Financial Reform with an Independent Consumer Protection Agency

March 6, 2010

By Padmini Arhant

The Wall Street bailout season commenced in 2008 and continued into 2009. Those corporations allied with the oligarchs not only survived but their CEO’s are thriving amid difficult economic times and some states experiencing a double-digit unemployment.

As stated earlier in numerous articles on the economy and the financial sector, the speculators’ reckless conduct together with greed led to the status quo. The sub-prime mortgage and credit card lending practices targeting the vulnerable population contributed to the housing market decline and the alarming bankruptcies.

In addition, the credit crunch has forced many small businesses to lay off employees and left the self-employed in a dire situation. The private sector have also been affected in the liquidity crisis triggering the 9.7 percent national unemployment rate and much higher when consolidated with the under employed statistics.

Evidently, a rigorous financial reform is necessary to revive the economy and avert future meltdown.

Although, an international consensus was reached during the G-20 meetings in 2009 at London and Pittsburgh to implement strong financial regulations, the domestic agenda in the United States is faltering due to the usual Senate gridlock and the lack of enthusiasm to push the issue forward.

However, the House of Congress is way ahead of Senate in passing legislations on many issues, reflecting the Speaker Nancy Pelosi and the House of Representatives’ commitment.

On the other hand, the Senate majority leader Harry Reid has a tough battle convincing the opposition, sworn to filibuster the legislations on any reform.

The Republican Senators and the democrat opponents believe in the market economy free of regulations and refuse to acknowledge the economic adversity brought upon by deregulations in the recent decades.

Failure to act now would be catastrophic for the global financial market and the economy.

There is no guarantee that the U.S economy and the rest of the world would not be subject to a similar scenario in the future with the hedge fund managers and the investment banks such as the Goldman Sachs…

Having set a precedence in wild speculations, high-risk exposure and fast track profiteering at the expense of millions of borrowers, investors and national economies like P.I.G.S, an acronym for Portugal, Iceland/Ireland, Greece and Spain, all of whom are currently dealing with insolvency.

Finance sector being the cradle of the economy, the benign symptoms would prompt the government bailouts of the default institutions. Thus, history repeating itself with the exponentially rising national debt remaining the constant factor in the non-regulatory environment.

Another attention worthy issue in this context is the establishment of an Independent Consumer Protection Agency.

Agency’s function would be fairly common and that being,

Protecting the consumer rights as the borrowers,

Creating awareness on the industry’s unethical practices apart from,

Preventing the banks in the systemic abuse of customers through inflated finance charges and interest rates on personal loans, credit card etc.

Further, it could also provide arbitration service to the borrower and the lender on financial disputes, thereby mitigating legal expenses for both parties.

Not surprisingly, there is resistance to the Independent Consumer Protection Agency.

As witnessed in the health care bill, the lobbyists are relentlessly engaged in ensuring the demise of the financial reform and the consumer protection agency.

The White House being suggested to nominate the Treasury Department in handling the Consumer Protection Agency affairs as opposed to a non-partisan and an independent committee, poses a conflict of interest stemming from the Treasury Department’s liaison with the financial institutions.

Likewise, the Federal Reserve maintaining control over the Consumer Protection Agency against the banking sector is an unrealistic expectation based on the Federal Reserve’s performance in the sub-prime mortgage debacle and the executives’ close ties with the finance sector.

Therefore, the consumer protection agency ought to be independent and focused on safeguarding consumer interest.

Financial reform cannot be delayed or relinquished especially with the Wall Street’s compulsive disorder to indulge in short term gains by acquiring toxic assets only to be transformed into a burgeoning liability.

Alternatively, the watered down legislation could fulfill a formality and not serve the purpose.

Hence, the requirement for a meaningful financial reform is absolutely vital to rein in on predatory traditions.

Finally, the U.S. economic recovery could be expedited through a robust financial regulation that would instantaneously restore the investor and consumer confidence.

Thank you.

Padmini Arhant

Earmarks, Pork-barrel Spending

March 8, 2009

By Padmini Arhant

The budget vote delayed due to enormous ‘pork’ in the $410 billion spending bill. The defenders of various pork projects may have their own justification.

