The Wells Fargo Story

Wells Fargo said that it discontinued the insurance practices last September after it had found “inadequacies in vendor processes and internal controls that negatively impacted some customers.” [“Inadequacies,” indeed—pure gobbledygook for underhanded double-dealing . . . “some customers”—274,000, to be exact.] The bank has contended that 570,000 people may be owed refunds.

[Allan] Dunlap, 55, is one of those affected by the bank’s insurance activities. His experience with Wells Fargo highlights the harm done to actual people and points to the challenges Wells faces in remedying it. More than a year after he started battling with Wells Fargo, Mr. Dunlap said, he is still awaiting confirmation that his credit report has been corrected.

“I never missed a payment and I always had insurance,” Mr. Dunlap said in a phone interview. “But they forced additional coverage on my vehicle and it showed up on my credit report that I was 60 to 90 days late on my payments.” Repeated calls to Wells Fargo to get them to fix the error were unsuccessful, he said. [Not answering the phone or misdirecting the call are favorite techniques of bureaucracies when they would rather ignore the injured party.]

Jennifer A. Temple, a Wells Fargo spokeswoman, acknowledged in a statement “that our customer service and our processes did not measure up and we are working with Mr. Dunlap to make things right.”[Translation: “We robbed him but got caught. Perhaps we’ll return the money.” 

Mr. Dunlap’s story began in March 2016 in Jamestown, N.D., where he worked transporting recreational vehicles.

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He found his dream car at a local dealership — a low-mileage, mint-condition Chrysler 300, vintage 2008, selling for around $25,000. Together with a friend who co-signed for the loan, Mr. Dunlap financed the purchase through Wells Fargo Dealer Services. The amount of the loan was almost $21,000.

Before he could take possession of the car, he was asked to provide the dealership with proof of existing car insurance. Wells Fargo loan documents prepared by the dealership show that his coverage was with State Farm.

For three months, he made his $410 loan payments without a hitch. But in early May, Wells Fargo sent both borrowers a letter saying it had not received the necessary documentation showing that the car was insured. A second notice saying the same thing followed a month later.

When the first notice came in, Mr. Dunlap was recovering from a stroke, he said. Still, he began calling Wells Fargo to tell them he already had insurance. He was unsuccessful, he said, because he’d be kept on hold for long periods and often got disconnected. [See what we mean about those phone calls.]

Ms. Temple of Wells Fargo said: “We recognize there were a number of customers who experienced difficulty verifying with Wells Fargo and our vendor if they had insurance and we are sorry that Mr. Dunlap experienced this challenge.”

On July 1, Mr. Dunlap’s loan statement showed, Wells Fargo charged $1,079 for insurance on the car — the first time such a charge had appeared. The insurance, a year’s premium, took effect in March when he bought the car.

Mr. Dunlap said he didn’t know about the charge and records show he made his regular loan payment in July. But because he owed the additional $1,079 for insurance, he fell behind. Late fees began accruing, and his problems on the loan were reported to credit bureaus.

He made more calls to Wells Fargo. “I’d talk to one person in one state, another person in another state; I’d send them papers,” he said. “There were so many different people involved, the information doesn’t get to the right sources.”

Some Wells Fargo letters came from Phoenix, Ariz., while others were postmarked Irvine, Calif., and Irving, Tex.

Sometimes Mr. Dunlap’s calls reached the office of the president at Wells Fargo Dealer Services. “Those people would say, ‘We’ll get back to you,’” Mr. Dunlap said, “but nothing would happen.”

He even tried reaching the bank’s board, Mr. Dunlap said.

In the old days it was the stagecoach that got robbed by the bad guys. But today it’s reversed: the stagecoach robs its passengers with impunity—the law is on their side.

Finally in mid-September, Wells Fargo canceled the insurance it had placed on Mr. Dunlap’s car. But the bank credited his loan account with only $846. That meant he was still behind on the loan.

Trying to get another loan to pay off the existing one was impossible, he said. “They would say, ‘No, you’re late with Wells Fargo,’” Mr. Dunlap said.

Exasperated, Mr. Dunlap decided to sell the Chrysler last November so he could close out the Wells Fargo loan. He sold it for around $19,000, he said, $6,000 less than he had paid eight months earlier. The amount he needed to pay off the loan was $20,250, Wells Fargo records show.

But Mr. Dunlap’s battle wasn’t over. Now he had to correct his credit report, an effort that he said was still going on.

Earlier this year, he asked the bank for $1,000 in compensation for its mistakes. In a letter dated June 1, the bank declined to provide it. [They make their own rules, whatever suits them best.] 

“At this time we are unable to comply with your request for compensation,” the letter said. Wells also said it was submitting requests to credit bureaus to remove the late payments recorded on Mr. Dunlap’s history. “We sincerely apologize for any inconvenience this matter may have caused,” the letter added.

Late last month, Mr. Dunlap said he was amazed when he saw an article in The New York Times disclosing Wells Fargo’s dubious insurance practices. “I thought I was the only one going through this,” he said.

Trying to get assurances that his credit report had been corrected, Mr. Dunlap called Wells Fargo again. He said he told the bank that he planned to contact the Times reporter about his experience. “They said, ‘Don’t talk to the reporter, we’ll try to fix this,’” he said. [Finally the bank begins to see that someone may be catching on to their skullduggery.]

The promise from Wells Fargo came more than a year after his problems with the bank began. It was too little, too late, he said.

The Wells Fargo Story

Some 800,000 people were affected by the Wells Fargo auto insurance dealings, according to an in-depth analysis commissioned by the bank. The expense of the unneeded insurance, which covered collision damage, propelled 274,000 bank customers into delinquency and resulted in almost 25,000 wrongful vehicle repossessions.

Wells Fargo said that it discontinued the insurance practices last September after it had found “inadequacies in vendor processes and internal controls that negatively impacted some customers.” [“Inadequacies,” indeed—pure gobbledygook for underhanded double-dealing . . . “some customers”—274,000, to be exact.] The bank has contended that 570,000 people may be owed refunds.

