“Something Liberals Should Remember”: Obama Is Right: Elizabeth Warren Is “A Politician Like Everybody Else”
On Friday, President Barack Obama sat down with Yahoo’s Matt Bai to promote the Trans Pacific Partnership and delivered his sharpest rebuke yet to Senator Elizabeth Warren and other liberals who oppose the trade deal.
“The truth of the matter is that Elizabeth is, you know, a politician like everybody else,” he said in the interview, which was published Saturday. “And you know, she’s got a voice that she wants to get out there. And I understand that. And on most issues, she and I deeply agree. On this one, though, her arguments don’t stand the test of fact and scrutiny.”
Bai correctly interpreted these comments as some of the harshest words the president has used against his liberal allies. But, at the same time, they are rather innocuous: Warren is a politician and is susceptible to outside pressure like anyone else. Liberals should remember that.
When Warren speaks about former Secretary of State Hillary Clinton, she often references a battle over a financial regulatory bill in the late 1990s and early 2000s. A law professor at the time, Warren strongly opposed the bill. But the economic team in President Bill Clinton’s White House was divided on it. Warren met with Hillary Clinton, then the first lady, and convinced her to oppose the bill as well. Hillary then convinced her husband not to sign the legislation at the end of his presidency.
Yet just a few months later, Clinton, as a senator from New York, the financial capital of the world, reversed her position. The bill passed and President George W. Bush signed it. “There were a lot of people who voted for that bill who thought that there was going to be no political price to pay,” Warren told The New Yorker’s Ryan Lizza recently. Warren wants to make sure that doesn’t happen again.
The fact that Hillary, the first lady, and Hillary, the New York senator, had opposite opinions of the bill shouldn’t have surprised Warren that much. As first lady, Hillary had no constituents to worry about. But as a senator, Hillary suddenly had millions of constituents with jobs either directly or indirectly connected to the financial industry. It would be great if she—and all politicians for that matter—always voted on principle and were immune from lobbying pressure. But that isn’t the case.
That’s true for Warren as well. The medical device industry is one of the most important industries in Massachusetts, and Warren has gone to bat for the industry multiple times. For instance, she is one of the few Democrats that supports the repeal of the medical device tax, which is part of Obamacare. In February, she introduced a bill to require pharmaceutical companies that pay a penalty and break the law to reinvest a percentage of that penalty into the National Institute of Health. But it has a loophole: Medical device manufacturers are exempt from the requirement unless they make drugs as well.
If liberals want to see a politician who always votes with his conscience, they need to look no further than Hillary’s one current challenger, Vermont Senator Bernie Sanders. When Sanders announced his presidential run, Matt Taibbi, writing at Rolling Stone, explained:
Sanders genuinely, sincerely, does not care about optics. He is the rarest of Washington animals, a completely honest person. If he’s motivated by anything other than a desire to use his influence to protect people who can’t protect themselves, I’ve never seen it. Bernie Sanders is the kind of person who goes to bed at night thinking about how to increase the heating-oil aid program for the poor.
When Sanders sat down with ABC News’s George Stephanopoulos, the host noted that he “can hear the Republican attack ad right now: He wants America to look more like Scandinavia.” To which Sanders responded, “That’s right. That’s right. What’s wrong with that?” That is a politician who doesn’t care about his image.
It’s just about impossible to imagine Warren answering a question that way. She and her staff closely guard her image. For instance, she is notorious for not speaking to reporters in the U.S. Capitol, unlike most of her colleagues. It’s very rare that she strays off message.
That doesn’t mean that her votes and policy positions aren’t principled most of the time. I have no reason to believe that she is opposing the trade deal for political reasons. I think she and the president simply disagree on the issue. But as liberals criticize the TPP as a sop to big business and the U.S. Trade Representative for its corporate ties—both of which may be true—it’s worth remembering that Warren herself is not immune to pressure.
