“Giving Wall Street More Leeway”: How Paul Ryan’s Budget Paves The Way For Another Financial Crisis
Representative Paul Ryan released his budget blueprint this week, and fans of his work were no doubt pleased: it called for $5 trillion in spending cuts over the next decade, focused heavily on domestic, non-military spending. Safety net programs like Medicaid and food stamps would face savage cuts, and the Affordable Health Care Act would be repealed entirely. Meanwhile, both corporate and individual tax rates would be lowered.
It is easy to make the case that the rich get richer and the poor get poorer under Ryan’s so-called “Path to Prosperity” plan: one needs only to look at the literally trillions cut from Medicaid and food stamps while the rich pay much less in taxes.
But it’s important to refine that point and note that the financial sector in particular gets many special favors in the Ryan plan. After all, it is one of Ryan’s leading benefactors and he can even be spotted sipping $350 bottles of wine with industry leaders from time to time. And his budget is no doubt a path to prosperity for them.
Moreover, in three crucial ways Ryan’s budget not only gives Wall Street more leeway to act recklessly, but makes it more likely that average Americans face the consequences.
Cutting the Securities and Exchange Commission budget: Already, the head of the SEC is complaining that her agency’s budget is not nearly adequate to police the country’s massive financial sector. In a speech earlier this year at SEC headquarters, director Mary Jo White said, “our funding falls significantly short of the level we need to fulfill our mission to investors, companies and the markets.” The SEC has only 4,200 employees, but must regulate eighteen different stock exchanges and over 25,000 different market participants—and the agency’s responsibilities are growing thanks to new mandates from the Dodd-Frank financial reform legislation.
Ryan has a much different take in his budget: he thinks the SEC is just too big. He doesn’t apply a dollar figure, but makes it clear the agency’s already meager budget should be substantially “streamlined.”
“In the run-up to the financial crisis and its aftermath, the SEC repeatedly failed to fulfill any part of its mission,” his blueprint notes, ticking off a familiar list of whiffs, from the unsound nature of Bear Stearns and Lehman Brothers to the Ponzi schemes run by Allen Stanford and Bernie Madoff.
So far, so good. But Ryan goes on: “These failures have taken place despite significant increases in funding at the SEC, which has seen its budget increase almost sixty-six percent since 2004.”
Apparently, the extra money was the problem. “This resolution questions the premise that more funding for the SEC means better, smarter regulation. Adding reams of regulations to the books and scores of regulators to the payrolls will not provide greater transparency, consumer protection and enforcement for increasingly complex markets. Instead, the SEC should streamline and make more efficient its operations and resources.”
In short: since the SEC failed to adequately police Wall Street at a time its budget was increasing, the magic solution would be to cut the agency’s budget, because ipso facto the agency’s performance would get better.
This line of thinking would not be unfamiliar to those who follow Ryan’s recommendations for federal anti-poverty programs, and it’s just as wrong here as it is there. As the agency’s director herself pointed out (on several different occasions), the SEC plainly needs more resources to conduct better regulation of a huge financial sector. Ryan provides no evidence, aside from that odd logical twist, that reducing the number of SEC staffers poring over filings from hedge funds would somehow increase oversight of those outfits.
Transferring the Consumer Financial Protection Bureau budget to Congress: Here Ryan resurrects a longstanding GOP proposal: that Congress, not the Federal Reserve, should fund the CFPB.
As it stands now, the bureau’s budget is essentially guaranteed. It can ask the Federal Reserve for funding up to a certain cap, and that request cannot be denied. The caps are fixed percentages of the Fed’s operating expenses. This guarantees autonomy from a Congress where many members (like, say, Ryan) are elected thanks to campaign contributions from the big financial institutions the CFPB polices.
Ryan claims to have a problem with this arrangement only because the Federal Reserve’s profits are supposed to be returned to the Treasury to reduce the deficit, but instead a portion of them are siphoned off to a new bureaucracy—one in which he suggests via scare quotes is ineffective. “Now, instead of directing these remittances to reduce the deficit, Dodd-Frank requires diverting a portion of them to pay for a new bureaucracy with the authority to write far-reaching rules on financial products and restrict credit to the very customers it seeks to ‘protect,’” says the blueprint.
CFPB funding would thus be transferred to Congress under the Ryan plan, and subject to annual appropriations. He doesn’t say what Congress should do with that budget once its under legislators control, but one needs only to look to his SEC budget proposals to get a sense of what would likely happen.
