GOP blocks vote on Richard Cordray to head consumer bureau [Updated]

 

Republicans on Thursday blocked the Senate from voting on the nomination of Richard Cordray to be the first director of the Consumer Financial Protection Bureau.

Supporters of Cordray's nomination came up seven votes short of the 60 needed to bring Cordray's nomination to the Senate floor for an up-or-down vote. The final tally was 53-45, with only one Republican, Scott Brown of Massachusetts, voting to cut off debate. Sen. Olympia Snow (R-Maine) voted present.

Snowe was one of several Republicans targeted this week by the White House in an extraordinary push to get Cordray's nomination confirmed. Nearly all Senate Republicans vowed in the spring they would not allow a vote on any nominee to head the controversial bureau unless Democrats and President Obama agreed to some key changes in its structure to weaken its authority.

The changes include replacing the single director with a bipartisan commission, subjecting the agency's budget to the congressional appropriation process and making it easier for other banking regulators to veto new consumer protection rules.

Sen. David Vitter (R-La.) said the changes were designed to limit what he called the agency's "unbridled, unprecedented authority."

"This notion that we're against consumer protection, that we're trying to gut the CFPB is just silly," Vitter said.

But that's exactly what Democrats charged Republicans with doing in continuing to block the nomination of Cordray, the former Ohio attorney general. Democrats noted that the agency cannot use many of its powers, including overseeing non-bank financial institutions such as mortgage brokers and payday lenders, without a Senate-confirmed director.

Sen. Sherrod Brown (D-Ohio) said the vote showed that "more than 40 of my colleagues chose Wall Street special interests over Main Street consumers. They should be ashamed of themselves."

[Updated at 9:40 a.m.: President Obama blasted Republicans for blocking Cordray's nomination and said he is considering installing him in the job if Congress goes out on a formal recess over the holidays.

"We are not giving up on this," Obama told reporters during an appearance in the White House briefing room shortly after the vote. "We are not going to allow politics as usual on Capitol Hill to stand in the way of American consumers being protected by unscrupulous financial operators. And we're going to keep on pushing on this issue."

Obama said he would look at all options, including a recess appointment, which would allow Cordray to serve for a year without the support of Congress. But all year Republicans have been blocking Congress from going on a formal recess.] 

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With mortgages at 4%, demand for home-purchase loans rises

With 30-year mortgage rates still averaging a rock-bottom 4%, applications to purchase homes rose after Thanksgiving to the highest level in four months.

Freddie Mac's weekly report on home lender offerings, released Thursday, showed the typical rate for a 30-year loan at 3.99%, the sixth straight week at or slightly below 4%.  Last year at this time, the 30-year fixed loan averaged 4.61%.

Fifteen-year fixed-rate home loans, a popular option for people refinancing homes, averaged 3.27%, down from last week's 3.3%. A year ago, the 15-year loan averaged 3.96%, Freddie Mac said.

The big government-backed mortgage buyer asks lenders what rates they are offering to borrowers with good credit and 20% down payments or 20% equity if they are refinancing. The rates are for loans of up to $417,500 with the borrowers paying about 0.75% of the loan amount in lender fees and points.

The typical mortgage rate for larger "jumbo" loans was running about a third of a percentage point higher, according to another report this week, this one from the Mortgage Bankers Assn. Jumbo loans are priced higher because lenders can't sell them to Freddie Mac and Fannie Mae, the other big government-sponsored mortgage buyer. 

Offering a bit of hope for housing at a time when foreclosures are drawing angry protests and government investigations, the mortgage bankers said applications for loans to buy houses reached the highest level since early August.

Refinances still made up about three-quarters of all applications for home loans, however.

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Jon Corzine to give first public testimony on MF Global collapse

Former U.S. Sen. Jon Corzine is returning to Congress on Thursday, but not by choice.

Corzine will be testifying before a House committee in his first public appearance since the bankruptcy of the company he led, MF Global.

Corzine was subpoenaed by the agriculture committee, which is investigating the circumstances surrounding MF Global's sudden downfall in late October. 

