from Reuters Money:
Consumer cops: Why we need Mary Schapiro and Elizabeth Warren now
Two women are fending off a vicious man-handling of investor protection.
As Congress pettily wrangles over the debt limit and the next budget, Mary Schapiro and Elizabeth Warren are fighting to protect you against the ravages of Wall Street.
Wall Street and its Republican allies would like to make the Dodd-Frank financial reforms disappear. The money trust has been pouring millions into lobbying to eviscerate the budget of the Securities and Exchange Commission and blocking the formation of the Consumer Financial Protection Bureau.
Mary Schapiro, who chairs the SEC, said she can't kick start the myriad pro-investor rules of Dodd-Frank without adequate funding. Republicans, lead by Budget Committee Chairman Paul Ryan, want to "starve the beast" in their fiscal year 2012 proposal.
Ryan's new budget proposal wants to cut off the SEC budget at its knees by giving the SEC $112 million for fiscal year 2012. That effectively freezes the top securities regulator's funding at 2008 levels. The current budget deal gives the agency a slight increase in funding.
Remember what happened to Wall Street in 2008? The Obama Administration wants $308 million for the SEC to prevent another year like that from happening. The money trust has deliberate amnesia.
While the SEC gathers most of its revenue from fees and fines, it can’t seed key investor protections like an office of investor advocate without the additional funds. Its budget was supposed to double under Dodd-Frank over the next five years. The money trust wants to keep the status quo and de-fund the agency.
Credit cards unkindest cut for U.S. consumers
— James Saft is a Reuters columnist. The opinions expressed are his own –
Government intervention or not, banks will be cutting up America’s credit cards at an unprecedented rate, with grave implications for the economy and company profits.
The U.S. Federal Reserve last week added more nutrition to its alphabet soup of rescue programs when it unveiled the Term Asset-backed Securities Loan Facility (TALF), under which, among other things, it will lend up to $200 billion to investors in securities backed by credit-card, auto and student loans.
It did so for a very good reason: the securitization market’s freeze now extends beyond mortgages, imperiling run-of-the-mill consumer financing and making it a certainty that many people who use credit to get them over “cash flow” situations will be, well, denied.
And even though the U.S. car industry may implode if starved of finance and many students will have to defer education, the real potential disaster is in credit card funding, which could push lots of households over the brink and in the process consumption and every business which depends on it, which would be all of them.
Put simply, even with an apparent will to try anything to bring the wheels of finance back into motion it will be very difficult for government to quickly fill the hole left by private finance. Details of the plan are still sketchy, but let’s just take it for granted that it works, even if the plan, at only one year, will give them huge fears about how they get out of their positions at the end of 2009.
Beyond that, the Fed is seeking to kick start securitization by attracting back a species of investors, leveraged ones, who don’t really exist any more.
A piece written by Micahe Farrell; “Welcome To the Keynesian Nightmare” spelled out the dilema many months ago. “It is no secret that the US is a country driven by debt. It now takes approximately $3.25 of total debt in the US to generate $1 of GDP, a significant increase from 1952, when it took just $1.30 in debt to generate $1 of GDP. However, in 1952, government debt—federal, state and local— was $244 billion and accounted for 55.1% of the $443.6 billion in total debt outstanding in the US. Today, government debt stands at $7.2 trillion but accounts for just 15.7% of the $45 trillion in total debt. Household debt today has a much larger impact on economic growth than government debt— at $13.6 trillion, it is almost twice as much as government debt, while in 1952 it was just one-third of government debt.”
The unwinding of U.S. consumer debt is underway. The implication is that the economy will not bounce back to what it was. It will be “pay as you go” for some time to come.
Until we have some decent watchdogs with integrity — backed by fiduciary duty mandates — Wall Street will remain the same and individual investors will continue to lose money on a regular basis. Warren and Schapiro are leading the charge to clean up Wall Street — a lonely crusade that we investors should support.