Tell me why the CFPB is a disaster

In the current fued over who should lead the US Consumer Financial Protection Bureau, what should be focused on is why the President and Republicans are calling the CFPB a “joke” or a “disaster.” This agency has penalized banks, credit card companies, lenders, etc. almost $12 billion for aggressive marketing practices, selling products people did not ask for and outright fraud.

Over 90% of this money goes to the affected customers who have been cheated. A good example is Wells Fargo being fined $150 million for setting up accounts for people that did not authorize them, so employees could meet a bonus goal. Another is Bank of America being fined over $780 million for selling services customers did not ask for. Other brand name organizations have also been fined for bad practices.

The organization has also helped over 29 million people with issues and education on financial matters. Since, financial issues are complex and so many were harmed during the housing crisis, the CFPB seems to be a big help to everyday Americans.

The reason for the comments by the President and Republican legislators is the CFPB is working too well and banks don’t like this. It is far from a joke or a disaster, so reporters need to ask the speaker of such a comment as to why they say this? The pat answer is the CFPB has too much authority and too little oversight. Yet, it was set up to be removed from the political process for these reasons. Banks, et all don’t want to be fined for their business practices, so they fund politicians to diminish the CFPB’s clout.

My strong advice to banks is to stop screwing people over and maybe you won’t get fined. Stop selling people products they don’t understand such as variable or pick-a-payment mortgages. Stop selling them products and services they did not authorize. My sister is dealing with one of these banks right now on a credit card account she did not open.

So, Mr. President tell me again why the CFPB is a disaster? And, tell me how attacking this organization helps those voters who put you in office? To be brutally frank, when this President uses the word “disaster” it usually means he is being untruthful about something.

 

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Beliefs equal facts per the GOP

At last week’s Republican Convention, the big loser was accuracy and factual data. Why let the facts get in the way of your story? If you want to scare the hell out of folks and tell everyone how bad things are and that you alone are the man and group to fix such problems, then why should facts interfere with that narrative? The problem is what was presented is largely at odds with the truth. I ask people who tell me how bad things are by asking a simple question, what country are you talking about?

John Oliver’s “Last Week Tonight” broadcast on Sunday shows the several bald-faced lies that were told by the convention speakers, including their nominee. The fact the nominee lied is not news as he has broken all records for lying in a campaign dating back to when fact checkers started measuring comments. What turned out to be the most fascinating conversation was an interview with former Speaker of the House Newt Gingrich, who is portrayed as the most serious and knowledgeable GOP spokesperson.

During the interview, the reporter challenged him when he said violent crime is up in America. The reporter said the data clearly shows a decline over the last twenty-five years. Gingrich refused to concede that, but the reporter kept insisting. She gave him an out saying there are a couple of large cities where it has gone up the past year and he seized that, but she reiterated it has clearly declined over time. Gingrich then said people believe it to be higher and I will leave the data to the liberals and media. “As a politician, beliefs are more important,” said Gingrich. Unfortunately, he was not the only person to say he believed something over facts, so in so doing it must make it true.

As Oliver pointed out, it does not work that way. You cannot substitute your beliefs for facts and think everything is alright. You can believe all you want that climate change is a hoax and even make it more colorful as The Donald does adding it is a hoax invented by the Chinese to steal our jobs. But, it remains a huge problem we must deal with.

Let me offer a few facts in rebuttal to the story painted at the GOP convention.

• America’s economy is actually doing pretty well, especially related to the rest of the world. The stock market has more than doubled under Obama, unemployment is down to under 5%, 10 million plus net jobs have been created on his watch and we are currently on the 5th (soon to be 4th) longest economic growth period ever in the US.
• In 2015, the US sold more US made cars than ever before, beating the previous record, ironically, when Bill Clinton was President.
• The rest of the world still respects the US as we have higher ratings than when Obama took the reins from Bush. Our reputation had fallen with the WMD story. By the way, the British just completed their review of the Iraq invasion story and were highly critical of Prime Minister Tony Blair and President George W. Bush. We have chosen to investigate Benghazi ad nauseam rather than the WMD issue.
• The Affordable Care Act is not perfect and needs improvements, but is working pretty well with over 20 million new insureds and slower cost growth than before it was implemented.
• The Consumer Financial Protection Bureau has penalized banks, credit card companies and pay-day lenders over $11 Billion for aggressive and fraudulent marketing practices, with over 90% of that money going to cheated consumers. Consumers benefit, but GOP legislators hate this program. By the way, Senator Elizabeth Warren played a strong role in its passage and implementation.

