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WSJ: "The impact of higher rates on banks' securities isn't limited to SVB. Across all FDIC banks, there were about $620 billion worth of unrealized losses in securities portfolios as of the fourth quarter."
"What have we learned?
One of the big questions coming out of this will be which banks misjudged the match between the cost and lifespan of their deposits and the yield and duration of their assets. This is very different from the questions about bad lending that haunted the 2008 financial crisis.
As money flowed into banks during the pandemic, buying the shortest-term Treasurys or keeping the money in cash would have insulated them from the risk of rising interest rates. But it also would have depressed their income. Banks' reach for "safe" yield may be what haunts them this time around."
I heard my Senator Mark (tool of MBA) Warner say this morning, "equity Shareholders should be wiped out"!
When asked if he regretted lifting stricter Dodd Frank Act requirements/regulations for banks with less than $250B in assets, he said, "No".
HeeeHeeee! Net Worth Swipe 2.0 will solve the SVB bank run, it's a statutorily valid power of the FDIC per the Collins decision, right!
A. Force the SVB Board to agree to a 'temporary' conservatorship.
B. Have the UST guarantee all future SVB losses up to $200B at 10% interest per annum.
C. Implement Net Worth Swipe.
D. Transfer all future profits into the Treasury's coffers into perpetuity.
IMO - if the bank has assets - at current market value to pay off 90% of deposits depositors then what is the fuss
"By allowing @SVB_Financial to fail without protecting all depositors, the world has woken up to what an uninsured deposit is – an unsecured illiquid claim on a failed bank," he began.
He then predicted that people will rush to withdraw huge sums of uninsured deposits from all non-systemically important banks (SIB).
"These funds will be transferred to the SIBs, US Treasury (UST) money market funds and short-term UST," Ackman postulated. "There is already pressure to transfer cash to short-term UST and UST money market accounts due to the substantially higher yields available on risk-free UST vs. bank deposits."
Ackman said that "the destruction of these important institutions" will begin once depositors start draining money from regional and community banks. He asserted that the U.S. government could have guaranteed SVB's deposits in exchange for penny warrants to avoid its collapse and create potential for profits.
"Instead, I think it is now unlikely any buyer will emerge to acquire the failed bank," he continued. "The gov’t’s approach has guaranteed that more risk will be concentrated in the SIBs at the expense of other banks, which itself creates more systemic risk."
https://www.foxbusiness.com/markets/billionaire-bill-ackman-svb-collapse-government-has-48-hours-fix-irreversible-mistake
Fannie Mae and Freddie Mac provided a willing and able buyer of MBS and did what they were suppose to do during a financial panic. The $187.5B provided by the UST helped shorten a prolonged worldwide financial crisis.
On August 17, 2012, the federal government rewards JPS and Common Shareholders by Nationalizing their companies and taking all their Economic Rights into perpetuity.
"Fifteen years after the subprime mortgage crisis which devastated the global economy, rating agencies continue to make the same mistakes.
At least, this seems to be the case with the prestigious rating agency Moody's Investors Service."
https://www.thestreet.com/technology/moodys-failed-to-warn-about-silicon-valley-banks-problems
https://www.bloomberg.com/news/articles/2023-03-11/fdic-races-to-start-returning-some-uninsured-svb-deposits-monday
https://www.cnbc.com/amp/2023/03/11/stablecoin-usdc-breaks-dollar-peg-after-firm-reveals-it-has-3point3-billion-in-svb-exposure.html
https://www.bloomberg.com/news/articles/2023-03-11/svb-fallout-spreads-around-the-world-as-uk-firms-plea-for-help?leadSource=uverify%20wall
“The loss of deposits has the potential to cripple the sector and set the ecosystem back 20 years,” they said in the letter seen by Bloomberg. “Many businesses will be sent into involuntary liquidation overnight.”
This is just the beginning. SVB had branches in China, Denmark, Germany, India, Israel and Sweden, too. Founders are warning that the bank’s failure could wipe out startups around the world without government intervention. SVB’s joint venture in China, SPD Silicon Valley Bank Co., was seeking to calm local clients overnight by reminding them that operations have been independent and stable."
"A drones startup founder there said a withdrawal she made on Thursday hadn’t gone through and that she was concerned about making payroll for her 12 full-time employees. She had tried calling the FDIC multiple times, “but the number doesn’t answer,” she said.
Another customer remarked that he should have brought a bottle of whiskey to pass around as they waited. In trying to get more information from an FDIC representative, he said, “Put yourself in our shoes.” The representative apologized before closing the glass door once again."
Probably have some action from the federal reserve/UST/FDIC by tomorrow evening.
That's probably why they were closed yesterday.
"Benchmark partner Eric Vishria wrote, “If SVB depositors aren’t made whole, then corporate boards will have to insist their companies use two or more of the BIG four banks exclusively. Which will crush smaller banks. AND make the too big to fail problem way worse.”
This 'living will' Bullsh*t from the federal financial regulators isn't going to work.
Someone should tweet MC and ask him what he thinks about this: "Observers are calling out the irony as some VCs with notoriously libertarian free-market attitudes are are now calling for a bailout. For instance, reactions to Sacks’ tweet included statements like “Excuse me, sir. Suddenly the government is the answer?!?” and “We capitalists want socialism!”
"But financier and former Trump communications director Anthony Scaramucci argued, “It isn’t a political decision to bailout SVB. Don’t make the Lehman mistake. It isn’t about rich or poor of who benefits, it’s about stopping contagion and protecting the system. Make depositors whole or expect lots of tragic unintended consequences.”
"Investor Bill Ackman made a similar argument in a lengthy tweet, writing, “The gov’t has about 48 hours to fix a-soon-to-be-irreversible mistake. By allowing @SVB_Financial to fail without protecting all depositors, the world has woken up to what an uninsured deposit is — an unsecured illiquid claim on a failed bank. Absent @jpmorgan @citi or @BankofAmerica acquiring SVB before the open on Monday, a prospect I believe to be unlikely, or the gov’t guaranteeing all of SVB’s deposits, the giant sucking sound you will hear will be the withdrawal of substantially all uninsured deposits from all but the ‘systemically important banks’ (SIBs).”
https://www.cnbc.com/2023/03/11/silicon-valley-bank-failure-has-investors-calling-for-government-aid.html
BA on SVB: “After what the Feds did to [JPMorgan] after it bailed out Bear Stearns, I don’t see another bank stepping in to help [Silicon Valley Bank]” he tweeted."
