11 Ways Big Banks Make Life Harder for Working Families

A new report from the Center for Popular Democracy examines the ways that large financial institutions are helping dismantle the middle class and making life more difficult for working families. The top 10 banks alone bring in some $100 billion in annual profits, and a significant amount of that revenue is generated from sometimes unethical and questionable tactics that working families have a hard time fighting back against.

Here are 11 ways the big banks are making life harder for working families:

1. While 27% of Americans have no or little access to financial services, the big banks are closing local branches, making the problem worse.

2. Banks are pressuring their workers to push customers to purchase services that use predatory banking practices instead of sound financial principles. Quotas drive the process rather than the needs of customers.

3. The large financial institutions are cutting wages, benefits and hours for workers, making it harder for them to serve customers and increasing work-related stress.

4. Core banking activities for the average worker, such as helping people open and manage accounts or plan for retirement or obtain a credit card, are considered low value services by the banks, and they are actively trying to avoid those services in favor of higher profit activities such as mortgages.

5. Workers who can’t fill their quotas for pushing mismatched or predatory products and services are threatened with termination or had their paychecks docked for the amount they fell short of their quotas.

6. Since 2011, 17 lawsuits have been settled by the financial services industry for alleged illegal and unethical business practices. The banks have paid out nearly $46 billion.

7. At least three banks are accused of charging people of color higher interest rates or fees than white borrowers.

8. The big five banks are accused of steering people of color into dangerous subprime mortgages.

9. Two banks have, in the past, maximized their profits off of overdraft fees by posting charges in order of the largest dollar amount first, increasing the likelihood that not only are customers more likely to overdraft their accounts, but more likely to do so multiple times.

10. Three financial institutions were charged with forcing homeowners to buy overpriced property insurance.

11. Nearly one-fifth of employees at the biggest banks reported that more and more jobs had been moved from full-time to part-time.

Read the full report.

Reposted from AFL-CIO NOW

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Time to Close Wall Street’s ‘Retirement Advice Loophole’

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There is a loophole in the rules that govern Wall Street brokers and financial firms that provide retirement investment advice that can drain away thousands, or even tens of thousands, of dollars of hard-earned savings from a single retirement account. Today, a coalition of senior, union and consumer groups launched a new website—SaveOurRetirement.org—to mobilize support to close the “Retirement Advice Loophole” through a new rule the U.S. Department of Labor is trying to adopt.

The way workers save for retirement has changed dramatically over the past decades. With the decline in traditional pensions, more and more workers depend on 401(k) plans and individual retirement accounts (IRAs), and they frequently seek investment advice from financial professionals. But the rule governing when that advice must be solely in the worker’s interest, free from conflicts of interest, has not been changed since 1975—and many loopholes exist.

The “Retirement Advice Loophole“ allows Wall Street brokers and financial firms with major conflicts of interest to provide investment advice that serves their own interests instead of what’s best for their clients.

For example, they can sell financial products that pay large commissions but hurt their clients with unnecessary fees, poor returns or excessive risks. Millions of Americans are affected by this loophole every year without even knowing it, and it is draining away their retirement savings.

Right now, some advisers are required to put their customers’ interests first while others are not—and it is often extremely difficult for workers and retirees to know which type of adviser they are dealing with.

The Labor Department rule has been under development for some time but has not been released yet. However, it is expected to require that investment advisers have no conflict of interest that might, for example, cause them to steer their clients toward investments that earn the adviser high fees but might not be in the client’s best interest. The rule should require anyone who gives retirement investment advice to act solely in their client’s best interest—a common sense standard known as the fiduciary duty.

Of course, Wall Street and the financial industry are adamantly opposed to reforming the rules. Two years ago they lobbied hard for a House bill aimed at derailing any new Labor Department investment advice rule, and surely they will be spending big money to do the same thing in 2015.

Be sure to visit SaveOurRetirement.org to learn more and find out how you can help close the “Retirement Advice Loophole.”

The groups in the coalition are the AFL-CIO, AFSCME, AARP, Americans for Financial Reform, Better Markets, Consumer Federation of America and the Pension Rights Center.