I could go on, but we are in a much better place than was told last week. Yes, we have things to improve upon such as the declining middle class and increased poverty which have occurred over the last forty years and we must have better dialogue around race and violence issues, as well as gun governance, but America is not going to hell in a hand basket. And, even if it were, The Donald is the absolute worst person to be given keys to the car. His track record is one of great salesmanship, but poor management.

So, please ask questions of politicians and don’t let them off the hook if they say they believe it to be so. Show me your data.

 

Weary from travel with time to think

These old bones have been in a car the last few days and the older I get, the more it wears me out. I will be the guy at the rest stop stretching by his car, before he gets back in and tacks on a few more miles. But, It does give me time to think, so what follows are the musings of a “rambling man” (I figure I can use that line since I passed through The Allman Brothers’ home state of Georgia).

Before they count ol’ Bernie out, Democrats may need to take serious stock of what happens in California and the remaining states. I will vote for either one against The Donald, as he is about as bad a candidate as they come, but it will be interesting to see what unfolds. If Bernie runs the table, with Hillary’s email issues, those super delegates may need to do some serious reflection.

By the way, the best Presidential candidate of either party is not running and that is Senator Elizabeth Warren. She may be drafted as a Vice Presidential candidate, but she has more street credibility and has taken on Wall Street successfully with her pushing through the Consumer Financial Protection Bureau, a huge success for Obama that no one has ever heard of. Republicans hate it because it punishes banks, insurance companies and credit card companies for fraudulent and aggressive marketing practices and over 90% of the penalties go to financial victims. Think of banks selling you (or your 80 year-old mother) something you did not ask for.

It is not surprising how the GOP is trying to make an abnormal candidate look normal. Everything people need to know about The Donald’s lack of veracity as a candidate is in his history and it is not hard to find. How this exploitive narcissist can portray himself as the champion of the common people may be the biggest con job I have ever witnessed. Whether he wins or not, he will be on trial for alleged misrepresentation to students and seminar goers under now defunct Trump University, one of his many failed enterprises. Yet, it is his thin-skin and false bravado of how tough he is, that show he should never be near a nuclear weapons command.

Finally, one thing I have observed about Clinton, while she may be imperfect, she is far tougher than Donald Trump. Leaders do not have to pat themselves on the back. Leaders can take criticism. It is apparent that Trump can dish it out, but he cannot take it. On the flip side, Clinton has had and will have her share of criticism, both fair and unfair. Benghazi was a smear campaign, as admitted by Kevin McCarthy who would have been Speaker of the House, but he let slip this fact which has been known, but not uttered. Yet, Clinton does need to answer questions about the emails which are legitimate.

People often accuse me of being a Democrat and the above will likely not change that. As an Independent, I left the GOP in 2006 because of their stance on climate change, guns and social issues and tendency to make things up with the aid of Fox News. In my opinion, I see a party that is on the wrong side of most issues – climate change, economy, guns, healthcare, LGBT issues, voting rights, etc. I also see a party who is too busy listening to its extreme voices and not reasonable voices.

I do not mind people being conservative or liberal, as most folks are combinations of both. I am fiscally conservative, but socially progressive. What I do care about is people lying and not using real data to make decisions. Governance is hard enough without people lying about the real story. It should be noted Trump is on record as lying over 75% of the time in this campaign, setting fact check records. Note, he says the fact checkers are part of the liberal media, but he cannot be judge and jury on his own lying. This is prima facie evidence of a problem with his candidacy.

 

What do these organizations have in common?

Based on the question asked above, I want you to think about the following organizations for a minute: Adelphia, American Express, Bank of America, Citigroup, Duke Energy, Enron, GM, Goldman Sachs, Healthsouth, Lehman Brothers, Lumber Liquidators, Marsh and McLennan, Massey Energy, Merrill Lynch, Penn State University, Toyota, Tyco, Volkswagen, and Wells Fargo.