By: Danny Vinik, Staff Writer, The New Republic, May 11, 2015
“The Most Opaque Investment Schemes Ever Devised”: Cities And States Paying Massive Secret Fees To Wall Street
California’s report said $440 million. New Jersey’s said $600 million. In Pennsylvania, the tally is $700 million. Those Wall Street fees paid by public workers’ pension systems have kicked off an intensifying debate over whether such expenses are necessary. Now, a report from an industry-friendly source says those huge levies represent only a fraction of the true amounts being raked in by Wall Street firms from state and local governments.
“Less than one-half of the very substantial [private equity] costs incurred by U.S. pension funds are currently being disclosed,” says the report from CEM, whose website says the financial analysis firm “serve(s) over 350 blue-chip corporate and government clients worldwide.”
Currently, about 9 percent — or $270 billion — of America’s $3 trillion public pension fund assets are invested in private equity firms. With the financial industry’s standard 2 percent management fee, that quarter-trillion dollars generates roughly $5.4 billion in annual management fees for the private equity industry — and that’s not including additional “performance” fees paid on investment returns. If CEM’s calculations are applied uniformly, it could mean taxpayers and retirees may actually be paying double — more than $10 billion a year.
Public officials are overseeing this massive payout to Wall Street at the very moment many of those same officials are demanding big cuts to retirees’ promised pension benefits.
“With billions of public worker and taxpayer dollars put at risk in the highest-cost, most opaque investment schemes ever devised by Wall Street for a decade now, investigations that hold Wall Street profiteers accountable are long, long overdue,” said former Securities and Exchange Commission attorney Ted Siedle.
Private equity firms have argued that their fees are worth the expense, because they supposedly deliver returns for investors that beat low-fee index funds, which track the broader stock market. But those private equity returns are typically self-reported by the firms over the life of those longer-term investments, meaning there are few ways to verify whether the returns are real. Indeed, a recent study from George Washington University argued that private equity firms are using their self-reporting authority to mislead investors into believing their returns are smoother and more consistent than they actually are.
In a 2014 speech, the SEC’s top examiner, Andrew Bowden, sounded the alarm about undisclosed fees in the private equity industry, saying the agency had discovered “violations of law or material weaknesses in controls over 50 percent of the time” at firms it had evaluated.
To date, however, the SEC has taken few actions to crack down on the practices, but some states are starting to step up their oversight.
In New Jersey, for instance, pension trustees announced a formal investigation of Gov. Chris Christie’s administration after evidence surfaced suggesting that the Republican administration has not been disclosing all state pension fees paid to financial firms.
In Rhode Island, the new state treasurer, Seth Magaziner, a Democrat, recently published a review of all the fees that state’s beleaguered pension fund has paid. The analysis revealed that the former financial firm of Democratic Governor Gina Raimondo is charging the state’s pension fund the highest fee rate of any firm in its asset class.
In Pennsylvania, the new Democratic governor, Tom Wolf used his first budget address to call for the state “to stop excessive fees to Wall Street managers.”
These moves are shining a spotlight on one of the most lucrative yet little-noticed Wall Street schemes. With so much money at issue – and with pensioners retirement income on the line — that scrutiny is long overdue.
By: David Sirota, Senior Writer at the International Business Times; The National Memo, April 24, 2015
“They Should Stop And Take A Second Look”: Ending Forced Arbitration Is A No-Brainer For Conservatives
The Obama administration is preparing to issue consumer protection regulations that will force Republicans to choose between their Wall Street allies and the Seventh Amendment right to a jury trial in civil cases. Republicans will be tempted to denounce the new rules as yet another example of this president’s customary imperial overreach, but on this issue, they should stop and take a second look.
The problem is called forced arbitration, and if you’ve ever taken the time to read a consumer service contract or end-user license agreement before signing it (which makes you an admirable human being, and very rare), you’ll almost certainly have seen a clause that revokes your right to go to court in case of a breach of the agreement by the corporation.
Such clauses are found everywhere, from credit cards and checking accounts to cable TV and car rentals. When you sign, you agree to accept the decision of a private, for-hire arbitrator. Unfortunately, the arbitrator is usually hired by the same company that breached the agreement and is not legally required to follow statutory or common law precedents. Its decisions are almost impossible to appeal. Most consumers have no idea that’s what they’re agreeing to.