Reposted from AFL-CIO NOW

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Van Hollen Offers Battle Plan to Combat Income Inequality

Van Hollen Offers Battle Plan to Combat Income Inequality

Rep. Chris Van Hollen (D-Md.) unveiled a new plan today to address the large and growing problem of income inequality that he says, “attacks the chronic problem of stagnant middle-class incomes from both directions: it promotes bigger paychecks and lets workers keep more of what they earn.”

His plan would create or expand tax breaks for child care, apprenticeship programs, middle-class working couples, those who save for retirement and companies that raise workers’ wages, while at the same time scaling back the tax break corporations currently claim for CEO bonuses. Van Hollen said his proposals are fully paid for with a “high-rollers fee” on Wall Street.

We can pay for these new tax benefits for working Americans by changing the ways our current tax code is rigged in favor of those who make money off of money and against those who make money from work.

AFL-CIO President Richard Trumka praised Van Hollen for “showing the kind of leadership that has become far too rare in Washington, D.C., today. Many of the policy prescriptions he outlined today are part of the blueprint to seriously addressing income inequality.” He also said:

A modest Wall Street speculation tax, or ‘high-roller fee’ as Rep. Van Hollen has proposed, will help curb harmful Wall Street practices and raise billions of dollars annually. These are critical funds that could pay for infrastructure and education to lay the foundation for long-term productivity growth. Additionally, Rep. Van Hollen is absolutely right to deny tax breaks for ridiculous, out of control CEO pay—they don’t need any more handouts.

Read more about the Van Hollen plan from Alice Ollstein at Think Progress.

Reposted from AFL-CIO NOW

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Republican Lawmakers Fight for Last-Minute Gift to Big Banks

If Republican lawmakers have their way, one of the final acts of the 113th Congress will be to make it easier for big banks to gamble with taxpayers’ money.

As Congress negotiates a last-minute deal to fund the federal government and avoid a shutdown on Dec. 11, it appears likely that a last-minute trade-off will roll back a provision of the Dodd–Frank Wall Street Reform and Consumer Protection Act aimed at limiting bank bail-outs.

The provision, “Section 716,” requires banks that trade some of the riskiest types of financial products to conduct the activity in subsidiaries separate from the portion of the bank that is insured by the Federal Deposit Insurance Corporation.

A group of pro-reform senators sent a letter to Senate budget negotiators late last week urging them to leave the controversial provision intact. The letter, signed by Sens. Sherrod Brown (D-Ohio), Tom Harkin (D-Iowa), Carl Levin (D-Mich.) and Jeff Merkley (D-Ore.) states, “Section 716 of the Act was a key component of the financial reforms. We urge you to oppose inclusion of provisions modifying or repealing this reform in any funding legislation.”

Sen. Elizabeth Warren (D-Mass.) blasted the efforts to roll back derivatives regulation, calling it “reckless.” She said:

Middle-class families are still paying a heavy price for the decisions to weaken the financial cops, leaving Wall Street free to load up on risk. Congress should not chip away at important reforms that protect taxpayers and make our economy safer.

Reposted from AFL-CIO NOW

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6 Reasons Why Bob Beauprez Is One of the Worst Candidates for Working Families in the 2014 Elections

It’s an election year and we are quickly approaching the time when working families will have the opportunity to go to the polls and vote against a whole host of extreme candidates who support policies that limit rights, make it even harder to afford a middle-class life and pad the pockets of their corporate buddies. One of the “Worst Candidates for Working Families in the 2014 Elections” is Bob Beauprez, who is running for governor in Colorado.

1. Beauprez supported legislation that deregulated financial systems, one of the major causes of the 2008 financial crisis that hit Colorado families so hard. [H.R. 2061, introduced 5/3/05; The Denver Post, 6/11/06]

2. He voted for laws to weaken consumer protections. [H.R. 2061, introduced 5/3/05; The Denver Post, 6/11/06]

3. He also voted for laws reducing the supervision of bankers and co-sponsored more than 100 pieces of legislation on taxation and banking that benefited Wall Street at the expense of working families. [H.R. 2061, introduced 5/3/05; The Denver Post, 6/11/06; Library of Congress, accessed 7/30/14]