"In March 2008, JPMorgan stepped in to acquire the failing decades-old investment bank and prevent its collapse. The Federal Reserve helped back the deal with $30 billion in support for Bear Stearns’s mortgage-backed securities. But the deal also meant that JPMorgan was on the hook for the legal troubles of Bear Stearns and the other troubled institutions it acquired. The investment bank eventually spent $19 billion in fines and settlements with customers and regulators.
JPMorgan CEO Jamie Dimon now considers saving Bear Stearns a bad idea, writing in 2015 that “we would not do something like Bear Stearns again.”
https://fortune.com/2023/03/10/bill-ackman-twitter-silicon-valley-bank-bailout-startups/amp/
"“[T]he structure and powers of this agency are not something the Founders and
Framers would recognize. By structuring the Bureau the way it has, Congress
established an agency primed to ignore due process and abandon the rule of law in
favor of Bureaucratic fiat and administrative absolutism.
The best that any Bureau director can do on his own is to fulfill his
responsibilities with humility and prudence, and to temper his decisions with the
knowledge that the power he wields could all too easily be used to harm
consumers, destroy businesses, or arbitrarily remake American financial markets.
But all human beings are imperfect, and history shows that the temptation of
power is strong. Our laws should be written to restrain that human weakness, not
empower it.
I have no doubt that many Members of Congress disagree with my actions …, just
as many Members disagreed with the actions of my predecessor. Such continued
frustration with the Bureau’s lack of accountability to any representative branch
of government should be a warning sign that a lapse in democratic structure and
republican principles has occurred. This cycle will repeat ad infinitum unless
Congress acts to make it accountable to the American people.”
42
Footnote 42: 42 CFPB, Semi-annual report of the Bureau of Consumer Financial Protection 1-2 (Apr 2, 2018),
https://files.consumerfinance.gov/f/documents/cfpb_semi-annual-report_spring-2018.pdf.
I think CATO is probably just a think tank, I don't think they bankroll litigation seeking redressability for the numerous victims of federal agency overreach.
NCLA and PLF do and I think there is another nonprofit in NYC that does it.
If you had enough money from some of the 8,000+ existing common and jps Shareholders you could start a litigation/investment fund or partnership, say 80% to buy up distressed shares and 20% for targeted litigation and lobbying. You could even do tranches of potential payouts to satisfy different investor needs.
Or just live with the idea that you're holding an option on the eventual release from the conservatorships. It may or may not end during our lifetimes.
But I can guarantee you that the current administration is not thinking about how to act benevolently towards the 'evil big corporations Shareholders and/or hedge fund guys'.
Jessica Thompson, of the Pacific Legal Foundation, in today's hearing in the House Finance Committee (from her written material):
"CFPB v. Community
Financial Services has the potential to be one of the most important separation of
powers decisions in recent history.
Congress should not wait for the Court to force its hand with regards to CFPB’s
funding. The separation of powers is essential to the design of the U.S. Constitution
and the rule of law—it ensures transparency and accountability, thereby protecting our representative form of government. The CFPB is ripe for reform to prevent
further damage to the U.S. Constitution’s separation of powers.
I. CFPB’s Funding Mechanism Violates the Separation of Powers
Article I, Section 9, Clause 7 of the Constitution solely vests Congress with the
power of the purse: “no money shall be drawn from the treasury, but in consequence
of appropriations made by law.” As James Madison explained in The Federalist
Papers, “This power over the purse, may, in fact, be regarded as the most complete
and effectual weapon with which any constitution can arm the immediate
representatives of the people[.]”4 The power of the purse guards against “all the
overgrown prerogatives of the other branches of the government.”5
Yet the Dodd-Frank Act designed CFPB to be a financial regulator with full
independence from Congress and the political process. With the constitutionality of
CFPB’s perpetual self-funding mechanism squarely presented to the Court, CFPB
has reversed course on its long-stated view that it is a “non-appropriated agency” in
its petition for certiorari6 and cert-stage reply brief.7 As prominent administrative
law scholar, Adam White, has detailed at length, this reversal is contradicted by a
decade of statements from CFPB and Congress itself.8
Congress delegated a core legislative power to CFPB in the Dodd-Frank Act.
With a simple one page letter to the Federal Reserve, the CFPB can fund itself with
up to 12 percent of the Federal Reserve’s annual operating expenses, in perpetuity.9
CFPB recently estimated its funding authority was $717.5 million in fiscal year 2021,
and $734.0 million in fiscal year 2022.10 For comparison purposes, the Office of Management and Budget was appropriated $106.6 million and $116 million in fiscal
years 2021 and 2022, respectively, for its salaries and expenses.11
Dodd-Frank further shields CFPB’s self-funding mechanism from oversight,
declaring that its funds “shall not be subject to review by the Committees on
Appropriations of the House of Representatives and the Senate,” nor subject to “the
consent or approval of the Director of the Office of Management and Budget.”12
CFPB’s independence from congressional and presidential appropriations processes
was by design, as the Senate Banking Committee explained CFPB would not be
“subject to repeated Congressional pressure.”13 “The Committee finds that the
assurance of adequate funding, independent of the Congressional appropriations
process, is absolutely essential to the independent operations of any financial
regulator.”14
From its inception, CFPB understood the vast power of the purse Congress
delegated to the new agency. In one of its first strategic plans, CFPB emphasized that
by “providing the CFPB with funding outside of the congressional appropriations
process,” Congress had “ensure[d] full independence” for the agency.15 Despite its
position in recent filings before the Supreme Court, CFPB has always described its
perpetual self-funding as not coming from “appropriations.”16 In 2021, CFPB Director
Rohit Chopra described CFPB as “an independent, non-appropriated bureau,” and
emphasized that its funds transferred from the Federal Reserve “are not government
funds or appropriated funds.”17 CFPB’s most recent financial report, released the day
after CFPB filed its cert petition, continues to espouse this view: “The Dodd-Frank
Act explicitly provides that Bureau funds obtained by or transferred to the CFPB are
not government funds or appropriated funds.”18
CFPB’s attempt to recharacterize its long-held status when placed under
constitutional scrutiny may be unsurprising, but its lack of candor to the Supreme
Court should ring alarm bells for Congress. It is long past time for Congress to reform
CFPB and submit the agency to the constitutional appropriations process."
