Overruled


Banks Spend TARP Funds on Anti-Consumer Lobbying Campaign
February 17, 2009, 10:34 am
Filed under: Ian | Tags: , , , , , ,

Last month, the Huffington Post‘s Sam Stein reported that three days after Bank of America accepted $25 billion in TARP funds, it hosted a conference call with movement conservatives and business heavyweights in order to organize opposition to the Employee Free Choice Act, a key bill intended to protect the right of workers to organize and join unions.  Two weeks later, Change to Win discovered that the Financial Services Roundtable, a financial industry lobbying group whose members received 78% of the hundreds of billions of dollars distributed by the TARP program, intended to host a meeting of CEOs at a $530/night resort on the Gulf of Mexico, where they could coordinate their anti-worker lobbying campaign.

The banking industry’s efforts to limit the rights of the American worker, even as it is kept afloat by hundred of billions in taxpayer dollars, is shameful—and it is only the tip of the iceberg.  According to lobbying disclosure forms recently filed in Congress, the banking industry has engaged in a massive anti-consumer lobbying campaign at the same time that received TARP funds intended to rescue the industry from insolvency.

As of February 11, 2009, Bank of America has received $45 billion in TARP funds—$15 billion in direct aid to Bank of America, $20 billion to fund its purchase of Merrill Lynch, and another $10 billion in direct aid to Merrill Lynch itself.  Accordingly, to provide a window into how the financial industry has focused its lobbying efforts since it started accepting taxpayer funds, this report examines the fourth quarter 2008 lobbying disclosure reports from Bank of America, Merrill Lynch, and from the Financial Services Roundtable itself.  During this period when the industry relied on TARP funds to remain afloat, it lobbyied on a number of bills intended to stop some of the industry’s most exploitative practices.

As a brief disclaimer, it is worth noting that lobbying organizations are not required to disclose the specific positions they took in lobbying Congress, only the issues that they lobbied on.  Accordingly, the reports do not disclose whether the banking industry lobbied for or against certain bills, or somewhere in between (such as offering to stop opposing a bill if Congress watered it down).  Nevertheless, the bills discussed in this report all would impose additional regulation on the banking industry, so it is unlikely that Bank of America and its allies wanted to see these bills enacted.

Among the bills which the banking industry lobbied on after it began receiving TARP funds are bills to prohibit abusive arbitration practices, such as the Arbitration Fairness Act, the Fairness in Nursing Home Arbitration Act and the Fair Contracts for Growers Act; bills to help foreclosure victims and prevent irresponsible mortgage lending, such as the Mortgage Reform and Anti-Predatory Lending Act and the Helping Families Save Their Homes in Bankruptcy Act; bills to prevent the exploitation of credit card holders, such as the Credit Card Holders Bill of Rights and the Stop Unfair Practices in Credit Cards Act, and even bills to hold TARP recipients accountable for how they spend taxpayer funds, such as the TARP Reform and Accountability Act.
A brief summary of the bank industry’s post-TARP lobbying is below the jump.

  • Arbitration

As I have blogged about at length, one of the credit card industry’s most abusive practices is the use of binding mandatory arbitration clauses, which force credit card holders to sign away their right to hold the bank accountable in court if it breaks the law—and instead shunts the cardholder into a biased, privatized forum.  Credit card companies increasingly refuse to issue credit cards unless the cardholder signs an arbitration agreement, and when the cardholder does sign this agreement, they effectively give the company carte blanche to violate any laws it chooses.  As one study of almost 20,000 arbitration decisions found, the corporate party prevails a massive 94% of the time in suits between a credit card company or debt collector and an individual cardholder.

Since it began receiving TARP funds, the banking industry has lobbied on several bills that would prohibit some of the most abusive arbitration practices. Unsurprisingly, the industry has focused on the Arbitration Fairness Act, which would prohibit abusive arbitration altogether in consumer, employment and franchise agreements.  Interestingly, the banking industry has also lobbied on arbitration-related bills that have nothing to do with its abusive treatment of credit card holders, including the Fair Contracts for Growers Act, which prohibits abusive arbitration agreements in livestock and poultry agreements, and the Fairness in Nursing Home Arbitration Act, which bans abusive arbitration clauses in contracts between a nursing home and its residents.

  • Mortgages and Foreclosures

The banking industry has also lobbied on various bills intended to offer relief to the victims of foreclosure and prevent banks from engaging in irresponsible lending practices in the future.  Among these bills is  The Mortgage Reform and Anti-Predatory Lending Act, which contains various reforms intended to prevent banks from offering mortgages to borrowers who cannot afford them, in addition to “anti-steering” provisions which prevent mortgage lenders from “steering” borrowers into predatory mortgages.  Among other things, the bill would prohibit banks from lending to a homebuyer unless the homebuyer has documented proof that they would be able to repay the loan; it forbids banks from offering financial incentives to loan officers to steer customers into more expensive mortgages; and it permits consumers who are injured by a violation of the Act to sue the bank in federal court.

Interestingly, the bill also would prohibit abusive arbitration clauses in mortgage agreements.