[Allan] Dunlap, 55, is one of those affected by the bank’s insurance activities. His experience with Wells Fargo highlights the harm done to actual people and points to the challenges Wells faces in remedying it. More than a year after he started battling with Wells Fargo, Mr. Dunlap said, he is still awaiting confirmation that his credit report has been corrected.

“I never missed a payment and I always had insurance,” Mr. Dunlap said in a phone interview. “But they forced additional coverage on my vehicle and it showed up on my credit report that I was 60 to 90 days late on my payments.” Repeated calls to Wells Fargo to get them to fix the error were unsuccessful, he said. [Not answering the phone or misdirecting the call are favorite techniques of bureaucracies when they would rather ignore the injured customer.]

Jennifer A. Temple, a Wells Fargo spokeswoman, acknowledged in a statement “that our customer service and our processes did not measure up and we are working with Mr. Dunlap to make things right.”[Translation: “We robbed him but got caught. Perhaps we’ll return the money.” 

Mr. Dunlap’s story began in March 2016 in Jamestown, N.D., where he worked transporting recreational vehicles.

He found his dream car at a local dealership — a low-mileage, mint-condition Chrysler 300, vintage 2008, selling for around $25,000. Together with a friend who co-signed for the loan, Mr. Dunlap financed the purchase through Wells Fargo Dealer Services. The amount of the loan was almost $21,000.

Before he could take possession of the car, he was asked to provide the dealership with proof of existing car insurance. Wells Fargo loan documents prepared by the dealership show that his coverage was with State Farm.

For three months, he made his $410 loan payments without a hitch. But in early May, Wells Fargo sent both borrowers a letter saying it had not received the necessary documentation showing that the car was insured. A second notice saying the same thing followed a month later.

When the first notice came in, Mr. Dunlap was recovering from a stroke, he said. Still, he began calling Wells Fargo to tell them he already had insurance. He was unsuccessful, he said, because he’d be kept on hold for long periods and often got disconnected.

Ms. Temple of Wells Fargo said: “We recognize there were a number of customers who experienced difficulty verifying with Wells Fargo and our vendor if they had insurance and we are sorry that Mr. Dunlap experienced this challenge.”

On July 1, Mr. Dunlap’s loan statement showed, Wells Fargo charged $1,079 for insurance on the car — the first time such a charge had appeared. The insurance, a year’s premium, took effect in March when he bought the car.

Mr. Dunlap said he didn’t know about the charge and records show he made his regular loan payment in July. But because he owed the additional $1,079 for insurance, he fell behind. Late fees began accruing, and his problems on the loan were reported to credit bureaus.

He made more calls to Wells Fargo. “I’d talk to one person in one state, another person in another state; I’d send them papers,” he said. “There were so many different people involved, the information doesn’t get to the right sources.”

Some Wells Fargo letters came from Phoenix, Ariz., while others were postmarked Irvine, Calif., and Irving, Tex.

Sometimes Mr. Dunlap’s calls reached the office of the president at Wells Fargo Dealer Services. “Those people would say, ‘We’ll get back to you,’” Mr. Dunlap said, “but nothing would happen.”

He even tried reaching the bank’s board, Mr. Dunlap said.

Bailed_UpIn the old days it was the stagecoach that got robbed by the bad guys. But today it’s reversed: the stagecoach robs its passengers with impunity—the law is on their side.

Finally in mid-September, Wells Fargo canceled the insurance it had placed on Mr. Dunlap’s car. But the bank credited his loan account with only $846. That meant he was still behind on the loan.

Trying to get another loan to pay off the existing one was impossible, he said. “They would say, ‘No, you’re late with Wells Fargo,’” Mr. Dunlap said.

Exasperated, Mr. Dunlap decided to sell the Chrysler last November so he could close out the Wells Fargo loan. He sold it for around $19,000, he said, $6,000 less than he had paid eight months earlier. The amount he needed to pay off the loan was $20,250, Wells Fargo records show.

But Mr. Dunlap’s battle wasn’t over. Now he had to correct his credit report, an effort that he said was still going on.

Earlier this year, he asked the bank for $1,000 in compensation for its mistakes. In a letter dated June 1, the bank declined to provide it. [They make their own rules, whatever suits them best.] 

“At this time we are unable to comply with your request for compensation,” the letter said. Wells also said it was submitting requests to credit bureaus to remove the late payments recorded on Mr. Dunlap’s history. “We sincerely apologize for any inconvenience this matter may have caused,” the letter added.

Late last month, Mr. Dunlap said he was amazed when he saw an article in The New York Times disclosing Wells Fargo’s dubious insurance practices. “I thought I was the only one going through this,” he said.

Trying to get assurances that his credit report had been corrected, Mr. Dunlap called Wells Fargo again. He said he told the bank that he planned to contact the Times reporter about his experience. “They said, ‘Don’t talk to the reporter, we’ll try to fix this,’” he said. [Finally the bank begins to see that someone may be catching on to their skullduggery.]

The promise from Wells Fargo came more than a year after his problems with the bank began. It was too little, too late, he said.

 

 

C.E.O.s Traditionally Avoid Politics, But No Longer Can

There are times when politics cannot be avoided. Our blog much prefers to remain neutral with regard to Republican/Democrat, Rich/Poor, Upper Class/Working Class, Elitist/Populist, Conservative/Progressive, feeling that the solution to Inequality lies somewhere in between and will require concessions and understanding from both sides to achieve. The issue is one of economics and should be understood that way.  It is not ideological.

What occurred in Charlotteville, Virginia earlier this week has made it impossible for those heads of major companies who advise the President to remain neutral.  Their break with the President  will have consequences with the economy and therefore we must take note of it.                                                               

By JAMES B. STEWART, August 6, 2017 for The New York Times

The bar for a chief executive of a public corporation to repudiate a United States president is extraordinarily high. Corporate leaders aren’t given their power, prestige, responsibility and nine-figure pay packages to use the corner office as their personal soapbox.