What thoughts pop into your head? What do these organizations have in common? Yes, they have all been successful and many still are. The answer I am looking for is they have all been fined, publicly shamed or found guilty of some level of malfeasance, criminal neglect or fraud. The disappointing truth is I have been a shareholder in four of these organizations, so it hurts me both morally and financially, to see leaders forsake their roles as stewards of the company.

Volkswagen is the latest to join the infamous group. I was speaking with a Volkswagen owner the other day. While I was talking about the fine and decline in stock value around their purposeful fraud to avoid poor EPA emissions test results, he was thinking of it as a further depreciated car value. As with the others, what Volkswagen did was wrong and it will hurt them for a long while. The poor emissions will be hurting all of us until the cars are fixed. The CEO resigned earlier this week, and well he should, as a fraud like this has to be understood or even sanctioned at the very top. As of this writing, some car owners and shareholder groups are considering class action lawsuits against Volkswagen’s leadership.

Why do I bring this up today? Quite simply, we have politicians running on a platform of eliminating regulations so business can flourish. We often confuse bureaucracy with regulations. We need to investigate and remedy inefficiency in the latter, as bureaucracy can be antagonistic to efficiency. But, we need to also challenge ourselves to be smart with our regulations. If regulations are not efficacious, we should make changes, which might include their elimination. But, as evidence of the above well-known examples, which do not include countless others, doing away with regulations carte blanche would be unwise and foolish.

So, when you hear a statement like “we must do away with regulations,” ask yourself why? Who does that serve? The answer may be illuminating. I will leave you with a quote from Senator Elizabeth Warren who led the effort to create the hugely successful Consumer Financial Protection Bureau. This agency has fined several of the financial companies above for hundreds of millions for aggressive marketing and outright fraudulent practices, over 90% of which goes back to the impacted customers. In response to a question about why she does not like Wall Street, she said “I like Wall Street, I just do not like cheating.” Neither do I, nor should any of us.

Wallace, Warren and W

It is a day of alliteration to the W. Three random, but related thoughts have surfaced around this starting letter. Let’s begin with Wallace. No, not William Wallace, which would have been an added alliteration, but our old friend George Wallace, the former Governor of Alabama. You know, the one who persisted on keeping the ugly Jim Crow alive against the efforts of Martin Luther King to make it go away. The one who blocked the doorway of progress for African-American students, an excellent metaphor.

You see, in an effort to compliment The Donald on his recent trip to Wallace’s home state, a fervent fan offered that he liked Trump as he spoke the truth. He went on to add, Trump is a lot like George Wallace in that regard. I recognize fully the man meant this as a compliment, but I can think of no better metaphor in defining why The Donald should not be President. He is a lot like George Wallace with his hate speak.

Skipping to the W, as in George W. Bush, his brother is doing his best to rewrite history. Jeb is doing his darnedest to say W was a better President than he was and he had won the Iraqi war until President Obama screwed it up. Having hired some of W’s people have not helped in this regard, as it appears they want to whitewash their errors hoping we don’t have a memory. Unfortunately for Jeb, too many people remember how bad W was, as he was not invited to be physically in attendance at the last two GOP Conventions. As a sitting President, he had to be televised into the proceedings in 2008, which is a major insult.

The middle W is for Warren, Senator Elizabeth Warren, that is. As former Secretary of State Hillary Clinton continues to have credibility issues, which may not go away or be let to go away (think Benghazi), the Democrat leadership is getting a little antsy. Senator Bernie Sanders is doing terrifically well speaking plainly about the issues (he actually thinks before he speaks), yet many do not think he can carry the ball to the goal line. I personally do not think America is smart enough to elect Sanders, as many will never get past the word socialist as they do not know what it means. I love Vice President Joe Biden and he gets a bum rap with people looking for him to misspeak. He has been one of the most effective Vice Presidents we have had in recent memory. Yet, I don’t know if he can carry the ball all the way, either.