Ensuring Taxpayer Bailouts of Big Banks: This is another up-is-down situation where a lot of unpacking of Ryan’s language is needed. His budget says:
Although the proponents of Dodd-Frank went to great lengths to denounce bailouts, this law only sustains them. The Federal Deposit Insurance Corporation now has the authority to access taxpayer dollars in order to bail out the creditors of large, ‘‘systemically significant’’ financial institutions. This resolution calls for ending this regime, now enshrined into law, which paves the way for future bailouts. House Republicans put forth an enhanced bankruptcy alternative that—instead of rewarding corporate failure with taxpayer dollars—would place the responsibility for large, failing firms in the hands of the shareholders who own them, the managers who run them, and the creditors who finance them.
Sounds good! But that would actually accomplish the exact opposite.
Indeed, Dodd-Frank gave the FDIC the power to wind down too-big-to-fail banks, which is called “resolution authority.” In a crisis, if a failing bank is deemed too big for traditional bankruptcy, a panel of bankruptcy judges can place it in receivership under the FDIC. That FDIC in turn then makes a plan for winding down the institution safely—something Barney Frank called a “death panel” for big banks.
Crucially, under this structure, taxpayers can’t end up paying for this wind down—Dodd-Frank explicitly forbids it. Any taxpayer money used upfront to ease the firm into bankruptcy would be recouped by a structured sale of the bank’s assets. (Note that Ryan sneakily says the FDIC has the authority to “access taxpayer dollars,” eliding the fact that in the end it has to pay them back.)
Ryan’s alternative is to end FDIC’s resolution authority and simply “place the responsibility for large, failing firms in the hands of the shareholders who own them, the managers who run them, and the creditors who finance them.”
That’s akin to just saying “it will all work out.” It is unlikely in the extreme that the shareholders and managers can somehow bail out a failing big bank, especially in a crisis. Inevitably, Congress and thus taxpayers would have to step in, without any of the established authority like asset sales that the FDIC now possesses.
Ryan’s plan would lead to more taxpayer bailouts of failing big banks—and by stripping down the budgets of the agencies meant to oversee those institutions, make failure more likely in the first place. But in the meantime, his friends on Wall Street could enjoy less regulation, less oversight, and more comfort that taxpayers will someday come to the rescue.
By: George Zornick, The Nation, April 2, 2014
“Laying It All Out On Medicare”: No Mistaking Paul Ryan’s Policy
The release of a new Paul Ryan budget plan is always the occasion for a lot of ridicule from liberals, for a whole bunch of reasons, and this year’s will be no different. Ryan’s budgets always manage to combine a remarkable cruelty toward poor people with a sunny optimism that draconian cuts to social services will result in a veritable explosion of economic growth, allowing us to balance the budget without taking anything away from the truly important priorities (like military spending) or, heaven forbid, forcing wealthy people to pay more in taxes.
I’m sure there are other people preparing detailed critiques of the Ryan budget, but I want to focus on one thing this brings up: the question of how we talk about Medicare. As he has before in his budgets, Ryan proposes to repeal the benefits of the Affordable Care Act, like subsidies for middle-class people to buy insurance and the expansion of Medicaid, but he’d keep the tax increases and Medicare cuts that the bill included in order to pay for it all, which helps him achieve his “balanced” budget.
Yes, it’s true that when Ryan was running for vice president, he joined Mitt Romney in condemning those very Medicare savings. But nobody really believed he was doing anything at the time but being a team player. So we can give him credit for taking at least a step toward putting his money where his mouth is on Medicare. Sure, it may be couched in some misleading words (the document refers to “strengthening Medicare” no fewer than ten times), but there’s no mistaking the policy.
Because the rest of his party is, to put it kindly, of two minds when it comes to the program. On one hand, they will tell you, Medicare is unsustainable, a ravenous beast that will devour the entire nation’s financial well-being if we don’t find a way to suppress its appetite. In Washington-speak, this is translated as “doing something about entitlements.” We have to Do Something About Entitlements! If you don’t want to Do Something About Entitlements, you’re just not serious about our nation’s fiscal challenges.
On the other hand, Republicans believe that Medicare is utterly sacrosanct, a jewel whose every facet is so perfect that even the most modest attempt to curtail its costs should be met with howls of anguish and outrage. Or at least that’s what they believe at election time, when they’ll air one ad after another condemning Democrats for cutting the Medicare seniors so desperately need. Democrats all over the country have been subjected to ads saying, “Congressman Fnurbler voted to cut $716 billion from Medicare!” over a picture of an elderly couple sitting at the kitchen table, looking over their bills with an engulfing despair, then meeting each other’s eyes in a tragic look that says, “Thanks to Congressman Fnurbler, all is lost. If only we had been able to pay our gas bill so we could stick our heads in the oven and end it all right now.”