FOOTNOTES 4 to 18:
4 The Federalist Papers : No. 58, Objection That The Number of Members Will Not Be
Augmented as the Progress of Population Demands Considered, Madison, available at
https://avalon.law.yale.edu/18th_century/fed58.asp.
5 Id.
6 Pet’r Pet. Cert., 16 (“The CFPB’s funding mechanism is entirely consistent with the text of
the Appropriations Clause, with longstanding practice, and with this Court’s precedent.
Congress provided that the CFPB shall be funded ‘from the combined earnings of the Federal
Reserve System.’ 12 U.S.C. 5497(a)(1).”)
7 Pet'r Reply Supp. Cert., at 2 (“Text, history, and precedent refute respondents’ assertion
that Congress violated the Appropriations Clause by authorizing the CFPB to spend a
specified amount from a specified source for a specified purpose.”).
8. Adam J. White, The CFPB’s Lack of Candor to the Court, Continued, Yale Journal on
Regulation, Feb. 3; Adam J. White, The CFPB’s Blank Check—or, Delegating Congress’s
Power of the Purse, Yale Journal on Regulation, Nov. 27; Adam J. White, The CFPB Engages
in Legal Deception, Wall Street Journal, Dec. 2022.
9 12 U.S.C.A. § 5497(a)(2)(C).
10 Consumer Financial Protection Bureau, Annual performance plan and report, and budget
overview, at 12 (Feb. 2022).
11 H.R. 133, 117th Cong. at 212 (2021); H.R. 2471, 117th Cong. at 204 (2022).
12 12 U.S.C.A. § 5497(a)(2)(C); § 5497(a)(4)(E).
13 S. Rep. No. 111-176, at 163 (2010).
14 Id.
15 Consumer Fin. Prot. Bureau, Consumer Financial Protection Bureau Strategic Plan FY
2013 - FY 2017, at 36-37 (Apr. 2013).
16 See e.g., Consumer Fin. Prot. Bureau, Financial report of the Consumer Financial
Protection Bureau, at 65 (Nov. 2015) (“The Congress, […] followed a long-established
precedent in providing the CFPB with sources of funding outside of the Congressional
appropriations process to ensure full independence […].”).
17 Consumer Fin. Prot. Bureau, Financial report of the Consumer Financial Protection
Bureau, at 45, 51 (Nov. 2021).
18 Consumer Fin. Prot. Bureau, Financial report of the Consumer Financial Protection
Bureau, at 45, 51 (Nov. 2022)."
-----
"Fortunately, Mr. Sturner and Townstone decided to fight back. When
Townstone was on the precipice of settling the case, PLF joined the Townstone
litigation team providing pro bono legal services to help alleviate some of the financial
strain on the small mortgage broker.
Then on February 3, 2023, nearly six years after
the CFPB first contacted Townstone, a federal judge in the Northern District of
Illinois dismissed, the CFPB’s case against Townstone, with prejudice.30 Applying the
Chevron framework, the district court held that ECOA prohibits discrimination
against applicants, but Regulation B’s language prohibiting discouragement of
prospective applicants exceeds the agency’s authority granted by Congress.31"
" But Townstone’s fight is illustrative of the harm that CFPB’s
overreach and avoidance of APA rulemaking can inflict on a small financial services
provider and in turn, consumers. Townstone’s reputation with consumers and the
financial industry was sullied by CFPB’s allegations..."
"Not many small financial providers would have the courage to run the gauntlet
and challenge the legality of a novel agency interpretation of a nearly 50-year-old
regulation. But the Constitution’s guarantee of the separation of powers is stronger
because of Townstone’s courage."
If Congress doesn’t act to bring CFPB back within Congressional oversight,
one thing is certain: the cost of compliance for financial institutions will continue to
increase as CFPB expands its authority outside of the APA rulemaking process, and
small financial institutions will feel the most financial strain from the increase in
compliance costs, and consumer access to financial services will suffer.
IV. The U.S. Constitution is the Solution
a. Congress should act now to bring CFPB within the constitutional authority. For example, in the Townstone case, CPFB argued that the authority
granted to it in the anti-circumvention provision of ECOA permits it to enforce
Regulation B to prevent the “discouragement” of “prospective applicants.”37 Congress
should start its review of authority delegated to CFPB with similar anti-
circumvention provisions in other statutes, such as the Truth in Lending Act
(TILA),38 as well as general rulemaking authority under the Consumer Financial
Protection Act39 and its Unfair, Deceptive, or Abusive Acts or Practices (UDAAP)
authority granted in the Dodd-Frank Act.40
appropriations process
Although the U.S. Supreme Court has announced it will hear arguments
regarding CFPB’s perpetual self-funding mechanism, Congress should act now to
reform CFPB and bring it within the constitutional appropriations process and
ensure proper Congressional oversight. Congress should fulfill its constitutional duty
to control the power of the purse and bring CFPB into the constitutional
appropriations process.
b. Congress should conduct oversight hearings to review the breadth of
authority delegated to CFPB
The Constitution vests “all legislative powers” in Congress.34 Congress should
jealously guard its duty as the people’s representatives to craft the laws and limits
its delegation of that power to executive agencies. As the Supreme Court’s recent
separation of powers cases35 and the application of the major questions doctrine36
demonstrate, executive agencies have shown a willingness to stretch their authority
beyond the powers granted by Congress. This has been an alarming trend for decades,
and although the Supreme Court has increased its scrutiny of agency action of late,
Congress also has a duty to police the boundaries of the separation of powers. The
CFPB v. Townstone Financial, et al. decision is illustrative of how CFPB is not afraid
to engage in alarming overreach.