So, if Hillary stumbles, I think the party needs to go hat in hand to someone who would be a terrific President if she chose to run. And, that would be Elizabeth Warren. She brings the intellect and fight of Sanders to the fray, along with terrific debate skills, story and experience. The Consumer Financial Protection Bureau has been a huge success for defrauded and aggressively marketed to consumers. She is the reason. Her favorite quote of mine when asked if she liked Wall Street. “I like Wall Street, I just don’t like cheating.”

Senator Warren, please reconsider. Even if Hillary prevails, it would be great to have two effective women candidates in the race. And, your party and America just might need you, as there is not an abundance of good ideas coming from the party with seventeen candidates.

 

Quiet heroes

A few weeks ago, I wrote a post about the invisible people at work that quietly go about their business and don’t strain their arms patting themselves on the back. It got me thinking about public figures who do their work in a dignified manner, not calling attention unnecessarily to what they do. Permit me to highlight a few.

In tennis, the bad boys of tennis seem to get the notoriety. These are the ones that throw tantrums, racquets, and verbal abuses of line judges. Ilie Nastase, Jimmy Connors, and John McEnroe could be quite the jerks on the tennis court and no one should emulate that part of their game. On the better side, Arthur Ashe was a class act as well as being an excellent player. The same could be said for Bjorn Borg, Pete Sampras and Roger Federer who seem to go about their business in a professional manner. These last four each have had more success, but they also achieved it without being a jerk on the court.

In football, it seems a player needs to draw attention to each good play they make, yet seem to be silent when they screw up. It need not be that way. Herschel Walker may have been the most gifted college athlete to ever play and was a very good pro player. Yet, when he made it to the end zone, he acted like he had been there before. He was not big into histrionics as it was not his nature. I also recall the time he was out jogging and he came upon a couple who had wrecked their car and the doors were jammed. Walker came up and after learning of their dilemma, ripped the door off the hinges, so they could get out. Once he confirmed they were alright and the police were on their way, off he went. He never made a big deal of it until a reporter later got the story and confirmed its truth.

In baseball, many know the Jackie Robinson story as the first African-American major league player and, if you don’t, please check out the movie “42” which came out last year. And, many may also know the name Hank Aaron, who before the steroid era allowed another player to pass his record, he had hit more home runs than any other player, including Babe Ruth. But, as the African-American Aaron was chasing Ruth’s record, the death threats mounted. It was similar to Robinson’s plight in 1947. Aaron always carried himself with a quiet grace and dignity. He did not brag much about his prowess and the tremendous Willie Mays and Mickey Mantle, seemed to get more notoriety. But, in the end, neither Mays or Mantle could come close to Aaron’s records.

In politics, the narcissistic group tends to draw attention to themselves. The first rule of being a Governor or Mayor is to show up whenever there is a business opening, relocation or groundbreaking, even if you have little to do with the event occurring. But, the people who come to mind that served with quiet grace include folks like President Jimmy Carter, Senator Bob Dole, Ambassador Madeleine Albright, Secretary of State and General Colin Powell, NC Governor Jim Martin and new Senator Elizabeth Warren to name only a few. None of these folks are without faults, but they seemed to go about their business in a very gracious and professional manner.

I mention these stories, not to say you have to be less exuberant. You do not get to the positions these people have held without being confident. As a former manager of people, I have witnessed and shared with others, the more arrogant you are, the less team-oriented you are, the more difficult to tolerate you are, then you better be that much better. Because if you are not, most people will not tolerate your BS too long. Steve Jobs could be one of the biggest jerks around, but he was tolerated as he was showing people a new path forward. Yet, many chose not to work with him. The ones who had success seemed to have experience in “handling” his moods and condescension.

You can be quite accomplished in your endeavors without being a jerk. The people I mentioned are all very talented and successful people. So, my suggestion is to be confident, but work well others and share credit. Be a class act and good things will happen. And, per an earlier blog post, do not mistake kindness for weakness.

A Fighting Chance – Senator Elizabeth Warren’s mantra

If Hillary Clinton chooses to run for President, she would be the odds on favorite to carry the Democratic nomination and likely the White House. The irony is, at least on domestic issues, she may not be the best female candidate from her own party. That might fall to Senator Elizabeth Warren from Massachusetts, who is the inspiration and instigation behind the establishment of the Consumer Financial Protection Bureau, the watchdog created for the common citizen. Warren has said she won’t be running for President, but she would be a formidable candidate.