4. Beauprez voted to enrich his Wall Street friends and even tried to reduce oversight on the bank where he made his $400 million fortune. [Library of Congress, accessed 7/30/14; H.R. 2061, introduced 5/3/05; The Denver Post, 6/11/06]

5. On taxes, Beauprez is even worse, having voted in favor of $774 billion in tax cuts for the wealthiest Americans while trying to make working families pay a 23% tax on everything they buy. [H.R. 5638, Vote 316, 6/2/06; The Denver Post, 10/7/06]

6. At the extreme right-wing sight Townhall.com, Beauprez endorsed “right to work” legislation that does nothing but strip rights from workers, and he was a keynote speaker at a right to work convention in New Orleans. [Townhall.com, 7/14/12]

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Reposted from AFL-CIO NOW

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These Two Studies Turn Wall Street’s Economic Argument On Its Head

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Two studies released in the past few weeks are busting long-held myths about what makes our economy grow.

The first came in June from three professors: Michael J. Cooper of the University of Utah, Huseyin Gulen of Purdue, and P. Raghavendra Rau of the University of Cambridge. They looked at the long-term performance of 1,500 businesses and found that higher CEO pay has a negative effect on a company’s performance.

Using data from 1994 to 2013, the professors saw that companies in the top 10 percent of CEO pay produced “negative abnormal returns” (lower shareholder returns than other firms in their industry) or around -8 percent over three years. The higher the pay got, the more pronounced the effect: the top 5 percent of highest paid CEOs steered their companies to a 15 percent worse performance.

Why were these companies doing worse?

In a word, overconfidenceCEOs who get paid huge amounts tend to think less critically about their decisions. “They ignore dis-confirming information and just think that they’re right,” says Cooper. That tends to result in over-investing—investing too much and investing in bad projects that don’t yield positive returns for investors.”

The second came this week from the Center for Economic and Policy Research, which compared employment growth between states and found that those states that raised their minimum wage levels experienced higher growth than those that didn’t.

Of the 13 states where the minimum wage went up on January 1, 2014 (either because of legislative action, referendum, or cost-of-living adjustments), all but one had positive employment growth, and nine of them had growth higher than the median. “The average change in employment for the 13 states that increased their minimum wage is +0.99% while the remaining states have an average employment change of +0.68%,” wrote CEPR.

“While this kind of simple exercise can’t establish causality, it does provide evidence against theoretical negative employment effects of minimum-wage increases,” writes Ben Wolcott of CEPR.

In other words, it doesn’t prove raising the minimum wage always creates a certain number of jobs within 6 months, but it does add to the pile of evidence showing that raising the minimum wage doesn’t negatively affect employment.

And CEPR isn’t the only group that reached these conclusions. An analysis by banking giant Goldman Sachs (!) also found the states that raised their minimum wages doing better than those that didn’t.

Taken together, these studies back up what working people already know:  higher wages add to a virtuous cycle that benefits both workers and businesses, and that exorbitant CEO pay does nothing for the broader economy other than line the pockets of an increasingly small and powerful group of uber-wealthy individuals.

Text RAISE to 30644 to join Working America’s fight for fair wages.

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12 Elizabeth Warren Quotes to Prepare You for Her Appearance at the AFL-CIO on May 2

Sen. Elizabeth Warren (D-Mass.) will be appearing at the AFL-CIO’s headquarters in Washington, D.C., with AFL-CIO President Richard Trumka on May 2 to promote her new book, A Fighting Chance, which chronicles her inspiring life story. From her working-class roots in Oklahoma to her successful 2012 campaign to replace incumbent Massachusetts Sen. Scott Brown (R), Warren tells the passionate story of what drives her to fight for working people. Here are 12 key quotes from her that show why she is a champion of the 99%.