In prepared remarks, Corzine is set to apologize for his role in the bankruptcy:

I appear at today’s hearing with great sadness. My sadness, of course, pales in comparison to the losses and hardships that customers, employees and investors have suffered as a result of MF Global’s bankruptcy. Their plight weighs on my mind every day –- every hour. And, as the chief executive officer of MF Global at the time of its bankruptcy, I apologize to all those affected.

The former New Jersey governor has been widely blamed for MF Global's troubles. He joined the firm in 2010 after losing a bid for reelection to the New Jersey governorship and quickly proceeded to lead the company in a drive for more profit. His main strategy was to make riskier trades with MF Global's own money, similar to the approach followed by Goldman Sachs, which he led during the 1990s.

In its last months, MF Global made big bets on European sovereign debt, which eventually helped bring the company down. Earlier this week it was reported that Corzine overruled objections to the risky strategy.

The agriculture committee, which oversees parts of the financial markets, is questioning what happened to $1.2 billion in customer money that has not been tracked down yet. Corzine is set to say that he only learned about the missing funds a day a before the bankruptcy -- during one of "the chaotic, sleepless nights preceding the declaration of bankruptcy" -- and does not know where the money is today.

Aside from a retracing of MF Global's last month, the testimony provides a colorful telling of Corzine's rise from rural Illinois, to night school and to the the top of Goldman Sachs.

Corzine is set to testify that most people would have taken advantage of their constitutional right not to testify, but not him.

As a former United States senator who recognizes the importance of congressional oversight, and recognizing my position as former chief executive officer in these terrible circumstances, I believe it is appropriate that I attempt to respond to your inquiries.

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Photo: Former MF Global Chief Executive Jon Corzine. Credit: Andrew Harrer / EPA

Citigroup shares slip after bank announces 4,500 layoffs

Citigroup Inc. shares fell on Wednesday after Chief Executive Vikram Pandit said the bank will lay off 4,500 employees as it attempts to trim costs in an "extremely challenging operating environment."

The cuts, which amount to less than 2% of Citigroup's approximately 267,000 employees, will be spread over several quarters, Pandit said at an investor conference Tuesday sponsored by Goldman Sachs Group Inc. Citigroup will take a $400-million charge in the fourth quarter related to the layoffs, factoring severance and other expenses.  

In mid-day trading Wednesday, the company's shares were down 1.6%, or 48 cents, to $29.27.
The Citigroup layoffs will come in part from the bank's proprietary-trading operations, Pandit said.

"It's a combination of market uncertainties, sustained economic weakness in the developed economies and, as well, the most substantial regulatory changes we've seen in our lifetime," Pandit said of the atmosphere on Wall Street, warning that the difficulties will likely last for years.

Several financial institutions have been paring down their staffs this year. Bank of America Corp. said in the fall that it plans to cut out 30,000 jobs over the next few years. JPMorgan Chase and Swiss lender UBS also said that they plan to shrink their headcounts.

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Proposed: Short, sweet credit card form that puts costs in big type

 

The Consumer Financial Protection Bureau on Wednesday unveiled a proposed simplified credit card agreement form designed to make it easier for consumers to understand interest terms and comparison shop.

"Credit cards can be complicated, with many moving parts that impact the cost to consumers," said Raj Date, the agency's acting director, who is scheduled to formally announce the form at a Cleveland news conference Wednesday. "When a consumer has to read through pages of legal fine print in their credit card agreement to figure out how their card works, it's easy to get confused. With a short, simple, easy-to-understand credit card agreement, consumers can clearly see the terms of the deal and make the decisions that are right for them."

The proposed two-page agreement, which banks and other issuers would provide to consumers seeking cards, is about 1,100 words -- much shorter than the 5,500-word average industry agreement, the agency said.

The new form highlights the actual costs -- such as the annual percentage interest rate on purchases, cash advances and balance transfers -- in large type. It uses plain language to explain other items, including how the interest rate is calculated, why late fees are assessed and how billing disputes are handled.

