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."

Stripper ‘Consultant’ Strikes Back against Boss

This article was originally published by the Fiscal Times on Thursday, March 31, 2011.

By Katherine Reynolds Lewis

When Ramona Cruz worked as a stripper at three different clubs in Massachusetts, her bosses dictated everything, from her skimpy attire, hair and makeup to the long hours she performed on stage and when she could participate in more lucrative private dances with customers.

Because she was eager for a job, Cruz agreed to work for no wages or benefits, just tips from her customers. Moreover, she had to share part of her tips with the club's other workers. Last fall, Cruz was stunned to learn from a friend that by law she should have been treated as an employee entitled to a minimum wage, overtime and other protections.

Instead, the club owners had gotten around federal and state labor laws for over a decade by classifying her and other exotic dancers as “independent contractors” who were entitled to none of those benefits. Last September, Cruz, 35, the mother of an eight-year-old girl, sued to recover the lost wages, tips and fees she was required to pay to work in the clubs, in three pending class-action suits challenging the classification of strippers as independent contractors.

"You don't feel like an independent contractor because you have to follow all their rules," Cruz, who now works as a home health aide in Boston, told The Fiscal Times. "We had to be there or we got late fees. Whatever they said went."

Treasury Plan to Wind Down Fannie and Freddie

This article was originally published by the Fiscal Times on Friday, Feb. 11, 2011.

The Obama administration released a white paper proposing the gradual winding down of Fannie Mae and Freddie Mac and overhauling the mortgage securities market.

By Katherine Reynolds Lewis

The Obama administration Friday laid out an ambitious vision for U.S. housing finance reform, in which the government gradually diminishes its role and private investors return to the mortgage securities market.

But the plan doesn't specify how to overhaul or eliminate Fannie Mae and Freddie Mac, instead setting out three possible options for the mortgage giants, which have been operating under government conservatorship since September 2008. Under the landmark Dodd-Frank financial overhaul legislation approved last year, the Treasury Department was supposed to present to Congress by Jan. 31 a report on the government-sponsored enterprises (GSEs) to help lawmakers write legislation to reform the agencies.

"This is a plan for fundamental reform — to wind down the GSEs, strengthen consumer protection, and preserve access to affordable housing for people who need it," said Treasury Secretary Timothy Geithner in a statement. "We are going to start the process of reform now, but we are going to do it responsibly and carefully so that we support the recovery and the process of repair of the housing market."

At stake are the health of the real estate market, economic growth and, some argue, the future of the 30-year fixed-rate mortgage. The challenge for policymakers is to attract private investors back into the mortgage market while retaining the benefits that Fannie and Freddie established — a liquid secondary mortgage market and greater access to homeownership. The administration and lawmakers are also attempting to prevent a repeat of the excessive risk-taking and inadequate supervision of the housing market that led to the 2008 financial crisis, while reassuring foreign investors in housing bonds and U.S. government debt.


Whistleblower Rule: Business Leaders Want it Changed

This article was originally published by the Fiscal Times on Monday, Feb. 7, 2011.

The SEC will soon issue a rule giving corporate whistleblowers the chance to collect big money for reporting securities violations, but the business community fears a wave of frivolous claims.

By Katherine Reynolds Lewis

In his continuing outreach to business leaders, President Obama spoke at the U.S. Chamber of Commerce this morning about global competition, technological innovation and the outdated or unnecessary government regulations. But a major concern of many corporate leaders is a proposed federal rule giving corporate whistleblowers an opportunity to collect hundreds of thousands of dollars for reporting securities law violations. The rule has alarmed the business community, which argues that the plan would encourage frivolous claims and undermine a decade of work to provide safe reporting channels for whistleblowers.

By April 17, the Securities and Exchange Commission must give final approval to the rule, which Congress ordered as part of the Dodd-Frank financial overhaul law aiming to prevent a repeat of the 2008 financial crisis.

Corporate lawyers and lobbyists have asked the SEC to require whistleblowers to report problems internally before going to the government, to limit the people eligible to collect a bounty and to extend the time a company has to correct violations. On the other side, lawyers who represent whistleblowers say the provisions the SEC proposed are needed to protect tipsters from retaliation and prevent corporate cover-ups.

The rulemaking is the latest in a series of government attempts to encourage corporate employees with knowledge of fraud or other violations to come forward. The Sarbanes-Oxley Act of 2002 — which Congress passed in response to accounting fraud at Enron, WorldCom and other corporate giants — required companies to establish internal reporting programs and made boards of directors and top executives personally liable for neglecting to investigate fraud complaints. In both 2001 and 2008, scandals over the activities of publicly traded companies quickly spread from the stock market to the broader economy, affecting everyday Americans as well as shareholders.

"This is one of the most explosive issues that has come up in a while for such a broad group of companies," said Alice Joe, a senior director at the U.S. Chamber of Commerce, which represents more than three million businesses. "Our companies have spent millions of dollars over the past 10 years trying to build up these compliance programs. Now you've got a rule that the SEC has proposed that is going to incentivize whistleblowers to completely bypass these systems."