With President Trump’s comments on white supremacists and other right-wing extremists ringing in the ears of America’s chief executives, that high bar appears to have been passed.

This week, what had been a trickle of defections from the White House business advisory councils over issues like immigration and climate change turned into a torrent. By Wednesday, both of the councils had collapsed; Mr. Trump insisted that he had decided to disband them.

Such a public schism between a president and a business leadership long considered the backbone of the Republican establishment left corporate historians at a loss for precedent. “There’s never been anything to compare to this,” said Jeffrey A. Sonnenfeld, a dean of leadership studies at the Yale School of Management and the author of “Firing Back: How Great Leaders Rebound From Career Disasters.”

0416_merck-kenneth-frazier-ceo_900

Kenneth Frazier

Referring to a tweet by Mr. Trump criticizing Kenneth Frazier, the Merck executive who led this week’s corporate retreat from the White House councils, Mr.Sonnenfeld,  said, “Never in history has a president attacked and threatened the chief executive of a major U.S. corporation like that.”

After provoking a furor with his initial failure to condemn the white supremacists behind last weekend’s violence in Charlottesville, Va., Mr. Trump might have staved off a full-scale exodus with his somewhat stilted but conciliatory comments on Monday. But then he reignited the flames at a news conference on Tuesday at which he said there was “blame on both sides,” including club-wielding members of what he called the “alt-left,” for the Charlottesville violence.

Jamie Dimon

Stephen Schwartzman

Ginni Rometti

As pressure mounted on prominent council members like Jamie Dimon of JPMorgan Chase, Stephen A. Schwarzman of the Blackstone Group, Ginni Rometti of IBM and Indra Nooyi of PepsiCo, as well as other chief executives who remained silent or issued platitudes, corporate boards were hastily meeting to map strategy. “I’ve heard from 24 chief executives in the past two days,” Mr. Sonnenfeld said on Wednesday. “Boards are having ad hoc conference calls. People are very worried and concerned.”

Those conversations have been far more complicated than one might expect. It’s safe to say that no chief executive wants to be identified with white supremacy, racism or domestic terrorism. At the same time the president wields enormous influence over their shareholders, employees and customers.

“Chief executives don’t have the luxury of ventilating their personal political opinions, whatever they might be,” Mr. Elson said. “They shouldn’t let their personal views influence their business decisions. If they really feel strongly about something, they can always resign and then say whatever they want.”

As he told me shortly after Mr. Trump took office, “When the president calls, you should go to see him, regardless of your political persuasion, out of respect for the office.”

Back then, Mr. Sonnenfeld, too, praised Mr. Trump’s openness to business views . . .

This week was a different story. After the Charlottesville events and Mr. Trump’s comments, “chief executives have a moral duty to use their position as a bully pulpit and to speak out,” Mr. Sonnenfeld said, adding that George Weyerhaeuser, a former chairman of the giant timber and wood products company bearing his name, had once told him, “We have a license to operate from society, and if we violate that license it can be revoked.”

Or as Mr. Elson told me, “At some point, if identification with the administration becomes so polarizing that it impairs your ability to run the company, then you may have to do something.”

Weighing the benefits of advising a president steeped in controversy versus the risks to shareholders and other constituents from potential consumer boycotts is a calculus that varies widely from company to company.

Unlike some companies with a large consumer base to appease, Boeing has thrived by burnishing its ties to Mr. Trump.

At one extreme is a company like Boeing, which, as I noted last week, has thrived by burnishing its ties to Mr. Trump, who posed for photos in front of a 787 Dreamliner at a nonunion Boeing plant in South Carolina. Boeing is one of the federal government’s largest contractors ($1.1 billion was allotted recently for 14 Boeing fighter jets); the Export-Import Bank once threatened by Mr. Trump finances many of Boeing’s buyers; a host of other executive-branch decisions affect its profits; and it has no direct exposure to consumers.

At the opposite end of the spectrum is Under Armour, the maker of athletic wear, whose chief executive, Kevin Plank, left the president’s council earlier this week. Under Armour’s success depends in part on endorsements from celebrity athletes, many of whom — like Stephen Curry, the basketball star — are African-American. Under Armour customers had already organized a consumer boycott on social media earlier this year, prompting Mr. Plank to issue an open letter pledging to be “a force of unity, growth and optimism for our city and our country” and to oppose “any new actions that negatively impact our team, our neighbors or their families.”

Stephen Curry is among a number of African-American players who endorse products by Under Armour, an athletic wear company that has pledged to be “a force of unity, growth and optimism for our city and our country.”

That new action appears to have arrived.

“The risk of consumer blowback is especially acute for companies like Under Armour, and you’ve seen this elsewhere in the retail space,” Mr. Sonnenfeld said. But he noted that speaking out against a social scourge like racism can also enhance a brand. “Taking a public stand doesn’t mean there’s a misalignment with shareholder interests,” he said. “It can be the right thing to do. Howard Schultz has done this very effectively at Starbucks.”

On Monday, Mr. Schultz publicly criticized the president’s response to the Charlottesville events, and on Wednesday he spoke at an emotional companywide meeting. “I come to you as an American, as a Jew, as a parent, as a grandparent, as an almost 40-year partner of a company I love so dearly,” he said. “I come to you with profound, profound concern about the lack of character, morality, humanity and what this might mean for young children and young generations.”

Howard Schultz, the chief executive of Starbucks, told employees on Wednesday that he had “profound, profound concern about the lack of character, morality, humanity” that he said was exhibited in Mr. Trump’s remarks.

Historically, corporate aversion to politics has at times held firm even under national leadership that threatens the health of the economy, and with it the well-being of every company. The most notorious example was the support of German industry for Hitler and the Nazi regime, which ended up destroying the nation’s economy. American companies also worked with the Nazis before the United States entered the war, including — as the current Amazon production of F. Scott Fitzgerald’s “The Last Tycoon” reminds us — Hollywood studios.