I have been a fan of hers for several years, especially after I heard her utter these apropos words when asked why she did not like Wall Street. She said, “I like Wall Street, I just don’t like cheating.” As an attorney and professor at Harvard, she has been a subject matter expert on bankruptcy in the US. This helped formulate much of her fighting spirit against cheating or rigging the system against those in need. When even bankruptcy judges incorrectly noted why people were becoming bankrupt, she did her own research and noted they tended to be people who worked hard, tried to start businesses or got overextended and had no recourse. She also noted banks made money preying off people who were on their way to trouble and did not want to stop that gravy train. The banks actually fueled the fire by offering more credit or consolidated credit when the person should have torn up their credit cards.

I just completed her latest book called “A Fighting Chance” which is an excellent read about her journey and fighting for people. She truly is the champion for the common person. And, yet if you mention her name in some circles, you may get a more negative reaction than to Hillary’s name. Banks do not like her as she called them out. The banking lobby spent $1 million a DAY to lobby against the Consumer Financial Protection Bureau being included in the Dodd-Frank Act. Her name was dragged through the mud and she was a target of undue criticism and innuendo. To many, the banking lobby’s zeal to prevent this bureau from succeeding is prima facie evidence that it is needed.

Banking used to be one of the more honorable professions, but the leaders of the industry threw that out the window by taking advantage of its customers, especially those who could ill-afford it and did not ask enough questions trusting the people in suits. There is a study of a few years ago called “Class Matters” whose principal finding is economic class matters in people’s decision-making. The lesser the class, the fewer questions are asked of service providers. These folks do not have the education or confidence to ask questions to explain what something meant. So, they would not fully understand that a variable mortgage could increase their interest rate by 200 basis points and would sign on the dotted line.

I would encourage you to not only read her book, but check out what the Consumer Financial Protection Bureau is all about at http://www.consumerfinance.gov/.  The purpose of this agency to protect consumers when banks, pay-day lenders and mortgage lenders are aggressively and fraudulently marketing their products. They have fined lenders close to $4 Billion for selling products and services that consumers did not ask for, aggressive marketing or even malfeasance. Over 90% of the monies collected go back to the impacted consumers, with the remaining amount going to fund better education and tools for borrowers and consumers. As an example, Bank of America was fined earlier this year for over $750 million for selling additive services to credit card holders that they did not ask for.

It will be arguable that when the Obama administration is viewed retrospectively, the creation of this agency will be one of his shining moments. He owes it to Elizabeth Warren. She gave and continues to give people of all persuasions a fighting chance. And, if you hear someone denigrate her name, that should be a lightning rod that shows which side that person’s bread is buttered or that person is getting their information from a source which caters to people who do not need her help. Reading this book shows how an industry and their spokespeople on the Hill tried to mow her down along with the agency. The rest of us need an advocate like Warren in our corner, now more than ever. But, don’t take my word for it, check out the book and the website link above, and draw your own conclusions.

Bankers used to be trustworthy, but threw their reputation out the window

Last week, Bank of America was the latest bank to be penalized for fraudulent or aggressive marketing practices. They have had so many fines for malfeasance or aggressive marketing practices that it is hard to keep track of their sins. The latest penalty fined Bank of America $783 million for selling credit card consumers products and services they did not request. The Consumer Financial Protection Bureau (CFPB), which was newly created a couple of years ago by the Dodd-Frank Act under the tutelage of now Senator Elizabeth Warren, said the $738 million of that fine is used to restore money to those customers who were fraudulently sold these products.

In its first two fiscal years of operations ending June 30, 2013, the CFPB has fined banks and financial entities $942 million of which the significant majority goes to the consumers who were harmed or defrauded. The banks and financial institutions that were penalized include, but are not limited to American Express, Capital One, Discover, and JP Morgan Chase. While the significant majority of the penalty goes to the consumers, the remainder, which is usually less than 10% of the overall fine, goes into a Civil Penalty Fund, which has the following purpose as stated in the CFPB 2013 Annual Report:

“Under the Act, funds in the Civil Penalty Fund may be used for payments to the victims of activities for which civil penalties have been imposed under the Federal consumer financial laws. To the extent that such victims cannot be located or such payments are otherwise not practicable, the Bureau may use funds in the Civil Penalty Fund for the purpose of consumer education and financial literacy programs.”