Virginia farm supplies D.C. eateries despite animal-care violations

This article was originally published by TBD.com on Thursday, Nov. 18, 2010.

By Katherine Reynolds Lewis

Mie N Yu, Potenza, Zola -- they're all among a movement in Washington culinary circles toward locally grown, all-natural ingredients.

Another thing they have in common: dealings with Black Eagle Farm, a producer in rural Virginia that was found to have violated animal-care statutes and that lost its organic and humane certifications. Last December, a Virginia state veterinary inspector found that many of the animals at the Nelson County farm were emaciated and in need of veterinary care; the farm's working dogs ate raw meat rather than appropriate food; and one hen house contained eight chicken carcasses.

"The place was completely filthy," said Karen Davis, president of United Poultry Concerns, a Machipongo, Va.-based animal rights group that reviewed state records and photographs of the farm. "The company just stopped feeding the birds."

The state investigation was sparked by "numerous complaints" about maltreated dogs, livestock, and poultry on the farm, which is about 45 miles southwest of Charlottesville. A dead goat was tied to a fence, according to the records, and six dogs were allegedly being locked in a trailer full of feces for four days without water, and at least one was dying. The allegations and findings are spelled out in state records obtained through a Freedom of Information Act request by Gina Schaecher, general counsel for the Appalachian Great Pyrenees Rescue, based in Richmond, Va., which tried to rescue dogs on the farm.

Financial Advisors: New Rules Protect Consumers

This article was originally published by the Fiscal Times on Friday, Nov. 5, 2010

With more than 100 professional designations for financial-services providers, it can be hard to figure out who you can trust with your with your money. New government regulations may change that.

By Katherine Reynolds Lewis

Wondering whether to jump back into the market after the Federal Reserve's plan to pump $600 billion into the economy sent stocks to their highest level since September 2008, but worried about the uncertain outlook? People looking for good financial advice can have a hard time.

There are no federal rules for the training or conduct of someone who hangs a shingle as a financial planner. “Certified” financial service providers include more than 100 professional designations, with acronyms like CFP, CFM, CIMA, CFA, CLU, CPA, EA and PFC, representing everything from a single self-study course to years of education, professional training, continuing education, testing and ethics.

Adela Pena, 63, thought she was being responsible when she took early retirement from a telecommunications company in 1998 and invested a $400,000 lump sum pension payment in an annuity recommended by a financial adviser. She watched the value of her portfolio plummet and the adviser stopped returning phone calls. By 2008, she had only $49,000 left.

“Now all I’m living off is my Social Security and the generosity of my children,” she said in an interview from her San Jose, Calif., home. “It’s not like I spend my money foolishly. My children and I never really went on vacation because I wanted to make sure I had some money in my old age so they wouldn’t have to worry about me.”

New Government Oversight
Now, for the first time, financial planners could be subject to government oversight and broker-dealers could be required to act in their customers’ best interests, after two landmark reviews ordered by Congress in this summer's financial regulatory overhaul. The initiatives could reshape the marketplace for financial and investment advice. Policymakers hope new rules will restore some of the confidence shaken by the global financial crisis and stock market collapse in 2008, and better protect investors for the future.

“If I go to someone who markets himself as a doctor or a lawyer, I know that person has passed an exam and that person is subject to a code of professional conduct,” said Marilyn Mohrman-Gillis, managing director for public policy at the Certified Financial Planner Board of Standards, the organization that grants the CFP designation. “It’s easier to be a financial planner than it is to be a cosmetologist.”

Justice quizzed on death penalty

This article was originally published by Gannett News Service and the Jackson Clarion-Ledger on Thursday, Sept. 30, 2010.

By Katherine Reynolds Lewis

WASHINGTON — Mississippi Justice James Graves Jr. clarified his position on the death penalty Wednesday during a Senate hearing on his nomination for a federal judgeship.

Responding to a question from Sen. Jeff Sessions, R-Ala., Graves explained that he joined a dissenting opinion in a capital murder case for reasons related only to claims by the defendant, Anthony Doss, that his attorneys had been ineffective and that he was mentally retarded.

"I take responsibility for joining that opinion, but I have not now nor have I ever subscribed to any point of view that the death penalty was unconstitutional," Graves told members of the Senate Judiciary Committee. "The United States Supreme Court has determined that the death penalty does not constitute cruel and unusual punishment. I would follow the law as handed down by the United States Supreme Court."

Graves, 56, is a nominee for the 5th U.S. Circuit Court of Appeals in New Orleans, which hears appeals from case in Mississippi, Louisiana and Texas.

He pointed to his nine years as a Mississippi justice, during which he voted to affirm convictions and the death penalty in at least a dozen capital punishment cases.

Graves is the only black justice on the court, which he joined in 2001. Before that, he was a Hinds County Circuit judge for 10 years.

He holds a bachelor's degree from Millsaps College and law and master's degrees from Syracuse University.