Comparing the Trump administration to the Nazis may be a stretch, but many business leaders are concerned that stirring up deep-seated racial and nationalist animosities could be destabilizing, leading to riots, property damage and widespread civil unrest reminiscent of the late 1960s. . . .

In such circumstances, collective action by business leaders is often the most effective course, as members of the president’s advisory councils appear to have decided this week. That way no one company bears the brunt of the president’s wrath.

After Mr. Trump’s comments about Charlottesville, Mr. Sonnenfeld has been among those calling for collective opposition. “Fomenting racial unrest is not in the nation’s interest and it’s not in businesses’ interest,” he said. “Divide and conquer has always been Trump’s strategy, and somehow it has worked until now. The way to take a bully down is through collective action.”

At Last The Democrats Are Turning to The American Working Man

Finally some politicians are approaching what should be their base but has been appropriated by the President. What has taken them so long? What has happened to the Democratic party? Their wooing of Wall Street, the Tech World and the Entertainment World didn’t win them the last election.

So they’ve finally come home, shabby as it is. Let’s hope they’ve come to stay. For it’s here they belong and here they’ll score their victories because America is a nation of hardworking, earnest men and women and not a rich man’s paradise. The wealthy are merely the frosting on the cake. 

Labor unions—which the Right has doggedly worked to undermine as the greatest threat to itself—need to be rebuilt and strengthened as the ultimate protection for the worker. The working class needs its self-respect restored, most of all through being paid a wage that reflects their value to their country—not cheated, tricked, and taken advantage of by management, as they have been since 1980.

Representative Donald Norcross, left, a Democrat from New Jersey, joined three other representatives as part of cross-country tour to better understand the economic concerns of some workers. Getty Images

By NICK CORASANITI, August 14, 2017 for The New York Times

CAMDEN, N.J. — The three Democratic congressmen sat at one end of a long, rectangular table that extended nearly the length of the Teamsters hall here, surrounded by about 50 union leaders, members and local residents offering a mix of praise, complaints and political strategy.

“This is a forum that was desperately needed for a long time,” James H. Paylor Jr., a top organizer for the International Longshoremen’s Association, told the lawmakers. “There’s a saying that it’s never too late as long as you start today.”

The need for the Democratic Party and the labor movement to take stock of their historically close alliance became clear after November’s election when Hillary Clinton’s support among union voters declined by 7 percentage points from 2012 when former President Barack Obama was re-elected.

For months, Democrats have been grappling with how to reconnect with the union and working class vote they once considered their base, prompting former Vice President Joseph R. Biden Jr. to lament after the election that “my party did not talk about what it always stood for.”

Representatives Mark DeSaulnier of California, Mark Pocan of Wisconsin and Donald Norcross of New Jersey finished a four-stop, cross-country tour on Aug. 4 that set out to do just that: understand and tap into the economic anxiety felt by many working class voters, as part of a broader, fractious and painful self-examination Democrats have undertaken following Donald J. Trump’s ascension to the White House.

“We in labor, we may not have the billions of dollars, but we still have a lot of people,” said New Jersey State Senate President Stephen M. Sweeney, a Democrat and the general vice president of the International Association of Bridge, Structural, Ornamental and Reinforcing Iron Workers. “And there’s a lot of seats that belong to working class people. It’s up to us to claim them.”

The Democratic Party leadership recently released its “Better Deal” platform, a progressive policy agenda designed to address issues central to the working class.

Along with Representative Debbie Dingell of Michigan, who could not make the final leg of the trip, the four Democratic House members are planning to release their report, “The Future of Work, Wages and Labor,” in the coming months. Though they view their work as a complement to the party’s progressive platform, they also acknowledge that fellow Democrats may disagree with some of their proposals.

Some of them that might even sound, well, Trumpian.

“Those trade agreements, we’re still paying a price on NAFTA,” Mr. Norcross said in an interview, referring to the North American Free Trade Agreement, a frequent target for Mr. Trump on the campaign trail last year.

Mr. Norcross argued that some of the demands within his party for uncompromising legislative positions has left Democrats on the wrong side of the jobs argument.

“It’s not yes to everything environmental, no to everything with jobs,” he said. “It’s a matter of working those together to try to move them forward.”

The idea for the initiative began a year ago when Mr. DeSaulnier, a freshman congressman from the Bay Area, saw the booming so-called gig economy spawned largely by Uber and other tech start-ups in his district, and wondered how lower paying, part-time jobs might be affecting working families. So he asked the two tradesmen he knew in the House, Mr. Pocan, a painter, and Mr. Norcross, an electrician.

That conversation inspired a yearlong tour by the four members of Congress, which culminated this month in a labor town hall meeting inside a crowded Teamsters building in this struggling city in southern New Jersey.

Ending the tour here, after stopping in California, Michigan and Wisconsin (which have “right-to-work” laws that prevent organized labor from forcing all workers to pay union dues or fees), offered a bit of a throwback case study: Though working class families in New Jersey face similar problems as the working class elsewhere, the state still maintains strong ties between organized labor and the Democratic Party.

The Democratic candidate for governor, Philip D. Murphy, heavily courted the major state unions and relied on union-organizing efforts to help him to his overwhelming primary win. The New Jersey Education Association, which endorsed Mr. Murphy, is considered one of the most powerful teachers unions in the country, while Mr. Sweeney holds a powerful position in an international union.

“Unions may be weaker than they once were, given the dynamics of the American political landscape,” said Ben Dworkin, director of the Rebovich Institute for New Jersey Politics at Rider University. “But New Jersey remains a place where unions are very politically active and are relied upon by politicians to help deliver in politics.”

After the town hall meeting, Mr. Paylor expressed both comfort and frustration. He did not know that Mr. Norcross had been working to introduce bills aimed at his interests, including one that would direct the Department of Energy to provide training for energy industry jobs and another that would allow people paying for apprenticeships to receive the same tax benefits as those paying for traditional college.

“Most working class people don’t even understand that that’s going on in Washington, so they’re willing to vote against their own personal interest in many cases,” Mr. Paylor said. The Democratic Party and its elected officials, he added, need to do a better job of communicating, and “to identify themselves that they are representative of the working class.”