What is interesting to me is why certain politicians are against this agency? I want them to tell me why an agency designed to protect the average Joe’s and Josephine’s is a bad thing. To state the obvious, these politicians tend to be Republican and tend to be supported by bankers. Senator Richard Shelby, who Chaired the Senate Banking, Housing and Urban Affairs Committee from 2003 – 07 is one of the key critics of the CFPB.

This is one area where people who don’t want regulation need to explain how we would be better without it. Would it be OK for bankers to have full license to sell their customers services they do not need? Is it OK for banks to screw people over? I find most people confuse unwieldy bureaucracy with regulation. We need the latter, but need to guard against the former. I also find people who don’t want to be regulated tend to be those who need to be regulated more. The fossil fuel industry comes to mind, but that would be a large digression.

Having worked in Human Resources within a bank back in the 1990s, what I have witnessed is being a banker used to be one of the most trusted professions. Now, it ranks much lower in trust.  And, they only have themselves to blame. Truth be told, bankers used to be trustworthy, but threw their reputation out the window.

The slippery slope began in earnest with the repeal of the Glass-Steagall Act in the late 1990s. This act had been put in place at the time of the Great Depression and was designed to assure that banks would be banks and not investment banks, security traders or insurance companies. With the feeling everyone learned their lesson and cooler heads would prevail, the repeal of the Glass-Steagall Act reopened the can of worms. The real reason for the repeal was banks wanted the fee income that usually came with those products and services. Yet, to add another metaphor, the can of worms became a Pandora’s Box.

What transpired after that repeal is banks pushing the envelope more and cross selling products and services to unsuspecting customers. Two marketing trends emerged. “Bundling” and “Tying.” Bundling represents the concept if you do more business with us, we will give you better terms. By itself, that is not necessarily a bad practice. Yet, when married with tying, it becomes unethical and illegal. Banks started tying business marketing together, so that you had to business with them in one area to get a better deal on another service which was more vital to the buyer. Usually these offers were not made in writing, as some tying can be illegal.

But, the larger trend that occurred is a selling push to reward employees for selling you services you may or may not need. The unscrupulous ones would push the hardest and do things that now get the attention of the CFPB. One of the key reasons the mortgage crisis hit is the better mortgage market dried up and banks had all of these mortgage bankers with nothing to do.

With the push out of the second Bush White House that home ownership was good, the higher risk mortgage market became the target. It was at this time you saw mortgage-in-a-box retail stores competing against banks to sell mortgages to people who did not understand fully what was being sold to them. Variable mortgages and the dreaded Pic-a-payment mortgages that brought Wachovia down after their acquisition of Golden West, were being sold to people who were in over the heads, both economically and educationally. People should have been asking more questions, but trusted the men and women in nice suits that told them they could afford the American Dream. They failed to mention or fully explain terms like “negative amortization” and “variable mortgages” especially what transpires when the rate goes up by 200 basis points.

So, bankers used to be trustworthy, but they threw it out the window. They earned these new stripes. You have to be the navigator of your customer service experience, in general, but especially with a bank. You have to ask questions about why you are being asked to do something. You need to ask why you need another credit card. You need to ask why is the salesperson pushing so hard on this issue. If you don’t, you may need the help of the Consumer Financial Protection Bureau.

With that said, I know many fine people who work for banks. They do their best to serve their customers. Yet, the higher-ups are pushing for sales and align incentives with that push. As a result, even well-meaning people will push the envelope even more. I have been a business for over 34 years and a truism I have learned is you make more money serving the needs of your client long term. You may make more money on occasion by pushing that envelope, but you may do so at the expense of a long term relationship which might come to an end.

For full disclosure, I am a shareholder and customer of both Bank of America and Wells Fargo. These fines disappoint me. I want them to be accountable to their customers, employees and shareholders. But, they also need to be accountable to their regulators. They owe it to all of us.