A Fighting Chance (56 page)

For example, there have been many toaster recalls, for a variety of reasons ranging from short-circuiting to failure to shut off. Most recently, in 2011 the CPSC announced the recall of a model where the toasters did not always pop up as intended, igniting the contents. Liz F. Kay, “CPSC Recalls Flaming Toasters,”
Baltimore Sun
, June 30, 2011.

who lived on the edge of a small southern town with his wife and stepson
: As noted previously, the data used in the bankruptcy studies were gathered under strict confidentiality requirements typical of human-subjects research protections at US universities. All data analysis was done using anonymous numerical identifiers for the study participants. When referencing individuals, names and specific identifiers have been changed to preserve anonymity. See
The Two-Income Trap,
184;
The Fragile Middle Class
, Appendix 1.

car payment would be $105 higher than the dealer originally estimated
: There are many examples of predatory car lending. Jason got caught by a “yo-yo scam,” where a car lender will not finalize the terms of the financing until after the car has been taken home from the dealership. See “Auto Lending Abuses in Dealer-Financed Loans,” Center for Responsible Lending, Issue Brief April 2011, at
www.responsiblelending.org
. Another common practice is for auto dealers to reach out to several lenders to whom the dealer could sell the loan. The lender will dictate the interest rate of the loan but will allow the dealer to increase the rate further and take a kickback from the increased rate. In a 2011 study, the Center for Responsible Lending estimated that consumers were paying more than $25 billion in increased interest rates to finance these dealer kickbacks. Delvin Davis and Joshua Frank, “Under the Hood: Auto Loan Interest Rate Hikes Inflate Consumer Costs and Loan Losses,” Center for Responsible Lending, April 19, 2011. Buy Here, Pay Here dealers act as lenders themselves, selling and financing used cars at extremely high interest rates and luring buyers into paying substantially more than market price for the vehicle,
http://www.responsiblelending.org/other-consumer-loans/auto-financing/research-analysis/auto-dealers-lending-abuses-cost-billions.html
.

rates that would make Tony Soprano blush:
According to a 2009 study by the Federal Reserve Bank of Kansas City, the average annual percentage rate (APR) on payday loans was 451 percent. See Robert DeYoung and Ronnie J. Phillips, “Payday Loan Pricing,” The Federal Reserve Bank of Kansas City Economic Research Department, Table 1 (February 2009), available at
http://www.kansascityfed.org/PUBLICAT/RESWKPAP/PDF/rwp09-07.pdf
.
See also Carolyn Carter et al., “Stopping the Payday Loan Trap,” National Consumer Law Center, 4, Appendix A-3 (June 2010). (APR for typical payday loans varies from 391 percent to 782 percent.)

in a journal called
Democracy: See Elizabeth Warren, “Unsafe at Any Rate,”
Democracy
5 (Summer 2007): 8–19.

would overhaul banking regulation:
As part of the TARP bill, Congress had instructed the COP to produce a report on financial regulatory reform to help guide future changes to the law. We put out the report in January 2009 and highlighted shortcomings in systemic risk management of “too big to fail” banks and the lack of transparency in credit ratings. We also called out the failures in consumer protection: “Fairness should have been addressed through better regulation of consumer financial products. If the excesses in mortgage lending had been curbed by even the most minimal consumer protection laws, the loans that were fed into the mortgage backed securities would have been choked off at the source, and there would have been no ‘toxic assets’ to threaten the global economy.” Many of these ideas were also embraced by consumer advocates in the weeks and months that followed. See “Special Report on Regulatory Reform,” COP report, January 2009.