Nevertheless, Washington must relinquish wasteful spending through several pet projects carried out on behalf of lobbyists by lawmakers concerned about their own job security in the future elections.

As stated earlier in the article “Omnibus Spending” on the website , the nation is grappling with dire economic situation due to significant job losses and housing crisis at this time and families are desperately seeking relief from both free market system and the government.

Unfortunately, the free market system dependent on taxpayers’ bailout is barely capable of remaining solvent despite unprecedented capital infusion in modern financial history. The root cause of all these problems attributed to lack of ethics, accountability, transparency and importantly executive management failure.

The critics of taxpayers’ bailout argue in favor of non-interference in the market economy on the assumption the system would correct itself in due course. They fail to recognize the fact that the economic meltdown commenced in the early 2000, though the impact was not acknowledged up until late 2007.

During that limited or non-regulatory period, the capitalist system had ample opportunities to review and reassess their performance and prepare them for the worst scenario.

However, it did not happen, even though Wall Street witnessed and experienced the collapse of Enron, WorldCom, Tyco, Global Crossing all in the year 2002 resulting from failed Corporate management, unethical accounting practices and blatant greed.

Somehow, the free market advocates seem to have forgotten these events because of their inability then to envision the domino effect on the entire economy in the immediate future. Another reason for the denial of economic crisis previously was the skyrocketing of the technology stocks combined with oil and defense stocks at the phenomenal cost of American taxpayers’ dollars and human lives in Iraq war.

The financial sector created its own superficial boom during that time with the concoction of subprime mortgages and diverse toxic assets bundled together and sold by the hedge fund managers in the overseas markets. This entire taking place while the past administration was preoccupied in the implementation of unjust Iraq war.

It is unequivocally a miserable failure on the part of the predecessors in Federal Reserve, Treasury department as well as the Securities Commission primarily responsible for monitoring and evaluating the daily market events and executing necessary precautionary measures to prevent the economy from overheating.

Surprisingly, with the history of ‘Great Depression’, Oil crisis, economic recessions, one would assume that the authorities would remain alert and watch over the economy with prudent advice against extravagant spending in unnecessary wars or at least demanded the administration engaging in wasteful spending provide legitimate cost and benefit investment analysis.

The gridlock in Washington or State legislature is contributed by political ideologies resisting flexibility to resolve any crisis. The fiscal conservatives steadfast against tax increases, the predominant revenue source for any government, consistently target essential programs designed to promote consumer spending vital for economic recovery.

Similarly, the spendthrift legislators on both aisles with a penchant for pet projects or pork spending refuse to yield to frugality and prioritize their commitments to lobbyists and local governments assuring their re-election over national interest.

The electorate voted for Change in 2008 and change has hope only with representatives in Congress and Senate quitting habits that create rather than solving crisis.

It is evident that the $410 billion spending bill is injected with significant pork projects and it would be appropriate for the sponsors to present cost / benefit ratio in monetary terms to justify inclusion in the bill.

Again, these projects must be evaluated to benefit the taxpayers and the nation as a whole rather than the individuals regardless of them being legislators or the lobbyists.

The lawmakers have lately advised ordinary citizens to downsize their lifestyle according to their means, the same should apply to them as any sermons, preaching, and advice is meaningful when individuals demonstrate through action.

After all, shouldn’t one practice what they preach others?

No matter how one circumvents the legitimacy of earmarks particularly at these tough economic times, it is inappropriate now and in the future to squander taxpayers’ dollars for far-fetched projects with beneficiaries being the authorizing entity and/or special interests rather than the entire nation.

Please refer to the following articles from other sources for data confirmation on earmarks / pork barrel spending.

Thank you.

Padmini Arhant

Senate Republicans force delay on budget vote:

GOP Members want to offer Amendments on $410 billion plan criticized for Pork – By Andrew Taylor,

Associated Press – Thank you.

Washington – Senate Republicans, demanding the right to try to change a huge spending bill, forced Democrats on Thursday night to put off a final vote on the measure until next week.

The surprise development will force Congress to pass a stopgap-funding bill to avoid a partial shutdown of the government.

Republicans have blasted the $410 billion measure as too costly. But the reason for GOP unity in advance of a key procedural vote was that Democrats had not allowed them enough opportunities to offer amendments.