The banking industry has also lobbied on The Helping Families Save Their Homes in Bankruptcy Act and other bills which would permit bankruptcy judges to modify the terms of a mortgage in order to help homeowners to stay in their homes.  This practice, which is sometimes referred to as “cram downs,” has been widely opposed by the banking industry and its allies.

  • Credit Cards

The banking industry’s lobbying disclosure forms also list a number of bills intended to protect consumers from abusive practices by credit card companies, including such bills as the Credit Card Holders Bill of Rights, the Stop Unfair Practices in Credit Cards Act, and the Credit Card Accountability, Responsibility and Disclosure Act.  These bills offer a variety of protections to consumers, including:

  1. Prohibitions on Arbitrary Rate Increases:  The bills’ various provisions would require credit card companies to give cardholders a 45 day notice before increasing rates, to give the cardholder an opportunity to cancel the card and pay of the balance at the existing interest rate and repayment schedule, and prohibit rate increases for reasons unrelated to cardholder behavior.
  2. Payments Must Be Applied to the Highest Balance Card: When a cardholder with multiple cards makes a payment, that payment to the card with the highest balance.
  3. No Interest on Fees: Banks could not charge interest on late fees, over-balance fees or similar transaction fees.
  4. No Misleading Terms: Use of terms like “prime rate” or “fixed rate” in a deceptive manner would be prohibited.
  5. No Stacking Over-Balance Fees:  Limits the number of times an “over-the-limit” fee may be applied on the same card for the same time that a cardholder goes over their credit limit.
  • TARP Accountability

As a final irony, as the banking industry was relying on hundred of billions of dollars in TARP funds to ward off insolvency, they were actively lobbying on bills intended to bring accountability to TARP fund recipients.  One such bill, the TARP Reform and Accountability Act, would requiring banks receiving TARP funds to report on the degree to which they have used the funds to increase lending to businesses and consumers, would impose executive compensation limits on new recipients of TARP funds, and would require at least $40 of the TARP funds to be used for foreclosure relief, among other things.

This is not a comprehensive list of the banking industry’s post-TARP lobbying.  Nevertheless, I hope it makes clear that, although the industry was given TARP funds to restore liquidity to the financial markets and rescue the industry from insolvency, they have chosen to spend a portion of those funds on an anti-consumer lobbying agenda.

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[…] crusade is only the tip of a much larger iceberg. As a recent report at Overruled reveals, the banking industry has continued a massive anti-consumer lobbying campaign, even as it took hundre… to stave off […]

Pingback by PoliTrix » Blog Archive » Ian Millhiser: It’s Not Just EFCA: Banks Spend TARP Funds on Anti-Consumer Lobbying

This ironic twist to the neo-con CON GAME … is like a Madoff conspiracy of the Bush Administration to fund anti-American propositions to do in the country and the American people with their own money. The irony of ironies.

Comment by Mike

[…] this abusive practice even as they were relying on government handouts to avoid bankruptcy. The full report on the banking industry’s post-TARP lobbying activities can be read here. How can we as Americans end this ridiculous set of loop holes that allows people to steal from us? […]

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[…] till you see what they’ve been used for.  Since receiving billions of dollars from taxpayers the largest banks in the country (see: TARP recipients) have spent significant amounts of money lobb… that have been killed in the Senate.  Nice to know that not only was the money given to the banks […]

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The question that no one is asking is: Why those bank executives were not fired? That should have been the first step before giving them any money. In the real world, you screw up, you get fired PERIOD!!

Comment by Guy H. LARREUR

[…] and empower is not part of the deal. Privatizing means there is no accountability to the voters and profit takes precedence over protecting and empowering citizens. Our democratic government is responsible for protecting and empowering its citizens. The free […]

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Pingback by See The Awful Sight of My Face! « Overruled

[…] From us. There may not be much transparency about the hundreds of billions of taxpayer dollars doled out through the TARP program, but we know where at least some of the money has gone: into making sure that none of the Bankers Gone Wild behavior that led to the current disaster is curtaile…. […]

Pingback by PoliTrix » Blog Archive » Arianna Huffington: The Credit Card Debt Crisis: The Next Economic Domino

[…] From us. There may not be much transparency about the hundreds of billions of taxpayer dollars doled out through the TARP program, but we know where at least some of the money has gone: into making sure that none of the Bankers Gone Wild behavior that led to the current disaster is curtaile…. […]

Pingback by The Credit Card Debt Crisis: The Next Economic Domino | America For Purchase

[…] From us. There may not be much transparency about the hundreds of billions of taxpayer dollars doled out through the TARP program, but we know where at least some of the money has gone: into making sure that none of the Bankers Gone Wild behavior that led to the current disaster is curtaile…. […]

Pingback by Arianna Huffington: The Credit Card Debt Crisis: The Next Economic Domino | Discover Texarkana

[…] From us. There may not be much transparency about the hundreds of billions of taxpayer dollars doled out through the TARP program, but we know where at least some of the money has gone: into making sure that none of the Bankers Gone Wild behavior that led to the current disaster is curtaile…. […]

Pingback by oolaah | The Credit Card Debt Crisis: The Next Economic Domino




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