Thursday, August 17, 2017

More Banking Follies

A power has risen up in the government greater than the people themselves, consisting of many and various and powerful interests . . . and held together by the cohesive power of the vast surplus in the banks. 
—ohn Calhoun, May 27, 1836 Speech

It was a sad coincidence. It occurred within a couple days after the public was apprised of Wells Fargo’s new foray into discovering ways to make more money by bilking its customers. It was not, of course, a first for that venerable institution. Last year it was learned that millions of customers of the bank had bank accounts and credit cards opened for them by employees of the bank, without being authorized to do so by the customer. If the employee had not only opened the account, but had caused the bank to deposit, for example, $1000 into the account in order to give it life, the practice would not have upset the unsuspecting customers. Instead, the employees simply opened the accounts and, instead of depositing money into them, charged the account holders fees for creating the accounts and associated fees for services that accompanied the new accounts. That, of course, did not please the customers and, when the practice was discovered, caused the bank to pay a $185 million dollar fine and $142 million to the millions of its customers who were victims of the bank’s practices. Wells Fargo was just beginning to recover from the reputational losses it suffered from what, in Trumpian terms would be described as “fake” bank accounts, when it was disclosed that its employees had discovered a new way of bilking customers-insurance sales connected with car loans.

In late July 2017, we learned that approximately 500,000 bank clients were sold car insurance when taking out car loans with the bank, even though they already had car insurance. According to reports, the bank will pay $80 million to clients who were bilked. Whether fines will be imposed on the banks will not be known until some time in the future. (In fairness to Wells Fargo it should be noted that in 2013 JPMorgan Chase paid $13 billion in fines and penalties for some of its activities. It makes Wells Fargo’s recent activities seem trivial.) The other event of note that happened at the end of July was purely coincidental.

The coincidence occurred when we learned that Congress was on the verge of getting rid of a new rule that had been proposed by the Consumer Financial Protection Bureau. The rule, if permitted to go into effect on January 1, 2018 as planned, would let consumers band together when they were defrauded by banks, and sue the banks as a group in what is known as a “class action.” Under current practices, individuals defrauded by bank practices, such as those undertaken by Wells Fargo, cannot bring class action lawsuits, but are forced into arbitration by virtue of the agreements they signed when entering into transactions with the bank. The rule proposed by the Consumer Financial Protection Bureau and was to take effect on January 1, 2018, would ban compulsory arbitration. Once it became effective it was estimated it would cost banks approximately $1 billion a year. That seems to many observers like a lot of money, but banks are believed to have roughly $171 billion in profits annually, so the rule is not as onerous as it might at first seem.

Keith Noreika, the acting Comptroller of the Currency, has said he has no plans to try to block the rule even though he thinks it is a bad rule. Indeed, in addressing the effects of the rule were it to go into effect he said: “Ultimately, the rule may have unintended consequences for banking customers in the form of decreased availability of products and services, increased related costs, fewer options to remedy consumer concerns and delayed resolution of consumer issues.” What he is, of course suggesting, is that if the rule were to go into effect, banks, confronted with the possibility of law suits and the need to defend their practices in front of juries instead of boards of arbitration, might decide to no longer issue credit cards or otherwise deal with consumers. Because of the actions of the House of Representatives and, once it returns to Washington, the Senate, Mr. Noreika will never have to explain what he meant when he said that: “The rule [if put into effect] may turn out to be the proverbial straw on the camel’s back.” Mr. Noreika will never have to explain why, a $1-billion-dollar reduction in profits for the camels (qua banks) would be the straw that would put them out of business. That is because, availing itself of procedural steps it can take under the Congressional Review Act to avoid the implementation of recently enacted regulations it dislikes, the House of Representatives passed a “resolution of disapproval” to revoke the rule before leaving on its well-deserved five-week vacation. The Senate is expected to follow suit when it returns from its holiday. The camel, whose back was threatened by a straw, can be heard breathing a big sigh of relief. The consumer can be heard simply sighing. Christopher Brauchli can be emailed at brauchli.56@post.harvard.edu. For political commentary see his web page at http://humanraceandothersports.com


Tuesday, July 18, 2017

A Letter to Trump

When one knows thee, then alien there is none, then no door is shut.
Robindranath Tagore, Gitanjali (1913)

Dear Mr. Trump,
Forgive me for not addressing you as president but the words do not permit themselves to be formed when I think of that word and you. If you read my columns you have probably noticed that in order to overcome this shortcoming, I only refer to you as DJT. Notwithstanding my feelings, I have a suggestion I am imparting, because I think you would find it would eliminate the need for you, when attacking the press, to limit yourself to 140 characters. If you follow my suggestion, you will be able to bring the press to heel and free up your twitter account for other kinds of ad hominem attacks that you so obviously enjoy.

I am writing to tell you that you are not the first ruler of a country to be troubled by a meddlesome press. You, of course, know that there are countries today ruled by friends of yours, like Vladimir Putin in Russia or Recap Erdogan in Turkey, who deal with a press they perceive to be hostile by imprisoning or arranging for their members to have unfortunate encounters. Although that is efficient, you probably realize that, in the United States today, that is not possible. What you are less likely to know, given your aversion to matters of substance, is that that was not always the case in the United States. Proof of that can be found in the Alien and Sedition Acts that were passed by Congress and signed into law by President John Adams in 1798. They comprised four laws, and you’d have loved each of them. The first was the Naturalization Act. Talk about a winner! That law made it harder for immigrants to become citizens, extending the time they had to live here in order to get citizenship, from five to fourteen years. Two other laws you would have liked were the Alien Friends Act, that gave the president authority to deport non-citizens the president thought were dangerous, and the Alien Enemy Act that permitted the president to deport non-citizens from hostile nations. Talk about “Making America Safe Again!”