And, if Mr. Norcross has his way, maybe a few more working class candidates will appear on the ballot.

Mr. Norcross told the crowd in the Teamsters hall that there were more than 200 attorneys in the House of Representatives. “There’s one electrician, one painter, and one iron worker and one carpenter. We need some more help folks. We need some more.”

The Deregulation of Wall Street Is Now In Process

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President Donald Trump with Treasury Secretary Steven Mnuchin. The Treasury Department released a report in June proposing a “broad rethink” of rules governing the U.S. financial sector. Many of the recommendations have been on the banking industry’s wish list for years. PHOTO: ZACH GIBSON / POOL/EUROPEAN PRESSPHOTO AGENCY
The Fox is now firmly in charge of the henhouse. This article in this morning’s WSJ shows clearly how far the present administration has already gone in dismantling the regulatory apparatus set up by the last administration to avoid another crash like the one we had in 2008. Whatever the bankers want, it seems, they will get.
 By RYAN TRACY and DAVE MICHAELS, Aug. 13, 2017 for The Wall Street Journal

 

Efforts toward financial deregulation are beginning to take concrete shape on rules governing trading desks, bank boardrooms, corporations’ financial disclosures and more. Nearly seven months into the Trump administration, regulators are setting the stage for a wave of eased rules.

Several agencies are reviewing the Volcker rule, a part of the 2010 Dodd-Frank Act that limits banks’ trading. Some regulators also recently dropped a plan to restrict bonuses on Wall Street that had been opposed by banks and brokerage firms. And the Labor Department on Wednesday disclosed an 18-month delay in the so-called fiduciary rule that requires brokers to act in retirement savers’ best interests rather than their own.

The moves show that while President Donald Trump is struggling to advance his legislative agenda in Congress, his administration has begun laying the groundwork to change some of the myriad rules that Wall Street has sought for years to overturn or water down.

“On most topics, we are still awaiting the approval of appointees, but it is encouraging that there are some issues, some of which are technical but incredibly important to running a bank, where some progress is being made,” said Greg Baer, president of the Clearing House Association of large banks.

“It is a time to…determine where the pendulum has gone too far,” Craig Phillips, counselor to U.S. Treasury Secretary Steven Mnuchin, told a government-advisory committee July 20 at the Federal Reserve Bank of New York.

Mr. Phillips, a former investment banker and senior executive at BlackRock Inc., has been leading the administration’s effort to identify changes to financial rules. He was a principal author of a Treasury Department report released in June that recommended 97 policies in the lending sector for Congress and regulators to re-examine. More reports are coming, covering other sectors.

So far, the rule book for Wall Street hasn’t been rewritten in major ways, in part because nominees for some key posts haven’t been named or are awaiting Senate confirmation. But officials who are in place are laying the groundwork.

Those efforts are triggering pushback about whether they would undermine protections adopted after the 2008 bank bailouts. Ohio Sen. Sherrod Brown, the top Democrat on the Senate Banking Committee, has said many of the proposals amount to “weakening or eliminating important safeguards.”

“Big banks are making record profits, yet they claim they’re besieged by their watchdogs,” he said last month.

Mr. Baer calls the changes under consideration “an effort to rethink things in a cogent way.”

Partisan tensions on Capitol Hill will make it difficult to make changes through legislation, meaning some items on the industry’s wish list, such as full repeal of the Volcker rule, are unlikely. But that inertia doesn’t restrict agency officials, who typically have broad discretion on how to implement rules that stem from legislation Congress has passed.

The current regulatory agenda of the Securities and Exchange Commission, published in July, removed more than a dozen proposals related to Dodd-Frank, including the plan to restrict bonuses.

The commission’s Trump-nominated chairman, Jay Clayton, has said he wants to lighten the regulatory burden on public companies, which are required to make public filings to keep shareholders informed about financial performance, business trends and potential risks.

He hasn’t taken action to scale back those rules yet, but his predecessor Michael Piwowar, a Republican SEC commissioner tapped by Mr. Trump to serve as acting chairman until Mr. Clayton was confirmed, started work toward changing two rules. One requires disclosure of the pay gap between chief executives and workers, and another requires companies to investigate whether their products include minerals from African countries where mining can benefit armed groups. Any significant changes to the rules would require an opportunity for public comment and a commission vote.

Mr. Clayton, in remarks last month to the U.S. Chamber of Commerce, also questioned whether small shareholders are abusing an election process that allows them to seek changes to corporate bylaws.

A more radical SEC step under study is how to revise the rules for who can invest in private companies. U.S. law allows companies to issue stock with little regulatory oversight as long as all investors qualify as wealthy or sophisticated enough to understand the risk or withstand potential losses. But Mr. Piwowar has questioned the restriction, saying it walls off sought-after investments for the rich.

The SEC and the four other federal agencies that wrote the Volcker rule agreed in recent weeks to give banks leeway on aspects of the regulation while beginning private discussions about how to rewrite it.

The Office of the Comptroller of the Currency, the chief agency that regulates federally chartered banks and which is temporarily led by a Trump appointee, took the first tangible step toward potentially rewriting the rule when it reopened it for comments from the public.

In early August, the Senate confirmed three of Mr. Trump’s nominees to the U.S. derivatives regulator, the Commodity Futures Trading Commission, including Chairman J. Christopher Giancarlo. That representation will strengthen the commission’s ability to carry out Mr. Giancarlo’s desired revamp of postcrisis rules governing the swaps market.

Mr. Trump in July announced his pick for the vacant job of Federal Reserve vice chairman in charge of bank oversight. The nominee, financier and former Treasury Department official Randal Quarles, has said he would support reviews of the Volcker rule as well as the central bank’s annual stress tests of large banks.

Staffers at the Fed already are taking a fresh look at a bank-capital rule known as the leverage ratio, a move long sought by the largest U.S. banks.

And the Fed in August proposed scaling back requirements it places on banks’ boards of directors, after determining it was overloading boards with too many specific requirements.

