Last year, the Huffington Post published the definitive take on the Congressional Black Caucus’ frequent sellouts to Wall Street, and how Maxine Waters has attempted to shut it down. Their public image as the conscience of the Congress belies a coziness with bank lobbyists and an open willingness to do their bidding. Ten CBC members sit on the House Financial Services committee, and can often convince those who don’t to go their way.
One of the more notable issues the CBC has worked on serves the interests of all their constituents in the asset management industry:
In June, 28 CBC members sent a letter to the Department of Labor, urging it to reconsider a rule requiring retirement account managers and investment advisers to act in their clients’ best interests — what is known in finance as a “fiduciary duty.” Fudge told us she was worried the rule would limit minority access to financial advice. But the letter was actually written by Robert Lewis, a lobbyist at the Financial Services Institute, who forgot to scrub his metadata from the document before circulating it around the Hill.
That half-assed job didn’t work out for the CBC; the Labor Department issued its fiduciary rule back in April. And despite an exhaustive series of hearings back in August and more expected in September, Labor Secretary Thomas Perez announced he plans to move forward on finalizing the rule sometime before the 2016 elections.
This hasn’t stopped the CBC from trying to kill the rule. This is from D.C. house organ The Hill:
Wall Street is wooing black lawmakers as part of their effort to block a controversial rule championed by President Obama that would change the way financial advisers operate […]
Some members of the Congressional Black Caucus (CBC) have been receptive to arguments about the rule, which has divided Democrats.
“Rich people are always going to get advice,” one aide to a CBC member concerned by the rule said. “But it’s the poor people — many of which are our constituents — who we’re concerned about.”
This is an insane argument. In essence, asset managers are saying that they only way they can afford to offer financial advice to low and middle-income earners is if they screw them. If you force them to act in their clients’ interest, it won’t become cost-effective. So CBC members want to protect their constituents’ ability to get sham advice contrary to their interest? There is no question that these constituents would be better off with no advice at all.
This is another case of Maxine Waters versus the sellouts. She’s been waging this war with her membership for going on three years now, and it’s like pulling teeth.
CBC Reps. David Scott (D-Ga.) and Lacy Clay (D-Mo.) signed onto a bipartisan letter in July calling on Obama to issue a re-proposal of the rule. CBC Reps. Gwen Moore (D-Wis.) and Frederica Wilson (D-Fla.) are also seen as having concerns with the rule, according to multiple sources.
CBC Reps. Bobby Scott (D-Va.) and Waters have spoken out in favor of the regulation, as has Sen. Cory Booker (D-N.J.), the only CBC member in the Senate.
There are two things to look out for here. First, the House is poised to pass a bill called the Retail Investors Protection Act, which also passed in 2013 with Democratic support. This is a purely dilatory measure that sequences the DoL’s rule behind a similar rulemaking from the SEC. As you might expect, the SEC is in no hurry to write their fiduciary rule, so it’s just a way to delay the Labor Department. It would also add a whole bunch of cost-benefit analyses to slow down the rule should the SEC ever get around to it.
The House will surely pass this, and how much CBC support they get could be critical. The Senate might take a whack at this, and while Democrats might hold together to filibuster, Claire McCaskill is making some noises against DoL’s rule, and you can surely find a few Senate Dems to agree with her.
The other, more critical threat comes from a rider delaying the rule that could go into whatever government spending bill Congress reads out at the end of the month. The rider would defund any efforts to complete or enforce the rule. That’s a bigger deal, and CBC support would again add credibility to the effort.
Obviously, if you’re in the districts of David Scott, Lacy Clay, Gwen Moore or Federica Wilson, you could let them know how you feel. But of course one reason these lawmakers thrive on giving Wall Street a hand is that they’re in safe seats with voters who aren’t attentive to the maneuvers of the banking industry, even when as in this case it affects them. That’s part of the whole game here.
Keep in mind that the Labor Department has been writing this thing for over five years. The industry is making a last-ditch effort to sink it, and going back to the well of members of Congress who prefer personal aggrandizement and nice lobbying jobs for their staffs over their own voters. I thought Waters had this more under control, but it’s sad to see what some members will do for a buck.