Majority Leader Harry Reid, D-Nev., canceled the vote, saying he was one vote short of the 60 needed to close debate and free the bill for President Barack Obama’s signature.

The 1,132-page spending bill is stuffed with pet projects sought by lawmakers in both parties.

Democrats and their allies control 58 seats, though at least a handful of Democrats oppose the measure over its cost or changes in U.S. policy toward Cuba. That meant Democrats needed five or six Republican votes to advance the bill.

None of the GOP’s amendments is expected to pass, but votes on perhaps a dozen are now slated for Monday night, Reid said.

The huge, 1-132-page spending bill awards big increases to domestic programs and is stuffed with pet projects sought by lawmakers in both parties. The measure has an extraordinary reach, wrapping together nine spending bills to fund the annual operating budgets of every Cabinet department except for Defense, Homeland Security and Veterans Affairs.

Once considered a relatively bipartisan measure, the measure has come under attack from Republicans – and a handful of Democrats – who say it is bloated and filled with wasteful, pork-barrel projects.

The measure was written mostly over the course of last year, before projected deficits quadrupled and Obama’s economic recovery bill left many of the same spending accounts swimming in cash.

To the embarrassment of Obama – who promised during last year’s campaign to force Congress to curb its pork-barrel ways – the bill contains 7,991 pet projects totaling $5.5 billion, according to calculations by the GOP staff of the House Appropriations Committee.

Sen. John McCain, R-Ariz., Obama’s opponent in last fall’s presidential campaign, called the measure “a swollen, wasteful, egregious example of out-of-control spending.”

The earmarks run the gamut. There’s $190,000 for the Buffalo Bill Historical Center in Cody, Wyo., $238,000 to fund a deep-sea voyaging program for native Hawaiian youth, agricultural research projects, and grants to local police departments, among many others.”


Further Excerpt of the article –

Sen. John McCain blasts $237,500 for Japantown museum – By Frank Davies, Mercury News Washington Bureau – Thank you.

Reps, Zoe Lofgren, D-San Jose, and Mike Honda, D-Campbell, secured that money to help the museum.
Honda, who is Japanese American, – “Jap. Museum boost tourism (thus jobs) in SJ Japantown, last of 3 authentic US Japantowns, Zoe & I proudly supported its funding.”

Banks Bailout – Accountability

January 11, 2009

It’s been a quarter since the banks bailout. The purpose of the bailout was to stimulate the economy by relieving the financial markets from liquidity crisis.

At least, that was the explanation offered by the Treasury Department and the Federal Reserve at the time of request.

They demanded that Congress approve the bailout to a tune of $700 billion as an emergency measure to avert the collapse of the financial market.

There were few stipulations to the approval of the bailout. The general expectation was to revive the housing market with a moratorium on foreclosures and overhauling of the existing loan programs to assist homeowners with affordable payments and ease the decline of the housing prices nationwide.

The other alternative to the housing market crisis was to utilize the bailout drawdown towards restructuring of the mortgage backed securities by allowing default homeowners dealing with foreclosures to refinance at the existing lowest market rate for a fixed period of two years, substituting the amount in the new economic stimulus package by President-elect Obama.

Despite financial bailout by taxpayers, the economic situation is deteriorating with the current unemployment soaring to 7.2 percent exceeding the Depression era. The criticism entirely directed towards government intervention in the revival process.

However, it is worth remembering that lack of oversight and accountability led the financial institutions to a dire state in the free market economy. The corporate executives as the beneficiaries have been responsible for the dysfunctional financial system even though none of them held accountable thus far.

The current administration assured taxpayers that financial bailout targets liquidity in the credit market, housing market decline particularly foreclosures, buy-back mortgage securities held as major liabilities on the banks’ financial reports and ease their burden to facilitate lending to homeowners and small businesses.

If the strategy followed through, it could have reduced the heat on the economy and set the pace for recovery.

In the absence of commitment by the banks, it would be appropriate for taxpayers to demand that the financial institutions release the funds towards lending and contribute to the economic stimulation as agreed to by them.

Failure to adhere to the agreement will result in the blockade of the remaining $350 billion that would be appropriated towards economic stimulus proposal by President-elect Obama.