Enter the Consumer Financial Protection Bureau, which has been authorized by Congress to step in to study this problem and, based on its findings, restore Americans’ ability to hold financial institutions accountable. Under the Dodd-Frank Act of 2010, the bureau is authorized to issue regulations that limit or ban the use of forced arbitration in consumer financial services and products. Regulations to do just that are expected to be promulgated sometime this year.
The regulations may turn out to be poorly framed or excessive – we’re talking about the same administration that gave us Lois Lerner and executive amnesty, after all – but the problem Congress wanted the agency to address is real.
Recently, while traveling to Topeka on business, I needed to rent a car. I stopped at the Thrifty counter at the Kansas City airport. While filling out the usual paperwork, I asked the gentleman behind the counter, “What happens if I don’t check this box that says I waive my right to sue?” He blinked at me uncomprehendingly for a moment and then replied, “Um, it means you don’t get the car.” I checked the box, disgusted. My destination was 80 miles away, I was in a hurry, and I didn’t have time to haggle or shop around with Thrifty’s competitors, all of whom undoubtedly have the same policy.
Today, a big company like Thrifty can effectively insist that we waive our Seventh Amendment rights on a “take it or leave it” basis; and market forces are not sufficient to police the problem. We’re stuck. And it isn’t just car rentals. When you buy a hair dryer or click “I agree” to a software download, you’re probably forfeiting your right to go to court.
Statistics show that, more often than not, the arbitrator hired by the company you’re disputing with will rule in the company’s favor, likely because he’s eager to be hired again by that company in the future.
Even consumers who think they understand what they’re signing usually have no clear idea of how arbitration really works. They mistakenly equate it with mediation or some other court-like procedure. In reality, forced arbitration is conducted in secret and lacks the procedural safeguards that allow consumers to prove their case. Arbitrators typically keep their reasoning private, making it hard for the losing party to know why he lost, and results are rarely published, making it difficult for similarly situated parties to know they’re entitled to relief.
To be sure, arbitration can be a great option when it’s voluntarily agreed to by both parties after a dispute has arisen, but to be truly voluntary, all parties need to be free to say no. In the case of consumer financial services and products (the kinds of agreements the Consumer Financial Protection Bureau is authorized to regulate), most individual consumers have no bargaining power, as anyone who’s tried to negotiate with his credit card company can attest.
Voluntary arbitration agreements have always been lawful, but up until the 1920s pre-dispute arbitration clauses like the one I had to sign at Thrifty were rarely enforced by American courts. Americans have long cherished the common-law right to a jury trial in civil cases. Indeed, preserving that right was one of the top demands of the Antifederalist skeptics of the proposed Constitution, and the Seventh Amendment was ratified precisely to preserve that ancient right in the courts of the newly constituted federal government.
In 1925, Congress enacted the Federal Arbitration Act to make arbitration a viable alternative for resolving contractual disputes between corporations. That strikes me as constitutionally tolerable, so long as agreements are voluntary and the parties are of roughly equal bargaining power, and if recourse to the courts is still possible if the arbitration process itself is disputed. But recent interpretations of that act by the U.S. Supreme Court have expanded its reach to cover all kinds of contracts, including consumer and employment contracts, and have even overridden state-level laws permitting class actions. (One of the reasons most corporations favor arbitration is that it forces each claimant to pursue his claim individually.)
So in disputes between individual Americans and big companies, the Seventh Amendment has become Swiss cheese, and with more holes than cheese. Many genuinely aggrieved consumers are being denied access to the civil justice system.
How can we fix this? The Supreme Court should reverse its errors, and Congress should amend the Federal Arbitration Act to ensure agreements are truly voluntary. (A bill to do that, dubbed the Arbitration Fairness Act, has been introduced in recent Congresses, but has gone nowhere, thanks to fierce opposition by the U.S. Chamber of Commerce.) Realistically, in the near term, the Consumer Financial Protection Bureau’s forthcoming Dodd-Frank regulations are the best hope consumers have for relief. But that only applies to consumer financial services and products. So there’s no avoiding a legislative remedy.