Regulation B was promulgated in 1975 and faced few legal challenges. The
Northern District of Illinois was the first to consider whether the authority delegated
to the Federal Reserve--later CFPB--in ECOA reaches the “discouragement” of
“prospective applicants.” Expansion of agency authority through enforcement actions
is another way that CFPB evades the APA rulemaking process and poses risks to the
rule of law. As the Townstone case shows, the attempted expansion of agency
authority through litigation can cause a nearly 50-year-old regulation to be called
into question. This harms regulated financial institutions through increased
compliance costs and these costs will ultimately affect consumer access to financial
services.
Congress should conduct oversight hearings to examine the delegations of
legislative power to CFPB. Where appropriate, Congress should amend statutes
granting legislative power to CFPB to place explicit limitations on CFPB’s exercise of authority.
V. Conclusion
The constitutional defects in the structure of the CFPB, combined with CFPB’s
appetite for expanded authority compound one another to create separation of powers
violations that pose a threat to individual liberty and consumer access to financial
services. Now is the time for Congress to reform the CFPB.
Thank you for the opportunity to testify on this important constitutional issue.
I look forward to answering your questions.
The 'evil hedge fund guys', a poor shareholder who can convince 1 of these nonprofits to bankroll it:
1. The Pacific Legal Foundation
2. The Competitive Enterprise Institute
3. The New Civil Liberties Alliance https://nclalegal.org/moroney-cfpb/
4. The CATO Institute
1 or more of the 8,000+ Fannie Mae and Freddie Mac Shareholders who have a well diversified portfolio mix and find the government overreach here inappropriate and unconstitutional.
But one thing seems likely, WITHOUT relief from one or more of the 3 branches of the federal government, the lifetime of the CONservatorships could exceed that of all 8,000+ Shareholders.
Americans like doing things about their predicament and doing something makes most Americans feel better than doing NOTHING.
"Is the CFPB funding legally allowed?" Its suppose to be from the Federal Reserve's EARNINGS and it will lose massive amounts of money this year, Powell will just print more money out of thin air, according to Powell's testimony yesterday.
The Issue: Can the CFPB receive funding only from EARNINGS as stated in Dodd Frank OR if the Federal Reserve has no earnings is it LEGAL to transfer the Appropriations to the coffers of the CFPB?
What does HERA say about the Appropriations of the FHFA's budget from the GSES and fhlbb banks?
MM 1:16
https://financialservices.house.gov/calendar/eventsingle.aspx?EventID=408627
P.S. Maxine, Ms. Beatty, and Mr. Foster (a card carrying member of the Bernie 2024 club?) are not excited about the hearing !
Here's a nice discussion today in the House about how the double insulated financing mechanism violates the US Constitution's Seperation of Powers (including the FHFA):
MM 55:
https://financialservices.house.gov/calendar/eventsingle.aspx?EventID=408627
Imagine what would happen if Rojit Chopra was the FHFA Director instead of Sandra L Thompson:
"On Wednesday, the agency released a list of illegal junk fees encompassing deposit accounts; auto and mortgage loan servicing; and payday and title lending.
Subcommittee member Blaine Luetkemeyer, R-Mo., said Chopra has used junk fees as an excuse to expand his authority.
“So, the fact that we now call them junk fees doesn’t mean it’s real,” Luetkemeyer said after witness Jessica L. Thompson, an attorney at the conservative-leaning Pacific Legal Foundation, agreed that the term does not exist as in the financial lexicon.
“Because there is no such word out there. There is no authority. So, I think we as a group need to be pushing back,” he said.
The murky definition for junk fees leaves financial institutions “with no roadmap as to how to follow that,” said William Himpler, president and CEO of the American Financial Services Association, a trade group for consumer credit companies.
Another witness accused the CFPB of making arbitrary decisions about what qualifies as a junk fee. The CFPB’s working definition of junk fees is “any fee they don’t like,” argued Devin Watkins, an attorney at the conservative-leaning Competitive Enterprise Institute.
“When the definition under how they’re acting is so broad like that, it raises real non-delegation concerns that could undermine their authority to enact any of these,” Watkins said."
https://www.cnbc.com/2023/03/09/house-hearing-targets-cfpb-over-junk-fees.html
Hmmm. If the CFPB funding structure is ruled by SCOTUS as unconstitutional, will there finally be a resolution in Congress to "decide the future of the GSES"?
"A subcommittee of the House Financial Services Committee is considering nearly 10 legislative proposals to change the nearly 13-year-old Consumer Financial Protection Bureau, as Republicans and critics outside the Capitol accuse the agency of overreach, insufficient rulemaking and a lack of accountability. Members heard testimony from several witnesses who defended or condemned the agency’s practices."
https://www.cnbc.com/2023/03/09/house-hearing-targets-cfpb-over-junk-fees.html
"MEMORANDUM
To: Members of the Committee on Financial Services
From: FSC Majority Staff
Date: March 6, 2023
Re: March 9, 2023 Subcommittee Hearing: “Consumer Financial Protection Bureau:
Ripe for Reform”
On Thursday, March 9, 2023, at 10:00 a.m. in Room 2220 of the Rayburn House Office
Building, the Financial Services Subcommittee on Financial Institutions and Monetary Policy
will hold a hearing titled “Consumer Financial Protection Bureau: Ripe for Reform.” The
following witnesses will testify:
• Bill Himpler, CEO, American Financial Services Association
• Brian Johnson, Managing Director, Patomak Global Partners LLC
• Jessica Thompson, Attorney, Pacific Legal Foundation
• Devin Watkins, Attorney, Competitive Enterprise Institute
• The Honorable Keith Ellison, Attorney General, State of Minnesota
Background
The hearing will examine the leadership structure, funding, budget, and operations of the CFPB
and areas in which reforms are needed.