Republicans are so deeply opposed to the idea of cutting Medicare that they can’t even stomach anyone trying to see if Medicare is spending its money wisely. Mention the Independent Payment Advisory Board, a component of the ACA that was designed to restrain Medicare costs if they rose too fast, and steam will come out of their ears. (The IPAB would make recommendations to Congress on ways to save money, and Congress would have to act on them. But since Medicare spending has slowed dramatically in the last couple of years, the requirement has yet to kick in, and President Obama hasn’t bothered to appoint anyone to what is still a theoretical board.) They waged a virtual war on comparative effectiveness research, effectively saying that it was dangerous to even ask which competing treatments work well and which don’t.
In other words, most Republicans believe we must, must, must reduce the cost of Medicare—excuse me, Do Something About Entitlements—but are adamantly opposed to every step that has been taken to reduce the cost of Medicare. I’m sure that lots of them are sympathetic to Ryan’s vision, which is to essentially turn the program into a voucher system, in which the government helps you buy private insurance, and over time costs magically go down (and if you’re thinking that sounds a lot like what people are getting on the Obamacare exchanges, any Republican will tell you that it’s totally different because freedom).
So let’s give Paul Ryan some credit. Sure, his numbers might not add up. But when he puts out a budget, there’s no mystery about where he’s coming from and what he wants to do.
By: Paul Waldman, Contributing Editor, The American Prospect, April 1, 2014
“Stunning Hypocrisy”: Hobby Lobby 401(k) Discovered To Be Investor In Numerous Abortion And Contraception Products While Claiming Religious Objection
In what just may be the most stunning example of hypocrisy in my lifetime, Mother Jones has uncovered numerous investments on the part of Hobby Lobby’s retirement fund in a wide variety of companies producing abortion and contraception related products.
Hobby Lobby is currently seeking relief from certain contraception benefit requirements of Obamacare in a United States Supreme Court case that promises to be a landmark decision on the rights of corporations and the extension of personal religious protections to corporate entities. In the case of the Hobby Lobby corporation, the company is closely held by the Green family who purport to have strong religious objections to certain types of contraceptive devices and are suing to protect those religious rights.
Remarkably, the contraceptive devices and products that so offend the religious beliefs of this family are manufactured by the very companies in which Hobby Lobby holds a substantial stake via their employee 401(k) plan.
As I suspect many readers will find this as hard to believe and digest as I, the data can be confirmed by reviewing the company’s 2012 Annual Report of Employee Benefit Plan as filed with the Department of Labor.
This according to Mother Jones’ Molly Redden:
“Documents filed with the Department of Labor and dated December 2012 (see above)—three months after the company’s owners filed their lawsuit—show that the Hobby Lobby 401(k) employee retirement plan held more than $73 million in mutual funds with investments in companies that produce emergency contraceptive pills, intrauterine devices, and drugs commonly used in abortions. Hobby Lobby makes large matching contributions to this company-sponsored 401(k).”
In a brief submitted to the Court in support of Hobby Lobby’s position in the case, the company specifically names contraceptive products such as Plan B, Ella, and IUDs as violating their religious beliefs because they work by preventing a fertilized egg from implanting in a woman’s uterus. According to the Green family, interfering with an already fertilized egg is tantamount to abortion—an act unacceptable to the family and one they refuse to participate in no matter what the Affordable Care Act may require .
However, it turns out that the owners of Hobby Lobby do not appear to have any problem with profiting from the companies that manufacture the very products that so grievously offend their religious principles.
The following is a summation of the companies manufacturing these products that are held by the Hobby Lobby employee retirement plan, as set forth by Ms. Redden’s remarkable reporting:
“These companies include Teva Pharmaceutical Industries, which makes Plan B and ParaGard, a copper IUD, and Actavis, which makes a generic version of Plan B and distributes Ella. Other holdings in the mutual funds selected by Hobby Lobby include Pfizer, the maker of Cytotec and Prostin E2, which are used to induce abortions; Bayer, which manufactures the hormonal IUDs Skyla and Mirena; AstraZeneca, which has an Indian subsidiary that manufactures Prostodin, Cerviprime, and Partocin, three drugs commonly used in abortions; and Forest Laboratories, which makes Cervidil, a drug used to induce abortions. Several funds in the Hobby Lobby retirement plan also invested in Aetna and Humana, two health insurance companies that cover surgical abortions, abortion drugs, and emergency contraception in many of the health care policies they sell.”