The agency is seeking public input on the form through its website and also plans to run a test of the proposed form with customers of the Pentagon Federal Credit Union, one of the nation's largest credit unions.

The simplified agreement is similar to one the agency is proposing for mortgage disclosure forms. Both are part of the consumer bureau's Know Before You Owe project.

Credit cards are one of the main areas of focus for the agency, which began operations in July. It said last week that it had received more than 5,000 complaints about credit cards through Oct. 21, which showed consumers were struggling to understand terms and conditions.

Wednesday's announcement comes amid a push by the Obama administration over the last week to get the Senate to confirm the nomination of former Ohio Atty. Gen. Richard Cordray to be the agency's first director. Nearly all Senate Republicans have been blocking Cordray's nomination because they want the administration to agree to changes to reduce the bureau's power.

The White House has been trying to pressure some Senate Republicans to stop blocking the nomination. The Senate plans to vote on Thursday to try to overcome the filibuster, although the Republicans are expected to prevail.

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Photo: Treasury Secretary Timothy F. Geithner, center, meets last week with Richard Cordray, right, President Obama's nominee to head the Consumer Financial Protection Bureau, and interim director Raj Date. Credit: Getty Images

California, Nevada team up to investigate foreclosure fraud

California and Nevada, two states at the heart of the nation’s housing crisis, will join forces to investigate allegations of foreclosure fraud and other types of mortgage improprieties.

The agreement to share resources and work jointly is the latest sign that the nation’s state attorneys general want to be out front in cracking down on bank practices the housing crisis — from the selling of mortgage-backed securities to the handling of foreclosures.

At a joint news conference in Los Angeles on Tuesday, California Atty. Gen. Kamala D. Harris and Nevada Atty Gen. Catherine Cortez Masto said their offices would share litigation strategies and evidence would link their offices' civil and criminal teams.

The announcement comes less than a week after Massachusetts said it was suing the nation’s five largest mortgage servicers over alleged foreclosure illegalities. The move marked the first such litigation to be filed by a state.

Harris' office has opened a number of its own probes of the mortgage business. Investigators have subpoenaed information from Fannie Mae and Freddie Mac as part of a wide-ranging inquiry into lending and foreclosure practices in the state, The Times has previously reported. Her office also is investigating Bank of America and its mortgage arm Countrywide Financial, along with Citibank, seeking information on their sale of mortgaged-backed securities in California.

The new alliance between Harris and Masto comes as banks are working to strike a deal with a coalition of attorneys general who are working to seek relief for consumers allegedly wronged by faulty mortgage servicing and foreclosure practices.

Harris formally withdrew from those talks earlier this year. Masto has said Nevada officials would evaluate any proposal the talks might produce but would also push ahead with their own work. New York, Delaware, Kentucky and Minnesota also have signaled they are unhappy with the direction of the talks with the banks. All of those states have expressed concern that the banks could be let off too easily.

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Photo: California Atty. Gen. Kamala D. Harris. Credit: Brian van der Brug/Los Angeles Times

Jon Corzine's troubles build after MF Global bankruptcy

As MF Global's bankruptcy recedes further into the past its problems are not going away.

Since the firm, which was led by former Goldman Sachs chairman and U.S. Sen. Jon Corzine, filed for bankruptcy protection on Halloween, each passing week has brought forward troubling new revelations.

The firm went down after making a series of big bets on European sovereign debt. The Wall Street Journal reports Tuesday that MF Global's risk officer raised concerns about these bets with Corzine and was rebuffed. According to the story, Corzine responded that "the likely profit was worth the risks."

The company's more immediate problem, though, is the hundreds of millions of dollars of missing customer money. A shortfall was revealed in the immediate aftermath of the bankruptcy, along with allegations that the company had misallocated the money in a bid to keep MF Global afloat. In late November, the trustee overseeing the bankruptcy raised the amount missing, from about $600 million to about $1.2 billion.