1. “There is nobody in this country who got rich on their own. Nobody. You built a factory out there—good for you. But I want to be clear. You moved your goods to market on roads the rest of us paid for. You hired workers the rest of us paid to educate. You were safe in your factory because of police forces and fire forces that the rest of us paid for. You didn’t have to worry that marauding bands would come and seize everything at your factory….Now look. You built a factory and it turned into something terrific or a great idea—God bless! Keep a hunk of it. But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along.”—September 2011

2. “People feel like the system is rigged against them, and here is the painful part, they’re right. The system is rigged.”—September 2012

3. “Hardworking men and women who are busting their tails in full-time jobs shouldn’t be left in poverty.”—August 2013

4. “Look around. Oil companies guzzle down the billions in profits. Billionaires pay a lower tax rate than their secretaries, and Wall Street CEOs, the same ones that direct our economy and destroyed millions of jobs still strut around Congress, no shame, demanding favors, and acting like we should thank them. Does anyone here have a problem with that?”—September 2012

5. “It is critical that the American people, and not just their financial institutions, be represented at the negotiating table.”—Summer 2009

6. “Americans are fighters. We’re tough, resourceful and creative, and if we have the chance to fight on a level playing field, where everyone pays a fair share and everyone has a real shot, then no one—no one can stop us.”—September 2012

7. “And that’s how we build the economy of the future. An economy with more jobs and less debt, we root it in fairness. We grow it with opportunity. And we build it together.”—September 2012

8. “I understand the frustration, I share their frustration with what’s going on, that right now Washington is wired to work well for those on Wall Street who can hire lobbyists and lawyers and it doesn’t work very well for the rest of us.”—October 2011

9. “If you’re caught with an ounce of cocaine, the chances are good you’re going to jail….Evidently, if you launder nearly a billion dollars for drug cartels and violate our international sanctions, your company pays a fine and you go home and sleep in your own bed at night.”—March 2013

10. “Corporations are not people. People have hearts, they have kids, they get jobs, they get sick, they cry, they dance. They live, they love and they die. And that matters. That matters because we don’t run this country for corporations, we run it for people.”—September 2012

11. “If there had been a Financial Product Safety Commission in place 10 years ago, the current financial crisis would have been averted.”—Summer 2009

12. “Nobody’s safe. Health insurance? That didn’t protect 1 million Americans who were financially ruined by illness or medical bills last year.”—February 2005

Reposted from AFL-CIO NOW

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Is This How You Reward Success? Wall Street Profits Are Down, But Bonuses Are Up

While workers across the country push to raise the minimum wage, the bankers on Wall Street are getting a 15 percent increase on their already hefty bonuses.

If that isn’t ridiculous enough, it seems that profits on Wall Street are actually down. According to the New York Times:

On Wall Street, profits are down and the number of workers is shrinking.

But bonuses continue to grow larger.

Cash bonuses paid to Wall Street employees in New York City rose 15 percent on average last year, to $164,530, according to estimates released on Wednesday by Thomas P. DiNapoli, the state comptroller. That was the biggest average bonus since 2007, the year before the financial crisis struck.

Over all, workers in the financial industry in the city made an estimated $26.7 billion in bonuses last year, a number that, again, was the highest level since the crisis.

So, raising the minimum wage to a little over $10 an hour will negatively affect the economy, but widening the gap between the haves and the have-nots won’t?

Photo courtesy of eneas on Flickr.

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Obstruction Loses! American Homeowners Win! The End of the DeMarco Era.

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Sometimes, small changes can have big impacts.

If the debate over the Senate’s parliamentary procedure in the case of presidential nominations made you want to take a long snooze, no one would blame you. But thanks to new Senate rules, a minority of senators can no longer block a presidential appointment for no reason without standing up and saying why.

And thanks to this long-awaited rules change, the Federal Housing Finance Agency (FHFA) has its first new director since the Bush Administration: former North Carolina Rep. Mel Watt.

Democrats have taken advantage of their weakening of filibusters and muscled through the Senate President Barack Obama’s pick to lead a housing regulation agency.

By 57-41 Tuesday, senators confirmed Rep. Mel Watt to lead the Federal Housing Finance Agency.

Obama nominated the North Carolina Democrat in May but he’s been in limbo ever since. Republicans have said he’s not qualified, while Democrats say the 21-year House veteran has the needed experience.

Until Tuesday, Watt’s nomination was blocked because Democrats needed 60 Senate votes to end a GOP filibuster. But last month, the chamber’s majority Democrats lowered that threshold to a simple majority.