But I’m not referring you to the Alien and Sedition Acts because of those laws. It’s because of the Sedition Act of 1798. That Act criminalized speech.  Fines and imprisonment could be used against those who “write, print, utter, or publish . . . any false, scandalous and malicious writing against the government of the United States or the President of the United States with intent to defame. . . or to bring them into contempt or disrepute.” Talk about dealing with “fake news” purveyors without having to rely on a tweet. The most famous example of the application of this law can be found in the case of a sitting United States Congressman, Vermont Representative Matthew Lyon. In 1798 Rep. Lyon wrote a letter critical of President John Adams that could easily be written today by a congressman speaking of you. In his letter he criticized President Adams for his “unbounded thirst for ridiculous pomp, foolish adulation, and self avarice.” For his comments Rep. Lyon was sent to prison for four months and, while imprisoned, re-elected to Congress.

My suggestion for you assumes that sending CNN and all its reporters to prison, would be far more gratifying for you than simply tweeting about them. Of course, tweeting offers more instant gratification and I know that is important for you. But I think a few front page pictures of CNN reporters entering a prison in handcuffs would ultimately prove to be far more gratifying for you than a tweet. My suggestion is that you send a 21st Century version of the Sedition Act to Congress ASAP.

I know that some of your advisors may counsel against trying to enact a new Sedition Act. They may tell you that in the case of New York Times Co. v. Sullivan, the U.S. Supreme Court said: “Although the Sedition Act was never tested in this Court, the attack upon its validity has carried the day in the court of history.” In a concurring opinion in another case, Watts v. United States, Justice Douglas said: “The Alien and Sedition Laws constituted one of our sorriest chapters; and I had thought we had done with them forever. . . . Suppression of speech as an effective police measure is an old, old device, outlawed by our Constitution.” Your response to those advisors is a simple one. By the time you have convinced Congress to pass the Sedition Act of 2017, and it arrives at the U.S. Supreme Court, that Court will be, if it not already is, a Court that will see nothing wrong with such a law, and will gladly support the criminalization of free speech when applied to those speaking of you.

I hope this letter helps you as you continue to make America Great Again.

Very Truly Yours,
Christopher R. Brauchli

P.S. You may also find that someone who says the sorts of things about you that Mr. Lyons said about President Adams, can be sued by you for libel.


Thursday, July 13, 2017

Sons and Daughters

Children Should Be Seen and Not Heard.
Anonymous

It had to be an incredibly exciting day for her. Of course, “Take your daughter to work” days are always exciting for the children. They get to watch their mothers and fathers as they engage in the routines that, for the parents, are quite ordinary, but for the children not only fun, but informative. They may even get some ideas as to what they would like to do when they grow up.

Introduction of “Take your child to work” days began many years ago and has flourished. It can be found in all walks of life. As exciting as it is for all children, none can expect to have quite the experience that Ivanka Trump enjoyed on her first “Take your daughter to work” experience. Her daddy not only took her to work after he was sworn in. He gave her her very own office in the West Wing of the White House. And that’s not all. He gave her the authority to hire as many people as she needed to help her as she worked alongside her daddy, even though she had no idea what she was supposed to do or how to do it. She even has her very own chief of staff. As exciting as those early days were, nothing could compare with the excitement when her daddy told her he was going to take her on his very big airplane to Hamburg, Germany where she could participate in a meeting of the G-20. That happened in early July.

The whole time Ivanka was at the G-20 meeting, she was treated like an adult, following her daddy around to social events and meetings. But the high point of her visit was when her daddy was called away from the table at a meeting of the Group of 20, to have important discussions with other important people. At the table he had been sitting next to President Xi Jinping of China and British Prime Minister Theresa May. When Ivanka saw that her daddy’s seat was empty she went over and took his seat at the table. That placed her between two of the most important people in the world and was very exciting for Ivanka. It is not known whether she had anything to say while seated there, but if she had, everybody would certainly have listened. She reportedly sat in her daddy’s chair at two other meetings, but, reportedly, didn’t say anything. When some people asked her daddy about the protocol of having his daughter take his place at important events when he could not personally be present, he said it was “very standard.” Although Ivanka’s daddy didn’t say this, it’s unlikely that he would have permitted her to take his place at important meetings, like those at the G-20, had she only been a three or four-year-old, since she would have become fidgety.

It is important not to forget that this new version of “take your daughter to work” day may have many repercussions in Washington, beyond Ivanka. And the purpose of this column is to give the reader an example of how this might work in a different branch of the government. Take for example, the United States Supreme Court.

Neil Gorsuch, the newest appointee to the United States Supreme Court, has two teen age daughters. They are probably every bit as proud of their father as Ivanka is of hers. Thus, just as Ivanka Trump was permitted to sit in for her father at a major international meeting, it does not tax the imagination to contemplate the possibility that the time will come when Justice Gorsuch takes one (or both) of his daughters to “take your daughter to work” day at the United States Supreme Court. If he decides to follow in the footsteps of Ivanka’s daddy, he may take them on a day when there is a case being heard by the Court that he thinks they would enjoy. He might even permit one of them to sit in his chair at the bench next to one of his colleagues. Were Justice Gorsuch to do that, he might explain a bit about the case to the daughter he permits to sit in his chair, so that she can ask intelligent questions of the lawyers who are making their appearances that day. It would unquestionably be a great learning experience for the daughter, and would make the day memorable, both for her, and the litigants who appear before her, just as it was a wonderful experience for Ivanka to get to sit with the important people who were at the G-20 meetings. The only people for whom such episodes were not, or would not be, great experiences, are the citizens of the United States. They used to think that United States citizens who participate in high level matters affecting the United States and the world, would actually know what they were talking about. Those days are gone forever.