In addition, the taxpayers’ also reserve the right to demand that the beneficiaries of the bailout return the earlier withdrawal currently hoarded for their undisclosed agenda with interest higher than the market rate.

It is time for checks and balances on the drawdown of $350 billion to various financial institutions.

Checks and Balances:

Have the objectives been achieved?

Is there an oversight committee on the financial bailout as agreed to the taxpayers?

Did the banks provide details of the secured amount to the taxpayers or the oversight committee?

Please be sure to read the articles presented below as they confirm the reality.

Thank you.

Padmini Arhant


First and foremost, the beneficiaries of the bailout are:

As per

Street Talk – Thank you.

Who Got Bailout Money So Far?

Wednesday, November 12, 2008 9:09 AM

"The Treasury Department’s $700 billion bailout plan, also known as the Troubled Asset Relief Program (TARP), is one of the main U.S. tools to address the financial crisis.

The Treasury Department on October 14 set aside $250 billion of the program to buy senior preferred shares and warrants in banks, thrifts and other financial institutions.

Half that money was allocated to nine big banks, the Treasury Department has said.

Another $38 billion has since been earmarked for regional or small banks, according to statements from individual banks.

On Monday, the department announced its single-biggest TARP investment — $40 billion in American International Group — which the government said would not come from the $250 billion bank capital program.

The TARP has so far committed the following funding:

AIG $40 billion

JPMorgan $25 billion

Citigroup $25 billion

Wells Fargo $25 billion

Bank of America $15 billion

Merrill Lynch $10 billion

Goldman Sachs $10 billion

Morgan Stanley $10 billion

PNC Financial Services $7.7 billion

Bank of New York Mellon $3 billion

State Street Corp $2 billion

Capital One Financial $3.55 billion

Fifth Third Bancorp $3.45 billion

Regions Financial $3.5 billion

SunTrust Banks $3.5 billion

BB&T Corp $3.1 billion

KeyCorp $2.5 billion

Comerica $2.25 billion

Marshall & Ilsley Corp $1.7 billion

Northern Trust Corp $1.5 billion

Huntington Bancshares $1.4 billion

Zions Bancorp $1.4 billion

First Horizon National $866 million

City National Corp $395 million

Valley National Bancorp $330 million

UCBH Holdings Inc $298 million

Umpqua Holdings Corp $214 million

Washington Federal $200 million

First Niagara Financial $186 million

HF Financial Corp $25 million

Bank of Commerce $17 million

TOTAL: $203.08 billion


In addition to the TARP program’s $40 billion capital injection into AIG, the Federal Reserve is providing the company with up to $112.5 billion in separate loans and funds for asset purchases.
Aid to the huge insurance company came after counterparties and rating downgrades forced AIG to post large amounts of collateral for its credit derivatives positions.
Some other insurers are interested in cash infusions, but must own a thrift or bank in order to qualify under the terms of Treasury’s current capital injection program.


The TARP program set a November 14 deadline for smaller banks to apply for capital injection funds remaining in the pool of $250 billion. The deadline will be extended for non-publicly traded banks.

The government’s preferred shares will pay dividends of 5 percent annually for the first five years and 9 percent after that until the institution repurchases them. Participating banks must comply with Treasury restrictions on executive compensation, which limit tax deductibility of senior executive pay to $500,000.

They require bonuses to be "clawed back" if earnings statements or gains are later proven to be materially inaccurate and prohibit "golden parachute" payments to senior executives.”


The following article has the response for all of the above issues:

December 23, 2008.

Economy in Crisis: By Matt Apuzzo, Associated Press, Washington – Thank you

Banks mum on bailout spending – They Refuse to provide Accounting

Elizabeth Warren, the congressional watchdog, appointed by Democrats—

“It takes a lot of nerve for banks not to give answers, she says.”

Think you could borrow money from a bank without saying what you were going to do with it?

Well, apparently when banks borrow from you they don’t feel the same need to say how the money is spent.

After receiving billions in aid from U.S. taxpayers, the nation’s largest banks say they can’t track exactly how they’re spending it. Some won’t even talk about it.

“We’re choosing not to disclose that,” said Kevin Heine, spokesman for Bank of New York Melon, which received about $3 billion.