Here’s why this is a big deal for American homeowners:

Since Republicans in the Senate wouldn’t allow a fair vote on a new FHFA Director, we were stuck with Bush’s guy: Ed DeMarco. DeMarco was a longtime opponent of government efforts to help homeowners affected by Wall Street’s brazen fraud and abuse. Specifically, DeMarco opposed the practice of “principal reduction,” encouraging banks to rewrite mortgages for underwater homeowners. Time after time, he rejected proposals from the Obama Administration to lend this kind of assistance to struggling people who had lost their homes or were about to lose their homes.

“I don’t know what DeMarco’s specific legal mandate is,” wrote economist Paul Krugman, “But there is simply no way that it makes sense for an agency director to use his position to block implementation of the president’s economic policy…This guy needs to go.”

DeMarco continued his harmful policies to the very end:

DeMarco was so extreme that he even opposed allowing lenders to sell foreclosed homes back to the previous owners, even if they had been victims of predatory loans and even if they made the best offer to purchase the house. Realizing that Watt would soon be sitting in his seat, DeMarco — on the eve of the vote to confirm his replacement — put into place mortgage fees that punish homeowners in states that have enacted strong protections against foreclosure abuses.

Rarely does one person stand in the way of relief for so many. But DeMarco was that guy. And now he’s gone.

Housing and community groups have high hopes for new Director Watt, a member of Congress who supported the creation of Elizabeth Warren’s Consumer Financial Protection Bureau (CFPB) and worked to get anti-predatory lending provisions into the 2010 Dodd-Frank Wall Street reform bill.

Photo by @CVHaction on Twitter

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The Real Reason Detroit Went Bankrupt

As the story goes, the city of Detroit went bankrupt because of $18 billion in long-term debt, in large part caused by pension and health care benefitsA new report, written by Wallace Turbeville and released today from Demos, says that narrative is inflated, inaccurate and irrelevant to explaining the city’s bankruptcy.

Despite what the city’s emergency manager Kevyn Orr, who was hired by Gov. Rick Snyder (R), says, the $18 billion figure is not relevant to the city’s bankruptcy. To emerge from the bankruptcy, according to chapter 9 of U.S. bankruptcy code, Detroit only needs to address its cash flow shortage, a number that even Orr sets at only $198 million. But that number, much like the $18 billion number, is inflated because it goes with extremely aggressive assumptions for economic trends that are very unlikely to represent what really happens.

When projecting costs, governments often create several projections, often reflecting best-case scenarios, worst-case scenarios and some moderate position in between those two. Governments usually choose the moderate option in order to determine their budget projections. But Orr, Turbeville says, has chosen the worst-case scenario and isn’t at all based on a certain liability that the city will face. Furthermore, Orr includes in that total nearly $6 billion of debt from the Water and Sewage Department debt as city liability, despite the fact that this liability is based on an area much broader than the city. The department covers 3 million people in southeastern Michigan, not just the slightly more than 700,000 people who actually live in Detroit.

Turbeville notes that the city’s operating expenses have declined by 38% since the beginning of the Great Recession. During that same time, the city’s pension obligations only rose by $2 million. Health care expenses increased by 3.25%, less than the national average of 4%. The biggest proportion of increased costs for the city actually comes from debt service and financial expenses related to complex Wall Street investments that amounts to more than pension and health care increases combined. Other key components of the city’s deficit are:

  • A significant decline in revenue based, in large part, on the city’s declining population, which contributed to declines in tax revenue and property values.
  • A decline of $67 million in state revenue sharing with the city.
  • As much as $20 million annually in corporate subsidies that have provided questionable benefits to Detroit.

The report concludes:

Detroit’s bankruptcy is, at its core, a cash flow problem caused by its inability to bring in enough revenue to pay its bills. While emergency manager Kevyn Orr has focused on cutting retiree benefits and reducing the city’s long-term liabilities to address the crisis, an analysis of the city’s finances reveals that his efforts are inappropriate and, in important ways, not rooted in fact. Detroit’s bankruptcy was primarily caused by a severe decline in revenue and exacerbated by complicated Wall Street deals that put its ability to pay its expenses at greater risk. To address the city’s cash flow shortfall and get it out of bankruptcy, the emergency manager should focus on increasing revenue and extricating the city from these toxic financial deals.

Read the full report.

Reposted from AFL-CIO NOW

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