The Dodd-Frank Act established the CFPB as an independent agency.1
Unlike other federal
financial agencies, the CFPB does not have an executive board, does not have an independent
Inspector General, and does not allow for meaningful oversight of the director. The CFPB is led
by a single director who is appointed by the president and confirmed by the Senate for a term of
five years. The Dodd-Frank Act stated the President may only remove the director from office
for cause, i.e. “inefficiency, neglect of duty, or malfeasance in office.”2
On June 29, 2020, the
Supreme Court ruled in Seila Law LLC v. Consumer Financial Protection Bureau that the
CFPB’s leadership structure is unconstitutional as a violation of the separation of powers.3
The CFPB operates outside of the annual Congressional appropriations process. Instead, it
receives funding through direct transfers from the Federal Reserve (Fed), which is also not
subject to the appropriations process.4
The Fed does not exercise authority over the CFPB or its
budget. The CFPB director is required only to submit a letter to the Federal Reserve Board each
quarter certifying the amount of funds that are “reasonably necessary” for carrying out the
authorities of the Bureau.5
The Federal Reserve then transfers the requested amount. The
CFPB’s funding mechanism differs than that of other financial markets regulators, including the
Federal Trade Commission, the Commodity Futures Trading Commission, or the Securities and
Exchange Commission, as well as the Federal banking agencies. This process affords very little
oversight of the CFPB’s budget.
Legislative Proposals
The bills outlined below will be discussed during hearing:
H.R. ____, the CFPB Dual Mandate and Economic Analysis Act
This bill would establish the Office of Economic Analysis in the CFPB to review all proposed
and existing guidance, orders, rules, and regulations. The bill would require the CFPB to identify
in each proposed rulemaking the problem to be solved by the rule or regulation and the metrics
the CFPB will use to measure the success of the rule or regulation. These metrics must include a
measurement of changes regarding consumer access to, and the cost of, consumer financial
products and services. Additionally, the purpose of the CFPB would be revised to include
strengthening private sector participation in markets, without government interference or
subsidies, to increase competition and enhance consumer choice.
H.R. ____, the Taking Account of Bureaucrats' Spending (TABS) Act
This bill would eliminate provisions that fund the CFPB using transfers from the earnings of the
Federal Reserve System. The transfers under current law permit the CFPB to be funded outside
of the annual appropriations process. This bill brings the CFPB into the regular appropriations
process allowing for greater oversight.
Additionally, this bill would bring the CFPB out from
under the Federal Reserve and make it into an independent agency named the Consumer
Financial Empowerment Agency.
H.R. ____, the CFPB–IG Reform Act
This bill would establish a separate Office of Inspector General for the CFPB. Currently, such
oversight of the CFPB is combined with the Office of Inspector General for the Board of
Governors of the Federal Reserve System.
H.R. ____, the Transparency in CFPB Cost-Benefit Analysis Act
This bill would set forth information required to be included in a rulemaking made by the CFPB.
Specifically, the CFPB must publish a justification of the proposed rulemaking; a quantitative
and qualitative assessment of all anticipated direct and indirect costs and benefits; alternatives to
the proposed rulemaking; impacts on small businesses; and any assumptions, data, or studies
used in preparing this information.
H.R. ____, the CFPB Whistleblower Incentives and Protection Act
This bill would require the CFPB to provide awards to whistleblowers who report information
relating to a violation of consumer financial law resulting in certain monetary sanctions
exceeding $1 million. Specifically, the CFPB would be required to award compensation to
whistleblowers (1) not less than the greater of 10% of the collected monetary sanctions, or
$50,000; and (2) not more than 30% of the collected monetary sanctions. The compensation to
any single whistleblower would be capped at $5 million. The bill would also set forth
requirements regarding the legal representation of a whistleblower and would provide for
confidentiality regarding the whistleblower's identity.
H.R. ____, the Consumer Financial Protection Commission Act
This bill would remove the CFPB from the Federal Reserve System, convert the CFPB into an
independent commission, and modify its leadership structure. Specifically, the bill eliminates the
positions of director and deputy director and establishes a five-person commission appointed by
the President and confirmed by the Senate.
H.R. ____, Encouraging Innovation and Protecting Consumers Act
This bill would revert the CFPB’s Office of Innovation structure and operations to its original
purpose.
H.R. ____, Making the CFPB Accountable to Small Businesses Act
This bill requires the CFPB to consider the impact of all rulemaking efforts on small entities and
to justify its decision to not adopt certain alternatives to regulations applicable to small entities.
H.R. ___, Federal Reserve Loss Transparency Act
This bill amends the Consumer Financial Protection Act of 2010 to prohibit the Fed from
transferring money to fund the CFPB if the Federal Reserve Banks incur an operating loss, and
amends the Federal Reserve Act to require the Fed to follow US GAAP."
Perhaps we will get more clarity from the Supremes on the relatively new emergence of the MQD in the student loan forgiveness cases if the Plaintiffs in that case have Standing.
HeeeeHeeee! This stock just keeps delivering the intellectual dividends, but I'm hoping we get real dividends some day from these never ending conservatorships.
In theory we continue building capital organically.
So which side are you on (Maxine and Sherrod want to know!), the side of workers and consumers or the 'evil big corporations and Wall Street'?
Do you think that DeMarco did 'important work' Nationalizing the GSES and that the Republicans on behalf of the 'evil big corporations and Wall Street' are trying to destroy the FHFA through the federal courts?
Do you really think that the FHFA with their 100% control over our companies into perpetuity is in the best interests of hard working low and moderate income American Families?
That's the thing, residential developers realize that a huge expense is incurred by getting zoning approved by the local government and complying with all the other federal, state, and local regulations.
Little wonder that builders like building high end units for well off prospective buyers.
Plus a vast majority of Americans want equal or better houses built in their 'hood'.