Thomas Kelly, a spokesman for JPMORGAN Chase, which received $25 billion in emergency bailout money, said that while some of the money was lent, some was not, and the bank has not given any accounting of exactly how the money is being used.

“We have not disclosed that to the public. We’re declining to,” Kelly said.

The Associated Press contacted 21 banks that received at least $1billion in government money and asked four questions:

How much has been spent?

What was it spent on?

How much is being held in savings? And,

What ‘s the plan for the rest?

None of the banks provided specific answers.

“We ‘re not providing dollar-in, dollar-out tracking,” said Barry Koling, a spokesman for Atlanta, Ga.-based SunTrust Banks, which got $3.5billion in taxpayer dollars.

Some banks said they simply didn’t know where the money was going.

“We manage our capital in its aggregate,” said Regions Financial spokesman Tim Deighton, who said the Birmingham, Ala.- based company is not tracking how it is spending the $3.5billion it received as part of the financial bailout.

The answers highlight the secrecy surrounding the Troubled Asset Relief Program, which earmarked $700 billion – about the size of the Netherlands’ economy – to help rescue the financial industry.

The Treasury Department has been using the money to buy stock in U.S. banks, hoping that the sudden inflow of cash will get banks to start lending money.

There has been no accounting of how banks spend that money.

Lawmakers summoned bank executives to Capitol Hill last month i.e. November 2008, and implored them to lend the money – not to hoard it or spend it on corporate bonuses or junkets or to buy other banks.

But there is no process in place to make sure that’s happening, and there are no consequences for banks that don’t comply.

“It is entirely appropriate for the American people to know how their taxpayer dollars are being spent in private industry,” said Elizabeth Warren, the top congressional watchdog overseeing the financial bailout.

But, at least for now, there’s no way for taxpayers to find that out.

Pressured by the Bush administration to approve the money quickly, Congress attached nearly no strings to the $700 billion bailout in October, 2008.

And the Treasury Department, which doles out the money, never asked banks how it would be spent.

“Those are legitimate questions that should have been asked on Day One,” said Rep. Scott Garrett, R-N.J., a House Financial Services Committee member who opposed the bailout as it was rushed through Congress.

“Where is the money going to go to?

How is it going to be spent?

When are we going to get a record on it?”

Nearly every bank the AP questioned – including Citibank and Bank of America, two of the largest recipients of bailout money —– responded with generic public relations statements explaining that the money was being used to strengthen balance sheets and continue making loans to ease the credit crisis.

A few banks described company-specific programs, such as JPMorgan Chase’s plan to lend $5 billion to nonprofit and health care companies next year.

Richard Becker, senior vice president of Wisconsin-based Marshall & Ilsley, said the $1.75 billion in bailout money allowed the bank to temporarily stop foreclosing on homes.

But no bank provided even the most basic accounting for the federal money.

Some said the money couldn’t be tracked.

Bob Denham, a spokesman for North Carolina-based BB&T, said the bailout money “doesn’t have its own bucket.”

But he said taxpayer money wasn’t used in the bank’s recent purchase of a Florida insurance company.

Asked how he could be sure, since the money wasn’t being tracked, Denham said the bank would have made that deal regardless.

Others, such as Morgan Stanley spokeswoman Carissa Ramirez, offered to discuss the matter with reporters on condition of anonymity.

When the AP refused, Ramirez sent an e-mail saying:

“We are going to decline to comment on your story.”

Most banks wouldn’t say why they were keeping the details secret.

“We’re not sharing any other details. We’re just not at this time,” said Wendy Walker, a spokeswoman for Dallas-based Comerica, which received $2.25 billion from the government.

Lawmakers say they want to tighten restrictions on the remaining, yet-to-be-released $350 billion block of bailout money before more cash is handed out.

Treasury Secretary Henry Paulson said the department is trying to step up its monitoring of bank spending.

Warren, the congressional watchdog, appointed by Democrats, said her oversight panel will try to force the banks to say where they’ve spent the money.

“It would take a lot of nerve not to give answers,” she said.

But Warren said she’s surprised she even has to ask.

“If the appropriate restrictions were put on the money to begin with, if the appropriate transparency was in place, then we wouldn’t be in a position where you’re trying to call every recipient and get the basic information that should already be in public documents,” she said.