AFL-CIO headquarters in Washington:
From the early days of the bankruptcy wars, through the fight for the consumer agency, and in the years since then, I’ve had the privilege to work shoulder to shoulder with amazing union leaders, and I’m deeply grateful for all the work of AFL-CIO; the Amalgamated Transit Union; the American Federation of Government Employees; the American Federation of Musicians; the American Federation of State County & Municipal Employees; the American Federation of Teachers; the American Postal Workers Union; the Bakery, Confectionery, Tobacco Workers & Grain Millers International Union; the Brotherhood of Locomotive Engineers & Trainmen; the Brotherhood of Railroad Signalmen; the Communications Workers of America; the Glass Molders Pottery Plastics & Allied Workers International Union; the International Alliance of Theatrical Stage Employees; the International Association of Bridge, Structural, Ornamental & Reinforcing Iron Workers; the International Association of Fire Fighters; the International Association of Heat & Frost Insulators and Asbestos Workers; the International Association of Machinists & Aerospace Workers; the International Brotherhood of Boilermakers; the International Brotherhood of Electrical Workers; the International Brotherhood of Teamsters; the International Longshore and Warehouse Union; the International Longshoremen’s Association; the International Union of Bricklayers & Allied Craftworkers; the International Union of Elevator Constructors; the International Union of Painters & Allied Trades; the International Union of Operating Engineers; the Laborers’ International Union of North America; the Marine Engineers Beneficial Association; the National Association of Government Employees; the National Association of Letter Carriers; the National Education Association; National Nurses United; the National Postal Mail Handlers Union; the National Treasury Employees Union; the Office & Professional Employees International Union; the Operative Plasterer’s & Cement Mason’s International Association; the Professional Aviation Safety Specialists; the Retail, the Wholesale and Department Store Union; the Seafarers International Union; the Service Employees International Union; the Sheet Metal Workers International Association; the Transport Workers Union; UNITE-HERE; the United Association of Plumbers, Fitters, Welders and HVAC Service Techs; the United Automobile, Aerospace and Agriculture Implement Workers of America; the United Brotherhood of Carpenters; the United Food and Commercial Workers International Union; the United Mine Workers of America; the United Steelworkers; the United Transportation Union; the United Union of Roofers, Waterproofers, and Allied Workers; the Utility Workers Union of America, and so many other unions who fight for the working men and women of America.

might fire at them:
“When AFL-CIO officials wander onto the eighth-floor balcony of their Washington headquarters, armed guards appear a block away at the White House and the Secret Service is on the phone, telling the union leaders to get back inside, PDQ.” Thomas B. Edsall, “For AFL-CIO and White House, The Great Divide Is Deepening,”
Washington Post,
September 2, 2002.

Not one:
The agencies are as follows: (1) The Office of the Comptroller of the Currency (OCC), whose primary mission is to charter, regulate, and supervise all national banks and savings associations, to ensure the safety and soundness of chartered institutions, and to ensure their compliance with laws requiring fair treatment of customers and fair access to credit and financial products; (2) the Office of Thrift Supervision (OTS), whose primary mission, before it was absorbed by the OCC in 2011, was to supervise savings associations and their holding companies, to ensure their safety and soundness, to ensure their compliance with consumer laws, and to encourage a competitive industry; (3) the National Credit Union Administration (NCUA), whose primary mission is to provide safety and soundness in the credit union system through regulation and supervision; (4) the Federal Reserve Board (the Fed), whose primary mission is, in its words, “to foster the stability, integrity, and efficiency of the nation’s monetary, financial, and payment systems so as to promote optimal macroeconomic performance”; (5) the Federal Deposit Insurance Corporation (FDIC), whose primary mission is to maintain confidence in the financial system, by insuring deposits, supervising banks for safety, soundness, and consumer protection, and managing receiverships of failed banks; (6) the Department of Housing and Urban Development (HUD), whose primary mission is, in its words, “to create strong, sustainable, inclusive communities and quality affordable homes for all”; and (7) the Federal Trade Commission (FTC), whose primary mission is to prevent anticompetitive, unfair, and deceptive business practices and to enhance consumer choice and public understanding of the competitive process.