Unsurprisingly, the Executive Branch through their Solicitor General believes that Collins stands for the proposition that the MQD does NOT apply to all cases involving major questions of Economic and Political Importance, from their Reply Brief in Biden v Nebraska:
"To the con-
trary, this Court regularly decides challenges to execu-
tive actions of major economic and political significance under the usual rules of statutory interpretation with-
out imposing heightened-specificity requirements. See,
e.g., Biden v. Missouri, 142 S. Ct. 647, 652 (2022) (per
curiam); Collins v. Yellen, 141 S. Ct. 1761, 1776 (2021);
Little Sisters of the Poor, 140 S. Ct. at 2380-2381; De-
partment of Commerce v. New York, 139 S. Ct. 2551,
2571-2572 (2019); Trump v. Hawaii, 138 S. Ct. 2392,
2408 (2018)."
Collins could have argued that the MQD invalidated the NWS but didn't and the Supremes were answering a question about what to do about the POTUS not being able to control one of his Executive Branch Agencies and NOT whether or not the Net Worth Sweep was a violation of the MQD.
What's interesting to note is that the federal government has acknowledged that the NWS IS A QUESTION OF MAJOR ECONOMIC AND POLITICAL SIGNIFICANCE.
The Collins decision NEVER addresses the question as to whether or not the NWS is a decision by an Unelected Bureaucrat to Nationalize the 2 lynchpins of the US Secondary Mortgage Market.
This seems to be a question for the federal judiciary to answer and the MQD was never brought up in any of the lower courts in any litigation that I am aware of.
Since you believe ALL current litigation is fruitless AND that the CONservatorships will last into perpetuity, why not let your local federal district Judge have a crack at it after the current litigation is exhausted?
We've got plenty of time.
https://www.ca5.uscourts.gov/opinions/pub/21/21-50826-CV0.pdf
That's the CFPB case not the single federal judge decision in the US District Court, I think it's in the US District Court in Houston.
https://www.txs.uscourts.gov/offices/houston-division
https://thehill.com/homenews/house/3888224-consumer-protections-laws-may-change-cfpb/
"I think at the end of the day, the bureau probably survives, but with a smaller budget and maybe a bipartisan commission. But Republicans are gonna be in the drivers’ seat, so they’ll be able to say, ‘If Democrats want this bureau at all, you’re going to do it our way,’” said Ian Katz, managing director of strategic policy firm Capital Alpha Partners.
Several high-profile Republicans including Sen. Ted Cruz (R-Texas) have introduced bills to abolish the CFPB altogether.
“It’s very possible … that you’d have a situation where maybe the House of Representatives says, ‘Well, we’re not gonna fund it anymore, and it [goes] out of existence,” Sen. Chuck Grassley (R-Iowa) told The Hill."
Found this today, from the Congressional Research Service (2 of their attorneys wrote it for Congress):
"The Bureau is not funded through discretionary funds from an appropriations act. The Bureau relies on
mandatory funding, chiefly through its Consumer Financial Protection Fund (the Bureau Fund or Fund).
Congress does not make annual appropriations to the Bureau Fund, and by statute, the Fund is not
“subject to review” by the appropriations committees. Instead, the statute authorizes the Bureau’s director
to determine the amount “reasonably necessary to carry out the authorities of the Bureau” and request that
amount from the Board of Governors of the Federal Reserve System. The Federal Reserve Board must
then transfer from its combined earnings to the Bureau Fund the amount specified by the director, so long
as it does not exceed a fixed percentage of the Federal Reserve’s operating expenses. Congress stipulated
that amounts in the Bureau Fund “shall not be construed to be Government funds or appropriated
monies.” Amounts in the Bureau Fund are “immediately available” and do not expire.
The Bureau’s chief funding source thus differs from annually appropriated accounts for most executive
agencies, but it is similar to other agencies that are supported in whole or in part by direct spending bills,
including other financial regulators. The Federal Reserve, the Office of the Comptroller of the Currency
(OCC), the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Administration, the
Farm Credit Administration (FCA), the Office of Financial Research (OFR), and the Federal Housing
Finance Agency (FHFA) cover all or part of their costs with funds derived from regulated entities or other
investments. Statutes specify that assessments by the Federal Reserve, the OCC, the FCA, the FDIC, the
FHFA, and the OFR are not “Government” or “public” funds, nor are they “appropriated” money. Like
the CFPB, these agencies do not rely on appropriations acts to continue their activities from year to year.
The Fifth Circuit’s Reasoning
The Fifth Circuit’s three-judge panel decision stems from a challenge to the Bureau’s Payday Lending
Rule (the Rule) brought by payday lenders and credit access firm associations arguing that, even after
Seila Law, the Bureau’s structure is unconstitutional. Among other challenges to the Rule, the plaintiffs
cast the Bureau Fund as “usurp[ing] Congress’s role in the appropriation of federal funds” in violation of
the Appropriations Clause and separation of powers.
The court largely agreed that the Fund was unconstitutional. It began by describing the Appropriations
Clause’s role in the separation of powers. Citing Supreme Court case law, the Fifth Circuit explained that
Congress’s control over money in the Treasury limits all powers of the other two branches. That is, no
action by the other branches may permit disbursements from the Treasury unless supported by an
appropriation. According to the Fifth Circuit, the clause is more than a restraint on the executive and
judiciary; the clause also “affirmatively obligates Congress to use” its “power over fiscal matters” to
preserve the separation of powers and individual liberty.
The Fifth Circuit then identified two features of the Bureau Fund that, in the court’s view, show Congress
abdicated this duty. The first and “[m]ost anomalous” evidence was the Bureau’s power to requisition
funds from the Federal Reserve, a “self-actualizing, perpetual funding mechanism.” According to the
court, Congress ceded both “direct control over the Bureau’s budget by insulating it from annual or other
time limited appropriation” and “indirect control” by drawing Bureau funding from Federal Reserve
earnings, which are themselves “outside the appropriations process.”
The second problematic feature of the Fund identified by the court was how Congress structured the
Fund. In the Fifth Circuit’s view, the Fund is “off the books” because it is allegedly not a “Treasury
account” but a “separate” account at a Federal Reserve bank. Fund amounts are available to the director
upon transfer, do not expire, are not government funds or appropriated monies, and are not reviewable by
the Appropriations Committees. The Fifth Circuit wrote that these provisions resulted in Congress
“relinquish[ing] its jurisdiction to review agency funding,” as well.