Not all the action is deregulatory. The new CFTC commissioners recently vowed to finish a position-limits rule to limit speculation in commodity markets, a regulation mandated by Dodd-Frank.

The Consumer Financial Protection Bureau, still led by an Obama appointee, in early July restricted mandatory arbitration in financial contracts, making it easier for consumers to sue financial companies. That rule won’t last if enough Republicans in the Senate vote to repeal it in the coming weeks.

 

 

Our Broken Economy, in One Simple Chart

    In 1980: The poor and middle class used to see the largest income growth.

     In 2014: But now, the very affluent (the 99.999th percentile) see the largest income growth.

 

By DAVID LEONHARDT, August 8, 2017 for The New York Times

Many Americans can’t remember anything other than an economy with skyrocketing inequality, in which living standards for most Americans are stagnating and the rich are pulling away. It feels inevitable.

 

But it’s not.

 

A well-known team of inequality researchers — Thomas Piketty, Emmanuel Saez and Gabriel Zucman — has been getting some attention recently for a chart it produced. It shows the change in income between 1980 and 2014 for every point on the distribution, and it neatly summarizes the recent soaring of inequality.

 

The line on the chart (which we have recreated as the red line above) resembles a classic hockey-stick graph. It’s mostly flat and close to zero, before spiking upward at the end. That spike shows that the very affluent, and only the very affluent, have received significant raises in recent decades.

 

This line captures the rise in inequality better than any other chart or simple summary that I’ve seen. So I went to the economists with a request: Could they produce versions of their chart for years before 1980, to capture the income trends following World War II. You are looking at the result here.

The message is straightforward. Only a few decades ago, the middle class and the poor weren’t just receiving healthy raises. Their take-home pay was rising even more rapidly, in percentage terms, than the pay of the rich.

 

The post-inflation, after-tax raises that were typical for the middle class during the pre-1980 period — about 2 percent a year — translate into rapid gains in living standards. At that rate, a household’s income almost doubles every 34 years. (The economists used 34-year windows to stay consistent with their original chart, which covered 1980 through 2014.)

 

In recent decades, by contrast, only very affluent families — those in roughly the top 1/40th of the income distribution — have received such large raises. Yes, the upper-middle class has done better than the middle class or the poor, but the huge gaps are between the super-rich and everyone else.

 

The basic problem is that most families used to receive something approaching their fair share of economic growth, and they don’t anymore.

It’s true that the country can’t magically return to the 1950s and 1960s (nor would we want to, all things considered). Economic growth was faster in those decades than we can reasonably expect today. Yet there is nothing natural about the distribution of today’s growth — the fact that our economic bounty flows overwhelmingly to a small share of the population.

 

Different policies could produce a different outcome. My list would start with a tax code that does less to favor the affluent, a better-functioning education system, more bargaining power for workers and less tolerance for corporate consolidation.

 

Remarkably, President Trump and the Republican leaders in Congress are trying to go in the other direction. They spent months trying to take away health insurance from millions of middle-class and poor families. Their initial tax-reform planswould reduce taxes for the rich much more than for everyone else. And they want to cut spending on schools, even though education is the single best way to improve middle-class living standards over the long term.

 

Most Americans would look at these charts and conclude that inequality is out of control. The president, on the other hand, seems to think that inequality isn’t big enough.

David Leonhardt is the managing editor of a new New York Times website covering politics and policy. He was previously the paper’s Washington bureau chief, as well as an economics columnist.

 

The United Auto Workers Lose Again

You will all recall the article we featured yesterday from the Sunday Review Section of The New York Times which told of how Nissan frightened its black employees in Mississippi into thinking they would lose their jobs if they voted for the union, and the National Labor Relations Board is investigating whether Nissan  illegally threatened to close the plant if workers chose to unionize.

This editorial covering the matter appeared in this morning’s Wall Street Journal and we have decided to reprint it in its entirety in this blog as an illustration of the newspaper’s bias. It so deftly  reverses explanations of each of the Times reported facts  as to fully satisfy its businessmen readers. Which of the two articles do you believe?  Reread the earlier article and compare. Doesn’t the editorial below strike you as having been written to match, blow for blow, the Times piece?

We have found the Journal’s reporting  to be on the whole balanced and fair. And we have drawn on it heavily for this blog. Its columnists, Peggy Noonan and William Galston (we apologize for having gotten Mr Galston’s name wrong in the earlier edition of this blog), are always worth reading. Its coverage of cultural events, films, books, art shows, compare favorably to the Times. It is only when the “Editor” takes up his pen to write that our mind says “prend garde” for here it comes! . . . .You judge.

By THE EDITORIAL BOARD of The Wall Street Journal, August 7, 2017

The United Automobile Workers suffered another humiliation in the South late last week as workers at a Nissan plant in Canton, Mississippi, voted in a landslide to reject union representation.

The nearly 2-to-1 defeat wasn’t for lack of effort from the union, which spent years making the case to the workers in Canton. In 2011 then-president Bob King said that if the union failed to organize transnational auto makers like Nissan, “I don’t think there’s a long-term future for the UAW, I really don’t.” The union spent heavily and enlisted big-name supporters like Sen. Bernie Sanders, Democratic National Committee chair Tom Perez, and actor Danny Glover. It lost 2,244 to 1,307.

More than 80% of the workers at the Canton plant are black, and the UAW and its Democratic allies sought to exploit racial politics as much as economics. In an op-ed for the Guardian, Sen. Sanders claimed that union supporters were “connecting workers rights with civil rights,” while Nissan was out to “exploit human misery and insecurity, and turn them into high profits.” They claimed white supervisors favored white workers.

But the race-baiting [the pot calls the kettle black] fell flat in Canton, where for 14 years Nissan has provided solid blue-collar jobs, many of which require only a high-school education. One of the UAW’s supporters told the New York Times last week that, before Nissan came to town, locals were stuck working in McDonald’s for $7 an hour, so “this is the best thing that ever happened to them.”

