Better Markets Month in Review Newsletter - July 2024

Hi friend,

As this unprecedented presidential campaign heats up, it can be easy to fall into the trap of believing that policy, politics and governing have become so divisive and partisan that no one ever agrees on anything.

That’s one reason I was happy to co-author an op-ed in Politico Magazine with Mark Calabria, a senior adviser at the Cato Institute and former official in the Trump administration; Tom Hoenig, a distinguished senior fellow at the Mercatus Center and former Republican Vice Chair of the FDIC; and Aaron Klein, a Senior Fellow and Miriam K. Carliner Chair at the Brookings Institution and former official in the Obama administration.

We come from different ideological viewpoints and often disagree on policy, but we respect each other and discuss consequential policy issues that are important to the country regardless of party or partisan politics. Frankly, my view has always been that most financial and financial regulation issues are wrongly put into a left-right political frame and reported through a partisan lens. For example, preventing financial crashes, avoiding taxpayer bailouts, punishing corporate lawbreakers, and protecting consumers from financial predators simply are not left or right or partisan. The 16 million foreclosure filings to throw Americans out of their homes and the 27 million Americans who were thrown out of work as a result of the collapse of Lehman Brothers and the 2008 financial crash were not Republicans, Democrats, independents, and nonvoters. They were just everyday Americans victimized by an underregulated and fragile financial system that didn’t care who was harmed by its lucrative, but very high risk, reckless, and, often, illegal activities.

That’s really why the four of us wrote the Op Ed: we agree that—regardless of who wins the White House or any other office—the government must stop bailing out bankers, financiers, investors, and creditors, creating upside down incentives, and putting taxpayers on the hook. Specifically, our op-ed opposed a recent Treasury Department proposal on mortgage servicers that would expand and further entrench the structural bias to privatize gains for the already rich via bailouts and shift the costs and losses to the Americans people. This is nothing more than a government subsidy and wealth transfer (starkly illustrated by Wall Street increasing its bonuses by more than 17%—to more than $20 billion—for 2009 after it crashed the financial system in 2008, received trillions of dollars in taxpayer backed bailouts, caused sky high unemployment, ignited a foreclosure crisis, and inflicted so much more misery across the country). We argued that instead of accepting that bailouts are inevitable—or actively promoting them—policymakers need to use their power to strengthen the oversight of our mortgage markets and make clear that if a mortgage servicer or any other financial institution fails, it will be private investors and creditors who lose money, not taxpayers.

In the current political and media environment, it’s easy to forget there are many issues most Americans agree on. This includes policies and rules that protect and empower hardworking Main Street Americans, while holding Wall Street and powerful financial institutions in check and accountable. Other examples include standing up to special interests looking to hijack the policy process and preventing our democracy from being corrupted by allowing betting on elections. These are not partisan efforts. They are fundamental to protecting our democracy, so that our government works for all Americans. The key is not to be distracted by special interests and their lobbyists and high-paid PR gurus who enrich themselves by polarizing issues and dividing Americans.

With your help, we can continue to rise above the false narrative of partisanship and deliver results that make a difference in the lives of all Americans, who just want a financial system that provides products and services at fair prices, responsibly supports the real economy, and creates broad based wealth. Americans deserve no less.

Dennis

Dennis Kelleher
Co-Founder, President and CEO

We’ve seen an explosion in cryptocurrency offerings that have ripped off millions of investors, and a huge increase in firms whose business model is to use lightning-fast trading systems to gain unfair advantages over everyday investors. The SEC adopted a rule that would address these threats by requiring these firms to register with the SEC. Of course, advocates for the predatory industries marched into federal court in Texas in hopes of nullifying the rule. But as we show in the legal brief we filed in support of the rule, their arguments have no basis and should be rejected by the court.

Since Chair Gensler arrived at the SEC on April 17, 2021, the agency has finalized almost 40 rules that address many key issues facing investors, markets, and capital formation. Now, with just months to go in President Biden’s term, it’s imperative for the SEC to also finalize some of the rules that remain outstanding on its agenda. They will better protect investors, make the markets fairer and more transparent, facilitate capital formation, and reduce systemic risks that could contribute to financial crashes.

President Biden nominated current CFTC Commissioner Christy Goldsmith Romero to be the next Chair of the FDIC, a beleaguered and scandal-scarred, but very important banking agency. Fortunately, she is well-qualified and has a unique combination of banking experience, securities and capital markets experience, derivatives experience, and law enforcement experience. In our fact sheet, we explain why she has the experience, toughness, and leadership skills to enact deep and lasting change at the agency.

We are opposing the proposed merger of Capital One and Discover because it will harm Main Street Americans, small businesses, the economy, the financial system, and financial stability. It will reduce competition, provide less choice, enable higher fees and costs, and cause job losses. Approval of the merger would hurt consumers and small businesses, erode competition, endanger financial stability, and allow two banks with an egregious history of repeated illegal behavior to grow even larger and more interconnected.

The crypto industry has been fighting in every conceivable arena to avoid being properly regulated, especially by the SEC. But the law is on the SEC’s side because of the seminal Supreme Court case for determining the scope of the federal securities laws: SEC v. J.W. Howey & Co. Everyone mentions Howey, but we issued a report detailing why crypto should be regulated by the SEC under the Howey test.

Better Markets in the News

The banks say that their only option is to pass on their costs [from necessary financial protection rules] to customers, but that’s not true. Yet again, banks are dressing up their attempts to maximize their own profit under the guise of what’s good or bad for customers.

Activities at the Regulatory Agencies

Each month our legal team outlines some of the top cases we're keeping an eye on, the Amicus "Friend of the Court" Briefs we have filed, and why everyone with a bank account, credit card, mortgage loan, or retirement loan should be interested in those cases.

In July, before both Chambers of Congress go on the annual August recess, lawmakers held hearings on a wide range of topics and worked to advance important nominees at banking agencies, the administration, and the SEC.