The Bureau’s arguments to the contrary did not persuade the court. The Fifth Circuit disagreed that the
Bureau Fund passed constitutional scrutiny because a statute created it. Here, the court distinguished two
types of statutes: “mere enabling legislation” and an “appropriation.” As a constitutional matter, only the
latter statute type authorizes outlays from the Treasury. The Fifth Circuit reasoned that Congress did not
make an appropriation under the Constitution when it created the Bureau Fund because Congress
specified that amounts in the Fund are not “appropriated monies.”
The Fifth Circuit also declined the Bureau’s invitation to follow other federal courts, including the U.S.
Court of Appeals for the D.C. Circuit, that have affirmed the Fund’s constitutionality. Those other
decisions, the Fifth Circuit wrote, were based “largely on one factor”: the self-funded nature of other
financial regulators. “Even among self-funded agencies,” the court stated, “the Bureau is unique.” It has
“a perpetual self-directed, double-insulated funding structure” that “goes a significant step further than
that enjoyed by the other agencies.” The court also emphasized that the Bureau was led by a single
director, answerable to the President with “plenary regulatory authority.”
Finally, the court highlighted possible implications of the CFPB’s arguments. If it were enough for the
Bureau Fund to derive from a statute, then “what would stop Congress from similarly divorcing other
agencies from the hurly burly of the appropriations process?”
HeeeeHeeee! "The major cocopuffs doctrine..."
I don't know, JB's Solicitor General is not cuckoo for the major cocopuffs doctrine (personally I'm a big fan of Count Cochoula !)
https://www.c-span.org/video/?525448-1/supreme-court-hears-challenge-biden-administration-student-loan-debt-relief-program&live
As I recall, David Thompson added the Appropriations Clause Violation claim shortly after the 3 Judge Appealate Panel Decision came out last fall.
Of course the federal trial court judge dismissed everything and now I'm pretty sure David Thompson appealed the lower court ruling to the 5th Circuit Appealate Court.
Nice! From the OIG FDIC report:
Ensuring the Validity and Efficacy
of FDIC Rulemaking
On October 19, 2022, the U.S. Court of
Appeals for the Fifth Circuit ruled that the
funding of the Bureau of Consumer
Financial Protection (CFPB) violated the
appropriations clause of the Constitution
and, as a result, the CFPB’s Payday
Lending Rule was invalid.85 The CFPB
receives it funding from the Federal
Reserve, which is funded through bank
assessments. The Court explained that this
funding structure is not subject to the
Congressional appropriations process and
therefore violated the Appropriations Clause. There is a risk that the Fifth
Circuit’s ruling could also be applied to the
FDIC. The FDIC is funded outside of the
Congressional appropriations process
through bank assessments (similar to the
Federal Reserve).
Also, FDIC rulemaking should be a
transparent process that analyzes the need
for bank regulation and the compliance
burden placed on banks. A foundational
component of transparent rulemaking is the
FDIC’s access to reliable information to
measure a regulation’s costs and benefits.
Effective governance is critical to ensure
proper oversight of the FDIC and the
accomplishment of its mission. The FDIC
Board and management should ensure that
the FDIC is identifying and managing risks
through an effective ERM program and
promptly addressing recommendations
made by the OIG and GAO to address
identified risks. The FDIC should measure
program effectiveness by establishing
outcome measurements and also address
whether the FDIC will follow Executive
Branch guidance. The FDIC should ensure
the validity of its rulemaking and ensure that
rules are premised on solid cost benefit
analyses.
https://www.fdicoig.gov/reports-publications/top-management-and-performance-challenges/2022-top-management-and-performance
Even the super powers of the fulcrum security are no match for Nationalization by our 'dear leaders' inside the federal government.
95% discount from par, Zero economic rights, zero cumulative dividends, and a recalcitrant FHFA and UST that refuses to accept any culpability for its past bad acts.
The Federal Reserve Board is different than the Unitary Executive Director at the CFPB as well as the FHFA, and that may be enough to different the Federal Reserve funding from the CFPB case (and FHFA?).
Personally, I think it's important to have a Federal Reserve independent from the Appropriations Oversight Review Process of Congress, otherwise there could be a real danger if politicians control monetary policy, it's practically an invitation for inflation.
Btw, $2.5B for a Federal Reserve HQ, may be a bit pricey, No?
From yesterday's WSJ:
The cost to renovate three downtown Washington office buildings has swelled to $2.5 billion
What Will Be Harder for the Fed? Taming Inflation or Its Office Renovation Expenses? The cost to renovate three downtown Washington office buildings has swelled to $2.5 billion
WASHINGTON—Anyone with a recent home renovation project that suffered from rising costs, shortages and delays now has distinguished company: The Federal Reserve, the U.S. institution charged with controlling inflation, is also struggling to hold down expenses on its stately digs.
The central bank is in the middle of a long-running project to overhaul three adjacent office buildings overlooking the National Mall into a state-of-the-art campus. The price tag for the endeavor has swelled to nearly $2.5 billion, up from an estimate of $1.9 billion in 2019—an increase of about 34%.
Budget documents released at the end of last year show the cost of the overall project has inflated due to "significant increases" in the cost of steel, cement, wood and other materials that "far exceed standard cost escalations."
Most of the overruns are for gutting and refurbishing two buildings: the Fed's headquarters, finished in 1937 and named for then-Fed Chairman Marriner S. Eccles, and a neighboring building known as "FRB-East" for now. The Fed acquired that building, which opened in 1933, from the Interior Department five years ago. Renovations on both began last year and are expected to run until 2027.
Until then, the Fed's senior brass has decamped for a third building that overlooks its headquarters from the north: the William McChesney Martin Jr. Building. It originally opened in 1974 and reopened at the end of 2021 after a top-to-bottom refurbishment that includes bathroom door sensors for touchless opening and a pair of hives of Italian honey bees on the roof.
Fed officials say their aim is to bring the majority of the board's staff to offices that are closer together and to reduce the central bank's leased space in downtown Washington.
