some economists have even been bold enough to say that getting rid of Dodd-Frank could indeed pave the way for another crisis.

What makes matters a lot worse, is that many experts believe that global financial systems and economies are more vulnerable now than they were ahead of the last financial crisis. So if we do suffer another major crash, the damage has the potential to be a lot more grave.

Central banks around the world have already slashed interest rates to record lows leaving them with limited ammunition to do more to stimulate economic growth. Government debt has also sky rocketed over the decade since the last crisis.

Whatever comes next, there is a toxic cycle that is waiting to crash down upon us with a tsunami of financial misfortune.

Federal Reserve policies in the wake of the last crisis set up the American people for a very bad fall. Economic vibrancy among the middle class and general population has been sucked dry, and they will be ill prepared to handle a new crunch in credit and possible hyper inflationary/deflationary crisis.

Trump’s pro-business, pro-American policies may help if they are instituted correctly, but enabling the financial sector to once again prey upon people and fuel the rise-and-collapse of a massive series of bubbles and a derivatives WMD is not a healthy option.

The stage has been set for a nightmare that we must pray never comes.

Trump To Sign Executive Orders Undoing Dodd-Frank, "Fiduciary Rule"

On Friday, President Donald Trump plans to sign an executive action to scale back the 2010 Dodd-Frank financial-overhaul law, in a sweeping plan to dismantle much of the regulatory system put in place after the financial crisis. The order won"t have any immediate impact. But it directs the Treasury secretary to consult with members of different regulatory agencies and the Financial Stability Oversight Council and report back on potential changes. 

"There are quite a few things that we could do on Dodd-Frank ... that we think will have fairly immediate and dramatic impact," the official said, including personnel changes at regulatory agencies and additional executive orders.

That likely includes a review of the CFPB, which vastly expanded regulators" ability to police consumer products — from mortgages to credit cards to student loans. Trump administration officials, like other critics, argue Dodd-Frank did not achieve what it set out to do and portray it as an example of massive government over-reach.

Trump will also sign a presidential memorandum Friday that instructs the Labor Department to delay implementing the so-called "fiduciary rule" - an Obama-era rule that requires financial professionals who charge commissions to put their clients" best interests first when giving advice on retirement investments. The "fiduciary rule" was aimed at blocking financial advisers from steering clients toward investments with higher commissions and fees that can eat away at retirement savings.

The retirement advice rule was issued by the Obama administration and was set to take effect in April. It has been staunchly opposed by the financial services industry, who argue the rule limits retirees" investment choices by forcing asset managers to steer them to the lowest-risk options. Opponents of the rule argued that the rule would result in high costs that will ultimately make small accounts unprofitable. While some lawsuits were filed against the rule, companies like Bank of America Corp"s Merrill Lynch and Morgan Stanley had announced plans to cooperate with the rule. The Labor Department had estimated that it could cost firms as much as $31 billion over the next decade to comply.

“Americans are going to have better choices and Americans are going to have better products because we’re not going to burden the banks with literally hundreds of billions of dollars of regulatory costs every year,” White House National Economic Council Director, and former Goldman president, Gary Cohn said in an interview with The Wall Street Journal. “The banks are going to be able to price product more efficiently and more effectively to consumers.”

A senior White House official outlined the measures in a background briefing with reporters Thursday. "We think that they have exceeded their authority with this rule and we think this is something that is completely overreaching," the official told reporters at a briefing on Thursday.

Trump pledged during the campaign to repeal and replace the law, which also created the Consumer Financial Protection Bureau. "Dodd-Frank is a disaster," Trump said earlier this week during a meeting with small business owners. "We"re going to be doing a big number on Dodd-Frank."

Cohn said the actions are intended to pave the way for additional orders that would affect the postcrisis Financial Stability Oversight Council, the mechanism for winding down a giant faltering financial company, and the way the government supervises big financial firms that aren’t traditional banks, often referred to as systemically important financial institutions.

More from the WSJ:

Trump blamed the political establishment and Wall Street banks for leaving behind many Americans and vowed to break up both. Those promises have already been called into question as he has filled his administration with members of Congress and Wall Street executives, including Mr. Cohn, who retired as president of Goldman Sachs Group Inc. to join the Trump administration.