When added up, the nine funds holding the stated investments involve three-quarters of Hobby Lobby’s 401(k) assets.
You may be thinking that it must have been beyond Hobby Lobby’s reasonable abilities to know what companies were being invested in by the mutual funds purchased for the Hobby Lobby 401(k) plans—but I am afraid you would be wrong.
Not only does Hobby Lobby have an obligation to know what their sponsored 401(k) is investing in for the benefit of their employees, it turns out that there are ample opportunities for the retirement fund to invest in mutual funds that are specifically screened to avoid any religiously offensive products.
“To avoid supporting companies that manufacture abortion drugs—or products such as alcohol or pornography—religious investors can turn to a cottage industry of mutual funds that screen out stocks that religious people might consider morally objectionable. The Timothy Plan and the Ave Maria Fund, for example, screen for companies that manufacture abortion drugs, support Planned Parenthood, or engage in embryonic stem cell research.”
Apparently, Hobby Lobby was either not aware that these options existed (kind of hard to believe for a company willing to take a case to the Supreme Court over their religious beliefs) or simply didn’t care.
By: Rick Ungar, Op-Ed Contributor, Forbes, April 1, 2014
“No Constitutional Freedom Is Limitless”: Companies Are Not Churches, And Must Conform To Modern Laws
What do contraceptives have to do with religion?
As a liberal Protestant, I see no connection — but that’s beside the point. There are plenty of sincere Catholics and conservative Protestants who believe the use of contraceptives, or at least some types of them, is sinful. That’s reason enough to be careful about any broad government regulations involving birth control.
Religious liberty is a cornerstone of the American way of life, a fundamental principle of the U.S. Constitution. The Founding Fathers were close enough to the bloody religious wars in Europe to try to found a country safe for pluralism, respectful of all religions while requiring none. If there is any such thing as American exceptionalism, freedom of religion is certainly one of its hallmarks.
Still, no Constitutional freedom is limitless. For more than a century, jurists have restricted religious liberties when they interfered with other important values. The Supreme Court did so as early as 1879, when it ruled against polygamy, practiced by some Mormons at the time.
That’s why the U.S. Supreme Court ought to rule against two corporations whose owners are fighting the requirement — a tenet of Obamacare — that employers’ health insurance plans pay for birth control. If businesses are given an exemption from a valid law that serves a useful public purpose because they claim it violates religious beliefs, where would it end?
(I’m leaving it to others to argue the perfectly valid point that corporations don’t have religious beliefs. They are not people. How many corporations have you ever seen sitting in the pews on Sunday?)
There are plenty of businesses and institutions that believe they have the right to fire gays and lesbians because homosexuality violates their religious beliefs. Some religious groups would keep outdated practices toward women, banning them from most high-powered jobs. While many people genuinely believe their God requires that, our civil society puts a premium on promoting equality.
If the two values are in conflict, individuals’ right to equality ought to win out. In a 1993 religious liberties case involving the use of peyote, Justice Antonin Scalia, himself a hyper-conservative Catholic, quoted from an earlier case when he wrote for the majority: “Can a man excuse his practices … because of his religious belief? To permit this would be to make the professed doctrines of religious belief superior to the law of the land, and in effect to permit every citizen to become a law unto himself.”
The case involving contraception is no different. The government has an overriding interest in ensuring that women’s health care is treated no differently from men’s, and reproductive services are vital. (As President Obama has noted, if men could have babies, contraception would already be a standard provision of all health insurance policies.)
For the record, laws have long been necessary to require health insurers to pay for certain procedures and pharmaceuticals. For example, the Georgia Legislature insisted in that 1990s that insurers pay for breast cancer screenings, which has helped to improve survival rates.
Since contraceptive use would help prevent abortions, religious conservatives ought to be among the most enthusiastic proponents of birth control coverage in health insurance. But one of the companies that opposes the law — Hobby Lobby, a chain of craft-supply stores — is owned by Southern Baptists who believe some forms of birth control, such as intrauterine devices, are tantamount to abortion. The other company involved in the Supreme Court case, Conestoga Wood Specialties, is owned by Mennonites who don’t believe in birth control of any sort.
The Obama administration has rightly compromised over religious objections to birth control mandates, exempting churches and other religious institutions. But corporations are not churches, no matter who owns them. Hobby Lobby and Conestoga Wood should be required to abide by the laws of a modern state.
