The ‘Warren Report’ - GOP Attacks Consumer Agency

This article was originally published by the Fiscal Times on Thursday, May 19, 2011.

By Katherine Reynolds Lewis

Even before it formally opens its doors this summer, the new federal agency created to protect consumers from unscrupulous financial industry practices is coming under withering attack by Wall Street and Republican lawmakers. And despite a months-long charm offensive by Elizabeth Warren, the former Harvard professor and chief architect of the new agency, Warren has been unable to win over many of her critics on Wall Street and within the GOP.

Bills pending in the House would curb the power of the Consumer Financial Protection Bureau, while 44 Republican senators have promised to block confirmation of a director for the new agency unless those restrictive measures are approved.

With Democrats in control of the White House and the Senate, but not of the House, the legislation is unlikely to become law. But between the Senate GOP ultimatum and financial industry criticism of Warren, few believe she could be confirmed if President Obama nominates her as the director.

As a result, Obama may have little choice but to name Warren as director during a congressional recess in order for the agency to have someone at the helm when it begins to wield regulatory power this summer. Warren currently is overseeing the creation of the consumer protection bureau as a special assistant to the president. If she is made director through a recess appointment that would all but assure a politically bumpy future for the agency.

The Senate GOP pledge "creates a climate that is ugly. That is an in-your-face kind of attack that I haven't seen in 20 years in Washington," said Ed Mierzwinski, director of the consumer program at the advocacy organization U.S. PIRG. "Elizabeth Warren wants to come in and make that marketplace fair. Wall Street would prefer to decide on their own how to make money."

What if you had to buy American?

This article was originally published by MSN Money on Thursday, May 12, 2011.

It might be supremely patriotic to stop purchasing imports, but the consequences for US consumers and the economy would be devastating.

By Katherine Reynolds Lewis

Legions of patriotic Americans look for "made in USA" stickers before buying products, out of a desire to support the country's economy.

But what if we all were restricted to purchasing only those goods that were made in America?

Our homes would be stripped virtually bare of telephones, televisions, toasters and other electronics, and many of our favorite foods and toys would be gone, too. Say goodbye to your coffee or tea, and forget about slicing bananas into your breakfast cereal -- all three would become prohibitively expensive if we relied on only Hawaii to grow tropical crops.

We'd have to trash our beloved Apple products because the iPod, iPad and MacBook aren't made in the U.S. Gasoline would double or triple in price, given that we now import more than 60% of our oil. And you couldn't propose to your true love with a diamond ring: There are no working diamond mines in the U.S.

Moreover, a complete end to imports would actually hurt the U.S. economy, because consumers and domestic companies would lose access to cheap goods. Trade protections, whether through tariffs or quotas, cost the economy roughly $2 for every $1 in additional profit for domestic producers, said Mark Perry, an economics professor at the University of Michigan-Flint and a visiting scholar at the American Enterprise Institute, a conservative think tank.

"If we restricted trade to just the 50 states, what would happen immediately -- and would increase over time -- would be a huge reduction in our standard of living, because we wouldn't have access to the cheap goods we get from other countries," Perry said. "We also wouldn't have any export markets, so companies like Caterpillar and Microsoft would have a huge reduction in sales and workforce." (Microsoft is the publisher of MSN Money.)

Saying no to the boss

It's all too easy for companies to fall into a yes-man culture, but managers that encourage loyal opposition are best suited to avoid corporate disaster.

This article was originally published by on Wednesday, May 11, 2011.

By Katherine Reynolds Lewis, contributor

Imagine going to your boss with news of a delayed project or cost overrun, and hearing"thank you" in response.

That's the rule at Menlo Innovations, a software company based in Ann Arbor, Mich., which trains project managers to smile and thank employees even when they're bearing bad news.

"My job is to say, 'Thank you for letting me know,' not 'I need you to work an extra 10 hours tonight,'" says Lisa Ho, 26, a Menlo project manager. "Sometimes it's hard to do because we have this deadline we're trying to meet. But I respect them for telling me and as long as we're very transparent… I can call the client."

In corporate America, many employees are afraid to report bad news because they're essentially saying no to the boss -- telling her that a business goal hasn't been met. But companies that foster a fear-free culture enjoy better decision-making, more ethical behavior and the ability to truly harness the collective brainpower of the workforce, according to Menlo CEO Rich Sheridan and other business leaders.

Encouraging employees to say no to the boss ensures that smart new ideas bubble to the top levels of an organization, Sheridan says. He sets such a high priority on healthy dissent that he's baked it into the corporate culture through training, procedures, regular communications to employees and a willingness to take risks based on staff suggestions.

National Debt: Budget Turmoil Slams Treasuries

This article was originally published by the Fiscal Times on Tuesday, May 3, 2011.

By Katherine Reynolds Lewis

Until recently, countries like Canada, Australia, and Norway could expect little more than scraps off the table after global investors parked most of their cash in U.S. Treasurys — long considered the gold standard for government securities. Throughout much of the past decade, more than two-thirds of the world’s cash reserves were held in dollars.

But all of that is changing as Wall Street, sovereign wealth funds, and other global financial concerns are looking askance at Washington’s long-term deficit problems and tumultuous political wrangling over the debt ceiling – and are scouting out more stable investments. The signs of this souring on U.S. debt are everywhere:

-- Major investors from PIMCO's Bill Gross to the central bank of China have pulled back on purchasing Treasury securities or have outright sold their Treasury bonds. Nine months ago, U.S. Treasuries accounted for half of the assets of Gross’s flagship Pimco Total Return, but that has shrunk to 30 percent now — the lowest ever in the fund’s 23-year history.

-- Individual investors have begun fleeing Treasurys as well. In March, the three worst-performing investment categories were U.S. short, medium and long-term debt, which lost $1.1 billion, according to Kevin McDevitt, analyst for Morningstar, which tracks mutual funds. Over the last 12 months, intermediate government bond funds lost 5.7 percent of their assets and long-term funds lost 14.5 percent.

-- And some sovereign wealth funds have shifted their focus from Treasurys to government debt in countries as diverse and disparate as Brazil, Malaysia, Canada, Australia, and the Scandinavian region — which while tiny markets compared with the United States have the advantage of appearing more stable.