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Another part of this lobbying effort involves frontgroup-funded “issue advocacy” TV commercials running here in Madison and who knows where else in which the actor playing a minority owner of a small construction business tells those of us behind the camera that “it’s hard enough to run a small business without politicians making it even harder” and encourages us to “tell Washington to quit messing with” the 401K he offers his workers (quotes from memory). It took a bit of digging to figure out that the ad was in reference these new rules.
Yea, yea the 401k he offers his workers, which in the vast majority of the cases of small businesses has zero matching of course, so all it’s doing is offering a tax shelter, so heaven forbid the workers (who are also small time investors) have any protection in an investment scheme the government itself highly favors, those tax breaks are significant.
Thanks for this informative post. Indeed, the CBC is just as much in bed with the lobbyists/1% as anyone else these days. Sell-outs across the board, no matter who their “little peeps” constituents are. They all serve mammon these days. And yes, most US citizens are utterly unaware of the chicanery afoot, much less what legislation like this means for them and their personal interests. Thanks to NC for keeping those of us who come here so well informed.
I tip my hat to Maxine Waters again and again. She’s been through the mill many times, but keeps standing up for what’s right. Looks like she’s trying to do what’s right again but appears to be fighting a losing battle. Good luck with that.
This is ( or at least should be ) a textbook example of how thoroughly bogus Identity Politics is in an era of pervasive political corruption. It is part ( and a large part ) of the Problem rather than of the Solution.
I would repeat your statement and simply substitute “Democratic Party” for “Identity.”
Have to agree to disagree. This applies to Republicans and Democratic voters equally. Ergo Identity Politics, imo, is the correct term. This particular post happens to be discussing the CBC, which purports to be a subset of the Democratic party. Similar issues apply across the Board, such as with the Tea Party.
Thank you DD.
A problem with this rule is that the Labor Department rules for fiduciary duty are not the same as SEC rules. Advisers will best serve their clients with one set of rules. Fiduciary capacity is very important. Some advisers now bound by the SEC rules will not take on clients with accounts that would come under the Labor Department rules—too much bother and risk of regulatory error for small accounts or smaller advisory firms.
Puhleeze.
The DoL rules are remarkably minimalist, in fact so minimalist that public pension funds (which follow DoL rules even though not bound by them) sign up with private equity firms that explicitly eschew fiduciary duty, as in they say they may consider interests other than those of their investors, including their own interest!
This is just an excuse for the fund management industry. If the DoL rules were even remotely effective, there would be no need for SEC rules.
The Labor Department rules are, in fact, modeled on the securities law best interest standard, with language taken directly from the relevant section of Dodd-Frank. What’s different is that DOL realizes that, to make a best interest standard stick, you also have to force firms to abandon practices that encourage and reward recommendations that aren’t in customers’ best interests — like setting quotas for the sale of proprietary products or paying advisers more to sell the funds the firm is trying to push. That’s why industry is spending millions to kill this rule — not because they are concerned about protecting small savers, but because they are protecting their own bottom lines. The IRA market is a multi-trillion market. Industry isn’t going to willingly walk away. That’s just the threat they always use when faced with a regulation they don’t like. The threat works on the SEC, which is one reason they haven’t adopted a fiduciary standard for brokers, reined in toxic conflicts, or even developed decent disclosures. The DOL appears a lot less willing to back down.
Voters in Prince George’s County, Md., in 2006 replaced the thoroughly corrupt Al Wynn with the progressive Donna Edwards, so it can be done. Now she’s running for Senate and against all odds appears to be in the lead.
here’s the link to an online petition supporting the fiduciary requirement being circulated by Americans for Financial Reform, if any NC readers care to sign:
http://action.civilrights.org/site/Survey?ACTION_REQUIRED=URI_ACTION_USER_REQUESTS&SURVEY_ID=4881
Excellent post, very complementary to Black Agenda Report’s criticisms of the Black Misleadership class.
http://www.blackagendareport.com/content/black-misleadership-class-needs-unmasking
B.A.R. has been on this case for a long time and they are spot on in their characterization of what is going on: MISleadership.