Adding to the potentially difficult optics for Mr. Trump, he will sign the actions on the same day he meets with a group of business executives, including J.P. Morgan Chase & Co. Chief Executive James Dimon and BlackRock Inc. CEO Laurence Fink. Asked about the potential political pushback because of his Wall Street past, Mr. Cohn said the administration’s goal of deregulating financial markets “has nothing to do with Goldman Sachs.”

“It has nothing to do with J.P. Morgan,” he said. “It has nothing to do with Citigroup. It has nothing to do with Bank of America. It has to do with being a player in a global market where we should, could and will have a dominant position as long as we don’t regulate ourselves out of that.”

The changes Cohn described are sure to face a fight from consumer groups and Democrats, who say postcrisis regulations are protecting average borrowers and investors from abusive practices, while making the financial system more resilient and bailouts less likely.

This path also may create political problems for Mr. Trump, whose campaign was successful in swaths of the Midwest where homeowners were hit hardest by the housing crash sparked by the financial crisis.

Meanwhile, asked about the potential political pushback because of his Wall Street past, in his WSJ interview Cohn said the administration’s goal of deregulating financial markets “has nothing to do with Goldman Sachs.”

“It has nothing to do with J.P. Morgan,” he said. “It has nothing to do with Citigroup. It has nothing to do with Bank of America. It has to do with being a player in a global market where we should, could and will have a dominant position as long as we don’t regulate ourselves out of that.” Cohn said existing regulations put in place by Dodd-Frank are so sweeping that it is too hard for banks to lend, and consumers’ choice of financial products is too limited.

Democrats and consumer groups have pushed for tighter controls on banks and other lenders, particularly after the subprime mortgage crisis that helped fuel the global financial crisis. But Cohn said that many of the postcrisis rules haven’t solved the problems they were supposed to be addressing. He said, for example, that there still isn’t a solid process to safely wind down the collapse of a giant faltering financial company or to ensure that those firms have access to short-term liquidity.

“I’m not sitting here saying we want to go back to the good old days,” Cohn said. “We have the best, most highly capitalized banks in the world, and we should use that to our competitive advantage,” he added. “But on the flip side, we also have the most highly regulated, overburdened banks in the world.”

Cohn also laid out a road map for how the Trump administration plans to target new financial rules. He said the Treasury Department would lead an effort to overhaul mortgage-finance giants Fannie Mae and Freddie Mac, which were put into government conservatorship after the crisis. He also said that the White House wouldn’t need a change in the law to redirect the mission of the Consumer Financial Protection Bureau, created by the 2010 law and which governs things like mortgage and credit-card rules. (Please see related article on B10.)

He suggested the White House could influence the mission of the bureau, set up as an independent agency, by putting a new person at its helm to replace Richard Cordray, the agency’s director. Asked about potential changes at the agency, he said, “Personnel is policy.”

* * *

Trump said repeatedly during the presidential campaign that the Dodd-Frank overhaul law was preventing banks from lending, which he said made it harder for consumers to access credit and get the economy to grow. Financial analysts have had mixed views on this assessment. Some believe that low demand from consumers has hurt the ability of banks to lend, and low interest rates have hurt the returns banks make on these loans. But smaller banks have said they are dealing with a crush of new regulations spurred by Dodd-Frank, something regulators have struggled to address.

Cohn didn’t specify how all of these regulations should be rewritten, but he said that financial markets have made their own corrections and that the environment that fueled the financial crisis no longer existed. He said, for example, that even if mortgage restrictions are rolled back, it doesn’t mean that there would be another boom in the subprime lending market. That is because, he said, those loans can’t be securitized and sold like they were before the financial crisis because the market for those products isn’t the same.

“We don’t want to do it an unregulated way,” he said. “We want to do it in a smart, regulated way.”

Translation: we want our bubble, we want to be able to securitize, package and sell it, we want to offload risky exposure to momentum-chasing retail investors and, potentially, widows and orphans.