other to be the friendliest, which shifted their role from watchdog to lapdog
: Before 2010, the responsibility for consumer financial protection was shared among seven principal agencies, and the scattered responsibility created an opportunity for regulatory arbitrage. The banking regulators received their funding from chartering fees paid by those they regulated. This had a particularly corrupting influence on the two main banking regulators, OCC and OTC, who were in head-to-head competition for banking business. When one banking regulator adopted more permissive regulations, the banks either moved their charters to this agency or threatened to move. That dynamic put pressure on all the competing regulators to “race to the bottom” by adopting the most permissive regulations to keep their chartering fees and remain relevant. There was one regulator, the Federal Trade Commission, that had consumer protection as a primary responsibility, but its consumer protection jurisdiction didn’t extend to banking entities, leaving a whole host of consumer financial products out of its purview. See Adam J. Levitin, “Hydraulic Regulation: Regulating Credit Markets Upstream,”
Yale Journal on Regulation
26 (2009): 143, 156–57.

As one example, Countrywide Financial, one of the worst abusers in the lead-up to the crisis, responded to increased regulatory pressure from the Fed and the OCC by re-chartering with OTS, after OTS promised more “flexible” oversight of its mortgage lending practices. Binyamin Appelbaum and Ellen Nakashima, “Banking Regulator Played Advocate over Enforcer,”
Washington Post
, November 23, 2008.

many of them were financed by the big banks:
For example, giants Wells Fargo, U.S. Bank, Fifth Third Bank, and Regions Bank offer payday loans. Liz Weston, “How Big Banks Offer Payday Loans,”
MSN Money
, April 19, 2013.

and, yes, toasters that catch fire:
The Consumer Product Safety Commission regulates the sale and manufacture of thousands of consumer products, ranging from kids’ toys to all-terrain vehicles and everything in between. According to the agency’s estimates, by promulgating new regulations, initiating recalls of faulty products, and partnering with industry in prevention efforts, more than $1 trillion is saved every year by avoiding costs that result from accidents. See “About CPSC,”
CPSC.gov
,
http://www.cpsc.gov/About-CPSC/
. See also “U.S. Consumer Safety Commission Strategic Plan,”
http://www.cpsc.gov//PageFiles/123374/2011strategic.pdf
.

a lot of terrible injuries:
See
http://www.cpsc.gov/PageFiles/122643/05perfrpt.pdf
. “For example, our work in reducing product-related injuries and deaths from cigarette lighters, cribs and baby walkers alone saves $2.6 billion annually in total societal costs.”

eager to take on the fight for the agency in the House:
Congressman Delahunt and Senator Durbin had introduced a similar bill on October 3, 2008, called the Consumer Credit Safety Commission Act of 2008, H.R. 7258 and S. 3629. The bill created a commission that would have the responsibility to promulgate new consumer safety rules banning abusive, fraudulent, and unfair practices; requiring adequate information and warnings on consumer credit products; and enforcing those provisions.

and I was invited:
See Senator Schumer’s statement:
http://www.schumer.senate.gov/Newsroom/record.cfm?id=309349&&year=2009
&. See also “U.S. Lawmakers Propose Financial Products Watchdog,” Reuters, March 10, 2009. Also Ryan Grim, “Financial Product Safety Commission: Dems Want Mortgages Regulated Like Toys, Drugs,”
Huffington Post,
April 10, 2009.

somehow you’re going to be protected:
For the transcript of the president’s Jay Leno interview, see “President Barack Obama on ‘The Tonight Show with Jay Leno,’”
New York Times
, March 19, 2009.

in 2007 by the Tobin Project:
The Tobin Project is an independent, nonprofit research group that was founded by Harvard Business School professor David Moss. It supports scholarly research and helps link people in government with a community of scholars across various fields who are working on significant policy issues.
http://www.tobinproject.org/about
.

that day was eighty-nine pages long:
See “Financial Regulatory Reform; A New Foundation: Rebuilding Financial Supervision and Regulation,”
http://www.treasury.gov/initiatives/Documents/FinalReport_web.pdf
.