No Financial Protection from Trump Admin, But States Can Help
As acting CFPB director Mick Mulvaney admits his subservience to the financial industry, states are beginning to provide consumers with protection from financial abuse, such as with New York State’s new retirement system, explains CEPR’s Dean Baker
GREG WILPERT: It’s the Real News Network. I’m Greg Wilpert coming to you from Quito, Ecuador.
Last week, Consumer Financial Protection Bureau Director Mick Mulvaney admitted that when he was a congressman he sold access to lobbyists for money. He told a conference of bankers in late April, quote: “If you’re a lobbyist who never gave us money, I didn’t talk to you.” Mulvaney may soon be named as President Trump’s new chief of staff, to replace John Kelly. As head of the Consumer Financial Protection Bureau, or CFPB, his job is to regulate the financial industry to protect the interests of consumers. However, last year he said that President Trump had told him to make sure that the CFPB will stop strangling access to capital. Regarding the rumors of him becoming the next chief of staff, he had to say the following.
MICK MULVANEY: He wants me to fix it. He wants me to get it back to the point where it can protect people without trampling on capitalism. Without, without, without choking off the access to financial services that are so critical to so many folks, and so many folks actually in the, in the lower and the middle classes. Folks who are trying to start their own businesses. People who are trying to to break out, people trying to get credit for the very first time. We need to figure out a way to both follow the law and protect citizens, as set forth in the Act, but do so in such a fashion that doesn’t choke off the access to capital. What does that mean? The access to money that is important for so many people to succeed in their small business and their private invest, in their private lives, and so forth. So that’s the charge he’s given me. We both share the belief that this, this particular bureau under the previous administration had gone too far over towards strangling access to capital, making it difficult for financial services to flow. And as a result, folks that we want to try and help were hurt. We’re going to try to fix that.
GREG WILPERT: Joining me to discuss the role that the financial industry plays in the Trump administration is Dean Baker. Dean is senior economist at the Center for Economic and Policy Research, and is the author of the book “Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer.” Welcome back, Dean.
DEAN BAKER: Thanks for having me on.
GREG WILPERT: So in your piece in Truthout, you write that the CFPB Director Mick Mulvaney is giving the financial industry a good return on their money. What do you mean by that? And what is Mulvaney’s approach to running the CFPB?
DEAN BAKER: Well, it really has been kind of incredible. First off, just to back up a step, it’s important to remember Mulvaney is an acting director, which by itself is somewhat of a scandal, because this was set up to be an independent agency. And what that meant was the idea was the person there cannot be easily dismissed by the president. If you had a regular director, if Trump had nominated someone to be director, that person be scrutinized by the Senate, and obviously a Republican Senate. They’d likely approve them. But then Trump won’t be able to dismiss them, except by cause. As an acting director he could dismiss Mulvaney any day he feels like it. You know, if he has a bad tweet day he could dismiss Mulvaney. In other words, it’s not an independent agency as long as you have an acting director there. That should be more of a scandal than it is.
But Mulvaney has basically tried to shut down the agency. He’s given, he’s, they have a number of cases that have been brought to court or are about to be brought to court on behalf of consumers against various financial institutions where he’s just ended, he just dropped the litigation, and basically made it impossible for the staff to to bring about new litigation. So essentially, he’s shut down the agency, for practical purposes. It is not in the business any longer of protecting consumers from predatory practices by financial institutions.
GREG WILPERT: So in your article, you provide a counterexample of how legislators could do things differently, and serve the citizens instead of the financial industry. And in the process you describe the New York State, which provides, provides a new retirement system for New Yorkers. Explain to us what this plan is about, and how it benefits ordinary citizens, and how is this instead of the financial industry?
DEAN BAKER: Well, a basic story here is, I mean, I would say this even if we had an operating Consumer Financial Protection Bureau. But if you can’t count on the government to protect consumers from predatory practices by the industry, well, best thing to do is work around it, go around it. And that’s what this program set up, being set up by New York State’s doing. They’re following the lead, I should point out, of other states. Illinois took the lead, here. Oregon and California are both ahead of New York, also.
And what they’re doing is setting up retirement accounts that will be managed by the state. They’ll be piggybacking on the state employee pension plans. They won’t interfere with that, but they’re taking advantage of the expertise. And workers will have, in the private sector, who don’t have a pension through their employer will automatically be contributing to this state-run plan. If they don’t want to they don’t have to, but if they don’t do anything then they’ll be contributing, I believe it’s 3 percent their paycheck. The big advantage, well, two big advantages. One is that they know they’ll be in, they’ll be in index funds. They won’t be getting ripped off with bogus investments.
And the other is that the fees will be much, much lower. So the fees in a plan like this might be two tenths, maybe three tenths of a percent of the money that workers have in there, whereas private 401Ks often charge well over 1 percent, sometimes even 1 1/2 percent. That might sound trivial, but if you have $100000 in an account, as a middle class worker well could by the time they’re in their 50s, that difference is over a thousand dollars a year. So that’s a big chunk of money that’s coming out of workers’ retirement going to the financial industry for essentially nothing. They aren’t getting anything in exchange for that. So that’s the sort of way we should look. If we can’t fix the industry, work around it.
GREG WILPERT: So if lobbyists of the financial industry have preferred access to legislators, as Mulvaney admits, how then did New York legislators end up voting for a bill, and in other states, for a bill that benefits its citizens instead of the financial industry? How’d that come about?
DEAN BAKER: It’s, you know, it’s a lot of work. I mean, the labor movement, grassroots movements have been behind things like this for a long time. I was actually, to be honest, quite frankly surprised by the New York State effort, because I didn’t realize that was close. I ‘ d worked with people in California, and I know, for example, SEIU, Service Employees International Union, was a very big actor in pushing that for many, many years, along with a lot of other groups around the state.
But again, I’m sure it’s a similar coalition in New York. And it does respond to a need that is widely recognized. Most, most workers, including middle class workers, have little or nothing by way of retirement savings. So if we go back 10-15 years, most middle class workers when they retired count on a defined benefit pension from their workplace that gave them a fixed amount, usually a percentage of their wages in their retirement for as long as they lived. And usually that was something that could give you a reasonably comfortable retirement. Those are disappearing very rapidly, except in the public sector. So if workers in the private sector, and that’s where the vast majority workers are, if they’re going to have anything in retirement, they need something like this, and the existing 401k system is failing them badly.
GREG WILPERT: OK. Well, we’re going to have to leave it there for now. I was speaking to Dean Baker, senior economist at the Center for Economic and Policy Research. Thanks for having joined us again, Dean.
DEAN BAKER: Thanks for having me on.
GREG WILPERT: And thank you for joining the Real News Network.