This issue should be a no-brainer for conservatives. Ending the un-American practice of forced arbitration should be on the agenda, not just of traditional consumer advocates, but of everyone who loves liberty and the Bill of Rights. As a freedom issue, it’s right up there with things like repealing health care mandates, allowing cell-phone unlocking, ending corporate subsidies and eliminating cronyist tax breaks.
By: Dean Clancy, Thomas Jefferson Street Blog, U. S. News and World Report, April 17, 2015
“The Sanity Initiative”: Obama Realizes What 10 Presidents Didn’t; Isolating Cuba Doesn’t Work
President Barack Obama made the dramatic announcement Wednesday that his administration is ending efforts to isolate Cuba that go back more than 50 years. While Congress will have to decide whether to end a formal economic embargo and a ban on casual tourism, senior administration officials said in a White House conference call that they would do everything within their power to end what Obama called a “failed policy.”
“Isolation has not worked,” said Obama from the White House.
Isolation has not helped to promote human rights in Cuba, it has not led to the downfall of the Castro government, and it is a policy carried out by the United States alone in the world. “I do not believe we can continue doing the same thing for five decades and expect a different result,” said Obama in a none too subtle allusion to a popular definition of insanity.
The initiative comes after 18 months of secret talks, with a major impetus provided by Pope Francis, who hosted the final discussions between Cuban and U.S. officials at the Vatican in the fall. (We should have known something was up when Obama and Cuban President Raul Castro shook hands at Nelson Mandela’s funeral a year ago.)
On Tuesday, Obama and Raul Castro spoke on the telephone for the better part of an hour, going down the checklist of measures that had been agreed upon in the negotiations.
These included a swap of three Cuban spies imprisoned in the United States for the last 15 years in exchange for an unnamed “U.S. intelligence asset” who has spent the last two decades in Cuba’s prisons. The asset was said to have provided the vital information that led to the shutting down of three different Cuban spy operations in the United States, including one in the Defense Intelligence Agency.
The release of American contractor Alan Gross, imprisoned for the last five years, was presented by the administration as a humanitarian decision by Havana since he was not an intelligence agent—despite Cuban claims—and thus the U.S. government would not trade spies to gain his release. Clearly the liberation of Gross took place in the context of what might be called a “grand bargain.”
Other measures include the decision to reopen embassies, closed since 1961, and steps to remove Cuba from the State Department list of countries that support terrorism.
There will be a dramatic expansion of the kinds of licenses that will allow Americans to travel legally to Cuba, covering everything from journalism to humanitarian work and help to the private sector on the island. Even if “tourism” is still barred by law, it is difficult to imagine that anyone wanting to visit the island will not be able to find some category that allows that to happen. And visitors can bring up to $100 worth of Cuban cigars back to the U.S. with them.
To help with those purchases, U.S. financial institutions will be able to operate to some extent in Cuba, and, perhaps most importantly, U.S. credit cards and debit cards will start to function.
Obama is arguing that engagement is more likely to bring about change in Cuba than isolation ever did, and his new policy will try to target areas where change is needed and can be made, particularly with regard to human rights, private enterprise, and access to information. (In what may be a significant gesture, Cuba released 53 prisoners on a list provided by the Obama administration although, of course, this was presented as a sovereign decision by Havana.)
The Treasury and Commerce departments also intend to clear the way for the U.S. export to Cuba of goods that will help small private construction firms, entrepreneurs and small farmers. Telecommunications workers and investors clearly will find it easy to travel to Cuba, at least from the American side. A major part of the Obama initiative aims to get more and better Internet access for the Cuban people.
Not the least of the Obama administration’s motives is the sense that the American policy of isolating Cuba has, instead, isolated the United States. Not a single country in the world supported it, including and especially the other countries of the Americas, north and south.
Even in the darkest days of right-wing dictatorships in South America in the 1980s, even they thought it wiser to engage the Castro regime than to attack it so relentlessly and gratuitously that it had an excuse for all its own failings. More than 30 years ago, the Argentine ambassador to Havana, who served the generals in Buenos Aires, would tell visiting reporters, “the best way to make war on Castro is with peace.”
Obama couldn’t say that on Wednesday, of course.
By: Christopher Dickey, The Daily Beast, December 17, 2014
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