The plant’s initial hires are now earning about $26 an hour, while newer recruits can earn up to $24. That’s far more than the $16.70 average hourly production wage in central Mississippi. Nissan also offers retirement benefits comparable to other U.S. auto makers and up to 37 days a year of paid time off, including vacation and holidays. For the past two years workers have received a $4,000 annual bonus.

The Canton auto workers are also well aware of how escalating union demands and stifling work rules suffocated the Big Three U.S. car makers in Detroit. An indictment unsealed a week before the Canton vote alleges that the UAW’s vice president teamed up with the top labor negotiator at Fiat-Chrysler to pilfer millions of dollars from a fund intended to train auto workers. That’s not a good look when you’re asking workers to hand over a chunk of their paychecks in union dues.

Trigger warning: Nissan didn’t shrink from explaining to workers that unionization could strain the plant’s global competitiveness. The UAW responded by accusing the company of threats and harassment, filing a ritual complaint with the National Labor Relations Board, which supervised the election. The NLRB could order a new election, but unions typically do worse the second time around.

The UAW’s problem isn’t unfair negotiating tactics. The reason the union hasn’t been able to organize workers in the South, and the reason its ranks have shrunk by more than 75% in 35 years, is because most workers don’t think a union has much to offer and will eventually put their jobs at risk. [The Times points to the far more plausible reason that black workers in the South have little or no experience with unionization.]

Automation Replaces Financial Advisers in Some Banks, Part I

Sorry to put this out so late. By accident Parts II and III got posted before Part I.

“Automation is threatening one of the most personal businesses in personal finance: advice.” So begins this three part article in today’s Wall Street Journal. Ironic, isn’t it, that being replaced by automation—which managers haven’t hesitated to inflict on workers in the quest for higher profits—is now being imposed on them. It turns out that a great deal of the mystique of financial advising is spurious—since it can be done equally well by automation.

    

Because the original article is very long and complete in reporting this turn of events, we have broken it down into three parts.

 

In the latest test of the reach of technology, a new breed of competitors— including Betterment LLC and Wealthfront Inc. but also initiatives from established firms such as Vanguard—is contending even the most personal financial advice can be delivered online, over the phone or by videoconferencing, with fees as low as zero. The goal is to provide good-enough quality at a much lower price.

“It’s always been questionable whether or not advisers were earning our money at 1% and up,” said Paul Auslander, director of financial planning at ProVise Management Group in Clearwater, Fla., who says potential clients now compare him with less expensive alternatives. “The spread’s got to narrow.”

The shift has big implications for financial firms that count on advice as a source of stable profits, as well as for rivals trying to build new businesses at lower prices. It also could mean millions in annual savings for consumers and could expand the overall market for advice.

Competitors across the spectrum agree the demand is there. Advice “is big and growing—it’s what clients are looking for,” said Roger Hobby, executive vice president of private wealth management at Fidelity Investments.

The hunger for help marks a shift from the 1990s, when do-it-yourself investing was in vogue. Back then, the adoption of 401(k) plans moved responsibility for investment choices to company employees just as one of the biggest bull markets in history was boosting individuals’ confidence in their investing prowess. Meanwhile, pioneering online brokerage firms made trading inexpensive and convenient.

After internet stocks collapsed in 2000, along with the broader stock market eight years later, many individuals sought help. In the past decade, baby boomers started to retire and wanted technical guidance on drawing down their assets.

    

The advice industry expanded with the demand. Besides managing people’s investment portfolios—handling the trades, not merely suggesting them—some financial advisers also provide help with budgets or tax and estate planning.

The number of advisory firms grew to almost 3,900 in 2017, up from fewer than 750 in 2002, according to a Wall Street Journal analysis of Securities and Exchange Commission data. This universe of firms handles at least $100 million in assets each and provides both investment management and financial planning to individuals.

As of March 2017, such firms collectively had $5.5 trillion in assets on which they made investment decisions, the Journal’s analysis found. That is about six times as much as in 2002.

Throughout this period, advice fees have largely held steady—typically 1% of assets, with a potential discount for big accounts. One reason the standard held is many clients value aspects of advice that can’t always be measured or easily compared.

  1. Lansdowne Hunt, 72, of Burke, Va., said he became more price-conscious after his portfolio fell 31% in the late-2008 stock-market meltdown. So in 2012, he switched to a less expensive adviser, and this year, asked for a discount on its 0.9% fee.

After being rebuffed, Mr. Hunt shopped for a new adviser for his $1.3 million portfolio at firms including Charles Schwab Corp. , TD Ameritrade Inc. and Edward Jones. The former Naval officer and defense-contractor employee concluded his current Virginia advisory firm offers services, such as tax-sensitive investing and stock picking, that might be hard to replicate for a lower cost.

“I couldn’t get the exact twin,” he said.

Many firms are wagering that other customers will take less, for less.

Slow Economic Growth in The U.S.

Apart from the confirmation that we are not going to see economic growth in this country much above 2 percent  for a long time, if ever (which we read in Piketty long ago and have maintained in our blog ever since), what interests us in this article from The New York Times is Lawrence Summers’s listing of the conditions it would take to encourage such a growth and how we will never achieve them. The original article was twice as long.

       CreditJun Cen

By NEIL GROSS, August 6, 2017 for The New York Times

At the end of last month, the International Monetary Fund downgraded its forecast for economic growth in the United States. Where the I.M.F. previously predicted the economy would grow at a rate of 2.3 percent in 2017 and 2.5 percent in 2018, it now expects 2.1 percent growth in both years.

The reason? An uncertain and insufficiently expansionary economic environment linked to the chaos in Washington. Yes, the stock market has been strong and unemployment is down. But Donald Trump, friend of business, may be costing us growth, a key indicator of economic health. . . .

There are several schools of economic thought on why growth has been in the doldrums — but unfortunately, few offer solutions that are viable in an atmosphere of political instability.

For example, Lawrence Summers, the Treasury secretary under Bill Clinton, has developed a theory called “secular stagnation.” The core idea is that the advanced economies of the world, including the United States, have entered a phase where there is too much saving and not enough new investment, keeping interest rates and inflation lower than they should be.