The end result will serve most of the 3,000 economists, lawyers and professionals who support the central bank's seven-member board of governors, who set interest rates to manage economic growth and who oversee the nation's financial system.
The massive construction project has largely flown under the radar, unusual in a city where regulators sometimes encounter stiff congressional protest over such facelifts. Last decade, Republican lawmakers pilloried the $145 million retrofit of brutalist-style offices that house the Consumer Financial Protection Bureau near the White House.
In the 1990s, two Democratic senators who were unhappy with the Fed's campaign to pre-empt inflation with stiff rate increases raised a stink over its budget , including the construction of a towering new headquarters for the regional Fed bank—there are 12 scattered across the country—in Dallas.
The Fed has been here before. Amid rising inflation in 1969, it delayed plans to construct what eventually became the Martin building, then at an estimated cost of more than $30 million, and asked other regional Fed banks across the country to consider doing their part to combat high prices by deferring planned construction activity. "This has been done to minimize competition for scarce goods and services during the current inflationary period," the Fed said at the time .
The New York Fed's plans to construct a new building in lower Manhattan in the 1920s ballooned to more than $25 million, far above an initial $10 million estimate. One banking regulator lamented in the New York Times at the time that the "luxurious and lavish appointments of marble and brass" would make "Solomon's temple of old seem quite cheap in comparison."
This time around, costs also have gone up because of design changes demanded by local planning officials. While the Fed can move trillions with the click of a mouse, erecting a building in the District of Columbia is a different matter.
"We've got a built-up country, and it's hard to get zoning," Fed Chair Jerome Powell said last November. While he was addressing a source of higher home-building costs, he might as well have been talking about the project in his own backyard.
The National Capital Planning Commission and the U.S. Commission of Fine Arts, century-old government agencies that review building proposals for federal property in the region, signed off on the Fed's renovations only after the central bank toned down certain design flourishes, particularly to the FRB-East building.
Members of the fine arts commission, for example, criticized in 2020 the proposed addition of a five-story "brightly glowing glass box" on FRB-East, saying it would look unsightly at night and clash with an older, more modest Depression-era building. The Fed agreed to reduce the height and to add a pattern of semi-opaque glass panels to make the addition more compatible with the original building. To make up for some of the lost space, the new plans have more square footage below ground level, which the Fed said sent up the price tag.
The Eccles building, constructed in a "stripped classicism" style with white Georgia marble, was designed by French-born Philadelphia architect Paul Philippe Cret after legislation backed by President Franklin D. Roosevelt moved the central bank out of the Treasury Department. Its boardroom, which features 26-foot-high ceilings, briefly hosted U.S. and British military advisers during World War II because it was one of the largest air-conditioned rooms in the city.
Over time, the building had become rundown, say current and former staffers and policy makers. They described leaky ceilings, antiquated electrical systems, and inefficient heating and cooling systems.
The recently completed renovations on the Martin building were plagued by delays. In 2015, the Fed sacked the initial architectural and engineering firm hired for the job over what an internal watchdog described as shoddy work. Costs went up again when workers had to remove more asbestos than anticipated.
For several years, those renovations were managed by Mr. Powell, who served as a governor before becoming chair in 2018 . Lael Brainard, who left the Fed last month to become the director of the White House National Economic Council, took over that responsibility after Mr. Powell became chair. His signature adorns an exposed piece of a steel beam inside a top-floor cafeteria that features panoramic views of the D.C. skyline. In the 1990s, Fed Chairman Alan Greenspan hosted lawmakers, Supreme Court justices, and reporters for a Fourth of July fireworks-viewing party from an adjoining terrace.
The new building boasts luxe amenities: The boardroom where the Fed's rate-setting committee meets has a special tap with still, sparkling or chilled water, and the basement holds artwork from the Fed's private collection and other works on loan, including by Andy Warhol and Alexander Calder.
But the open-office design led to grumbling from some Fed staffers, including those who work with confidential bank data or other classified information.
Unlike other federal agencies, the Fed isn't subject to annual funding from Congress and instead pays for its operations through the interest it earns managing the nation's money supply, so its renovations didn't require outside approval from lawmakers.
The Fed is expected to run a loss this year for the first time in its 110-year history, however, because as it raises rates, it is paying more money in interest to banks and other financial institutions on cash held at the central bank than it will earn on $8.3 trillion in securities and other assets it owns.
The Fed raised rates at the fastest pace last year since the early 1980s to combat inflation that also hit 40-year highs. The appearance of a 10-foot construction barrier around the Eccles building last year fueled speculation among some market watchers—erroneously—that it was a new security measure deployed to fortify the central bank's headquarters against public protest.
The Fed added a short explanation about the construction project last fall to a longer list of "frequently asked questions" on its website to head off such confusion.
The Fed is open for business, it says, "and Federal Reserve operations are not affected."
Jerome Powell in response to Senator Reed:
"Central Banks tend to be self funded and that's a key part of our Independence"
"I'd rather not comment on matters at the Supreme Court."
Said this morning at SBC, in response to Senator Reed's request for comments on the CFPB case at the SCOTUS.
That's interesting, thanks! Here's another question that may or may not be in your wheelhouse, but could the Collins Plaintiffs or another shareholder in Texas, Louisiana, or Mississippi, initiate a new Claim or Pleading alleging an Appropriations Clause Violation under HERA?
If MOHELA or at least one of the Student loan forgiveness case borrowers has standing, then the SCOTUS may provide some more insight into the MQD.
The federal government has misbehaved badly here and acted in an abusive and coercive way. If they get away with it this time, it's just a matter of time before it happens again.
When is it acceptable for a US Treasury official to "salt the Earth with the shareholders carcasses and make sure that the GSES never go pretend private again"?
"Fluff"? Okay, if that's what you think bringing litigation invalidating the NWS and/or other federal government agency overreach is called.
I'll let you know.
By the way, "fluff" was used to invalidate a $400B federal agency spend over at the Education Department in one of the federal district courts.
Impact on Collins appeal? Wouldn't judicial economy argue for staying the appeal until the SCOTUS rules on the CFPB case?