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Banking law weakens safeguards, gives half-billion to banks
|2018-May-24  (Updated: 2018-Jun-10)||By: Rob Dennis and Barry Shatzman|
A new law signed by President Donald Trump will weaken regulations for banks - increasing the likelihood that a financial institution will fail. It also will cost the federal government more than $600 million over 10 years.
Half-billion dollar taxpayer giveaway to big banks
The biggest beneficiaries of the new law are major banks that have been designated as Too Big to Fail. Under the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, banks with assets of at least $50 billion received this designation that subjected them to higher scrutiny. This bill raises that threshold to $250 billion.
Of the 38 banks that had received this designation for stricter regulation, about 12 will retain it. Banks such as American Express, Ally Financial, and Barclays - whose assets are less than $250 billion - now will be relieved of the designation.
The 26 banks freed from the enhanced scrutiny effectively will receive $500 million of public money over the next 10 years, the Congressional Budget Office (CBO) estimates.
The reason is, while these banks still will be regulated, banks regulated as Too Big to Fail must reimburse the government for the cost of the regulation. Now that they fall below the higher threshold, they no longer will be charged.
Another clause in the bill allows banks to use an accounting maneuver to make them appear to have less assets. The CBO reports that banks such as JP Morgan and Citibank may be able to take advantage of this maneuver to legally bring them under the $250 billion threshold also - though they have combined assets of more than $4 trillion.
Community banks allowed to make riskier investments
The bill also helps banks with assets of less than $10 billion - often called community banks. As with larger banks, these banks have been prohibited from using money from customer accounts for certain investments considered to be risky. It's a provision of Dodd-Frank referred to as the Volcker Rule.
With this bill, banks with assets of less than $10 billion no longer are subject to the Volker Rule.
Many smaller banks likely would not make changes as a result of this new freedom, but those that do would cause "a small increase in the risk profile of community banks," the CBO reported.
How necessary was this?
The law's proponents claim that this bill was necessary because Dodd-Frank's regulations were hurting large banks due to the excessive scrutiny, and small banks by limiting their investment opportunities.
However, large and small banks alike have been enjoying increasing profits through the current year - before the new law was passed.
There is a provision of the bill that directly benefits consumers. Credit reporting agencies no longer will be allowed to charge you to freeze (or unfreeze) your credit.
Credit reporting agencies also will be required to provide a web page for consumers to request freezes and fraud alerts.
Several states already had prohibited these charges, and the credit reporting agencies already had established web pages to request freezes.
Rule to disclose payments to foreign governments nullified
|2017-Feb-14||By: Barry Shatzman|
One provision of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act would require drilling and mining companies to disclose payments they make to foreign governments - an attempt to fight corruption in countries that use repressive work conditions to mostly enrich their rulers.
Former Exxon CEO Rex Tillerson personally lobbied against the requirement, but it nevertheless was included in the final bill.
It took the Securities and Exchange Commission (SEC) until June, 2016 to enact a regulation implementing that section of the law.
Tillerson now is Secretary of State.
In one his first bills signed since taking office, President Trump has signed a bill to prevent the SEC requirement from taking effect.
It was passed by Congress under the Congressional Review Act, meaning it was not subject to a filibuster in the Senate.
SEC considering making companies disclose political donations
The Securities and Exchange Commission (SEC) is being asked to require publicly traded corporations to disclose their political donations.
The proposed rule would allow shareholders of a company to evaluate that aspect of the company's operations - similar to the SEC rule that requires the disclosure of executive compensation.
The rule would not apply to donations by individuals or private corporations.
Supporters of the proposed rule include Sen. Robert Menendez and Rep. Chris Van Hollen, as well as almost half a million people who have commented on a petition to the SEC.
The rule is being opposed by large business organizations such as U.S. Chamber of Commerce. Many companies donate money to such organizations, which use the money to advocate policies that favor the companies.
On April 18, Republicans in the House of Representatives introduced a bill that would prevent the SEC from making such a rule.
For more, read the New York Times story.
For more on the combined opposition to this rule by corporations, read this Center for Responsive Politics report.
To read the petition to the SEC, click here.
To read all the comments the SEC has received regarding the petition, click here.
The bill is the Focusing the SEC on Its Mission Act.
Senate bill would end overseas tax breaks
Sen. Bernie Sanders has introduced a bill that would stop corporations sheltering income in foreign tax havens and end tax breaks for companies that ship jobs and factories overseas.
Sanders said the bill, and a companion measure to be introduced in the House of Representatives by Rep. Jan Schakowsky, would raise more than $590 billion over the next decade, according to an analysis by the Joint Committee on Taxation.
Under current law, corporations are allowed to defer income taxes on overseas profits until the money is brought back into the United States. Companies also receive credits to offset taxes paid to other countries.
Eighty-three of the Fortune 100 companies in the United States, including Citigroup, PepsiCo and General Motors, use offshore tax havens, according to a 2008 Government Accountability Office report. One-quarter of the largest corporations in America pay no federal income taxes.
The Business Roundtable, which represents CEOs of major U.S. companies, has proposed raising the eligibility age for Social Security and Medicare benefits. Sanders countered with a report pointing out that 31 corporations represented by the organization have avoided $128 billion in taxes by setting up subsidiaries in foreign countries.
Consumer Protection agency forces Capital One reimbursement
The Consumer Financial Protection Bureau has ordered Capital One to reimburse customers to whom the bank illegally sold credit card protection. It was the first time the newly-created agency has taken enforcement action against the financial industry.
Capital One was charged with - among other illegal practices - selling the protection, that would suspend late charges and minimum payments should the customer become unemployed, to customers who already were unemployed and therefore would be ineligible to receive benefits they were being charged for.
For more, read the New York Times story.