Otherwise, where would this end? Bigotry operating under the auspices of the Bible could once again become the law of the land.
By: Cynthia Tucker, The National Memo, March 29, 2014
“A Blatant Violation Of Civil Rights”: When ‘Religious Liberty’ Was Used To Deny All Health Care To Women And Not Just Birth Control
On Tuesday, the Supreme Court will hear Hobby Lobby’s and Conestoga Wood Specialties’ claims that they should be exempt from their legal obligations to provide a full range of health coverage — in this case, contraceptive care for women — because they object to providing this coverage on religious grounds. Yet, for women who worked for a California private school in the 1980s, this lawsuit must feel like déjà vu. Nearly three decades ago, the Fremont Christian School claimed a similar right to deny health coverage to its female employees, citing its religious beliefs as justification for doing so. Fremont Christian’s case does bear one important difference from Hobby Lobby’s, however, they did not just want to deny birth control to their employees — they wanted to deny all health coverage to many of the women in their employ.
Fremont was owned by a church which claimed that “in any marriage, the husband is the head of the household and is required to provide for that household.” Because of this belief, they had a very unusual compensation package for their employees — though Fremont offered a health plan to its workers, the plan was only available to “heads of households” which Fremont interpreted to mean single people or married men. When a woman became married, she was to rely on her husband for health care.
(In what Fremont described as an “act of Christian charity,” there was an exemption to this rule. A married woman could receive health benefits if “the husband is incapable of providing for his family, by virtue of non-working student status, or illness” though the school also emphasized that “the husband is still scripturally the head of the household.”)
Offering one set of employee benefits to men and a different, inferior package to women is a blatant violation of federal civil rights law, which prohibits employers from “discriminat[ing] against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual’s race, color, religion, sex, or national origin.” While Fremont claimed that their religious liberty gave them a trump card, a federal appeals court disagreed. “Congress’ purpose to end discrimination,” the court explained, “is equally if not more compelling than other interests that have been held to justify legislation that burdened the exercise of religious convictions.”
So could a victory for Hobby Lobby and Conestoga Wood cause the courts to rethink Fremont Christian? Probably not. Society’s compelling interest in eradicating discrimination against women is widely accepted, even by conservative judges, and Fremont Christian is an extreme case. Nevertheless there is reason to be concerned about what happens with religious employers who push the envelope only slightly less than Fremont Christian School did.
The Supreme Court has long recognized that the “First Amendment mandates governmental neutrality between religion and religion, and between religion and nonreligion.” But a decision in Hobby Lobby and Conestoga Wood’s favor would place courts in the awkward position of picking and choosing among religious faiths. What happens to sects of the Jehovah’s Witness faith, who have religious objections to blood transfusions? Or to faiths that object to certain vaccines? Or to Scientologists who object to psychiatry? Or to Christian Scientists who object to modern medical science altogether?
If Hobby Lobby wins, are these faiths now empowered to deny health coverage to their employees as well? And if not, why not? If the Court rules in Hobby Lobby’s favor, it will either need to abandon its longstanding neutrality among religions, or it will need to allow every sect to exempt itself from health coverage laws that it does not want to follow — including, potentially, sects like the one in Fremont Christian. Moreover, Hobby Lobby’s brief argues that any law burdening an employer’s religious exercise must survive “the most demanding test known to constitutional law.” That is not a good position to be in if your employer objects to blood transfusions or mental health care.
Although there is a superficial basis for Hobby Lobby’s argument, they are asking the Court for a massive shift in the law. For decades, the Supreme Court has respected the principle that one person’s religious liberty stops at another person’s body — and this is especially true in the business context. As the Court explained in United States v. Lee, “[w]hen followers of a particular sect enter into commercial activity as a matter of choice, the limits they accept on their own conduct as a matter of conscience and faith are not to be superimposed on the statutory schemes which are binding on others in that activity.” If the law were otherwise, Lee warned, employers could “impose” their “religious faith on [their] employees.”
Any decision favoring Hobby Lobby and Conestoga Wood will have to drive a massive hole through Lee. The essence of both businesses claims is that they should not have to follow the same health care laws that apply to all other businesses, and that employers should be able to limit their employees’ ability to obtain contraception because the employer objects to its use. But once Lee falls, it is not at all clear what rises in its place, or how easily courts are going to be able to draw a distinction between relatively narrow claims like Hobby Lobby’s and sweeping attempts to deny health care like Fremont Christian’s — not to mention the many grey areas in between.
By: Ian Millhiser, Think Progress, March 23, 2014
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