Mr. Summers points out that it costs a lot less to start a company in the internet age than when the only way to make money was through manufacturing. So there’s less investment demand.

With a nod to the New Deal economist Alvin Hansen, who wrote about the relationship between population size and interest rates, Mr. Summers notes as well that population growth in Europe and the United States has steeply declined. Without new workers and consumers coming onto the rolls, there’s an upper limit to domestic profit-making opportunities.

Mr. Summers believes there’s a way out of the low-growth trap. He argues for a major debt-financed infrastructure spending program, coupled with tax reform, policies to address rising inequality (since when income gains go almost entirely to those at the top, it’s hard to get a broad-based rise in consumer demand) and efforts to counter protectionist trade practices.

The thing is, nothing like what he proposes will be possible so long as we have a president whose inflammatory language, egregious actions and administrative incompetence continue to alienate voters and members of Congress. President Trump campaigned for infrastructure spending, but at this point neither Democrats or Republicans are likely to get completely on board. As for the other pro-growth suggestions, the president and his cabinet of billionaires couldn’t care less about inequality and seem to be gunning for a trade war with China. And it’s anyone’s guess whether Mr. Trump has the discipline to negotiate corporate tax reform. . . .

Neil Gross is a professor of sociology at Colby College

Nissan Workers in Mississippi Reject Union Bid by U.A.W.

This article from The New York Times illustrates how manufacturers today prevent their workers from unionizing. Nevertheless, by threatening to unionize its workers, U.A.W. has forced Nissan to provide its workers with conditions almost as good  as the Union would have required.

By NOAM SCHEIBER, August 8, 2017 for The New York Times

In a test of labor’s ability to expand its reach in the South, workers at a Nissan plant in Mississippi have overwhelmingly rejected a bid to unionize.

Out of roughly 3,500 employees at the Canton-based plant who voted Thursday and Friday, more than 60 percent opposed the union. It was an emphatic coda to a yearslong organizing effort underwritten by the United Automobile Workers, which has been repeatedly frustrated in its efforts to organize major auto plants in the region. . . .

The election campaign at the plant, where a large majority of workers are African-American, frequently took on racial overtones. Some employees alleged that white supervisors dispensed special treatment to white subordinates, a charge the company emphatically denied.

For their part, anti-union workers highlighted the U.A.W.’s contributions to local civil rights and religious groups, accusing the union of seeking to buy support in the African-American community.

In the end, though, basic economics combined with a fear of change may have carried the day. Veteran workers at the plant make about $26 per hour, typically only a few dollars less than veteran workers represented by the union at the major American automakers, and well above the median wage in Mississippi.

Nissan also pays a roughly similar percentage of employees’ incomes into their retirement accounts as do the Michigan automakers.

Before coming to Nissan more than 14 years ago, “I didn’t have a 401(k), I had one week of vacation,” said Marvin Cooke, a Nissan paint technician who was previously an assistant manager at a Shoney’s restaurant. “Now, I have four weeks’ vacation. I’m off on every holiday. Nissan has provided a great living for me.”

Mr. Cooke voted against the union.

While a significant number of workers at the plant, which has a total work force of nearly 6,500, are contract workers who earn lower wages than employees, they were not eligible to vote in the union election. . . .  [It would have been interesting to learn what percentage of the Nissan workforce are contract workers without health benefits or holidays.]

In meetings between management and workers, and in a video featuring the plant’s top official, Nissan was more menacing, suggesting that a union would put workers’ jobs at risk.

“They’ve come out with some of the nastiest, most unprecedented attacks I’ve seen in the 20 years I’ve been doing this,” said Gary Casteel, the second-ranking official at the U.A.W. “This issue of threatening to close a facility is the worst threat you can put toward an employee.”

At one point leading up to the vote, managers delivered a slide presentation warning that in the event of a strike, most employees who walked out would not be guaranteed jobs afterward. Many workers appeared to find the presentation alarming, even though strikes are rare in the industry and replacing production workers could be difficult.

Another manager emphasized in a meeting that Nissan could decide not to automatically deduct workers’ union dues, in which case the union would end up sending workers a regular “bill.”

“It was just to deter people from joining, was what I’m getting out of it,” said Earnestine Mayes, a union supporter. “No one wants to sit there and pay that bill every week.”

The company said its communications with workers were an attempt to provide information and clear up misimpressions, and that dues were not a focal point.

A regional director of the National Labor Relations Board, prompted by a series of charges filed by the U.A.W., issued a complaint last week accusing Nissan of illegally threatening to close the plant if workers chose to unionize, and threatening to fire workers involved in the organizing effort. . . .

“Before all this came out, I felt like the U.A.W. might come in, like it had momentum,” Mr. Cooke said.

The defeat raises further questions about organized labor’s potential for inroads in the sparsely unionized South, which many union leaders see as the key to improving wages and labor standards across the country.

This year, workers rejected a union by a nearly 3-to-1 margin at a Boeing plant in South Carolina after a long organizing effort by the International Association of Machinists and Aerospace Workers.

In 2014, the U.A.W. narrowly lost a hotly contested organizing campaign at a Volkswagen facility in Tennessee, although a small group of the plant’s skilled-trades workers later voted to unionize, and the union has notched some victories at Southern auto parts-suppliers in recent years.

“If you’re in an area where there are unions, people have friends, neighbors and relatives that might be in a union, and it’s very clear that people in unions like them,” said Hoyt N. Wheeler, a retired business professor who taught labor relations at the University of South Carolina.

But in a region like the South, few workers can speak from personal experience on the union’s behalf when the company or local politicians attack. “It makes it tough; you don’t have contrary voices,” Mr. Wheeler said.

Whatever its advantages, Nissan took no chances, pressing its case through the final days. This week, it set up a huge tent outside the facility and invited every worker on each shift, even those ineligible to vote, for meetings in which senior plant officials made their closing pitch. . . .

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