At least one congressional committee has voted to subpoena Corzine, to force him to testify about where the money went.

Meanwhile, former employees at MF Global, who were almost all laid off, are now suing Corzine and the company's board, saying that they destroyed the careers and retirement savings of MF Global's staff.

The whole saga of Corzine's rise and fall -- from the loftiest heights of Wall Street, to public disgrace -- is told in a long Newsweek story this week. The story says that Corzine continues to return to his old barber on Wall Street, but has to hide himself on the way in and out:

While preparing to defend himself, Corzine continues to pay regular visits to Wall Street — if only to sit in the throne-like chair at Esquires, as he has since the days when he gazed into the barbershop mirror and saw the CEO of Goldman Sachs reflected back at him. It bears noting that J.P. Morgan once kept an apartment on the uppermost floor of the 32-story building where Esquires is located, directly across the street from the New York Stock Exchange, which the tycoon singlehandedly rescued from itself during the Panic of 1907. For all his many virtues, Corzine had become the latest Wall Street sinner, the latest to have been blind to the lessons of the past.

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Photo: MF Global CEO Jon Corzine. Credit: Rich Schultz / Associated Press

Wall Street's Ivy League pipeline faces growing criticism

The battle for the hearts and minds of America's best and brightest is heating up.

As The Times reported earlier this fall, students and professors on elite college campuses have been criticizing the high proportion of smart students who go to work in the financial industry (at Harvard last year, 29% of employed graduates did so).

Since then, the debate has only grown more fierce. At Yale and Harvard, students affiliated with the Occupy Wall Street movement have stood outside recruiting events for Goldman Sachs and Morgan Stanley and chastised students in attendance. Outside Harvard's Office of Career Services, a few dozen students chanted, "Goldman Sachs, you can’t hide. We can see your greedy side," the campus newspaper reported.

Thursday, at an event sponsored by Bloomberg, the former chairman of the Securities and Exchange Commission, Arthur Levitt, said that the anger is likely to have a long-term impact.

"No longer will financial services be the companies of choice of college seniors," Levitt said. "There is such vast disillusionment."

While individual students on these campuses had previously written articles critical of the flow of talent toward Wall Street, Thursday the editorial board of Duke University's Chronicle took up the cause:

If more smart people pursue jobs oriented toward creating socially-valuable products and services or commit themselves to developing solutions to educational or environmental problems, society will improve in ways that trading in mortgage-backed securities will never achieve. We encourage students headed for Wall Street to stray from that tired road, but recognize the institutional, parental and social pressures that compel many to pursue careers in finance and consulting. Although these careers promise security, wealth and status, we believe that Duke students can do better. Those who choose another path have the power to improve society in lasting and meaningful ways. We hope that they will.

The editorial was careful to note that not all the members of the editorial board agreed with the stance.

Meanwhile, at Harvard, the students paper's editorial board questioned the tactics of protesters trying to shame students interested in finance -- though it was anything but an endorsement of the banks.

Perhaps it is not ideal that so many of us go on to Wall Street, but targeting individuals looking at career options in this way is hardly the appropriate remedy.  Many students who enter these fields are not the scions of banking families but rather hard-working students looking for a challenging job that lets them experience a newfound financial prosperity.

At the end of the day, the protesters may get what they are hoping for, not thanks to a change in opinion but rather due to the recent retrenchment in the financial industry. As Bloomberg recently reported, Wall Street is set to lay off 200,000 employees this year and hiring is slowing to a trickle.

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Photo: Yale students argue with a fellow protester at Occupy New Haven in October. Credit: Jessica Rinaldi / Reuters

Timothy Geithner urges Senate to confirm consumer bureau nominee

After meeting with top officials at the Consumer Financial Protection Bureau on Thursday, Treasury Secretary Timothy F. Geithner urged Senate Republicans to stop blocking the nomination of the agency's first director.

"I guess I'd ask the question, 'Who are they protecting?' " Geithner said of Senate Republicans. "They're not protecting consumers."

Geithner appeared before reporters with the officials, including Richard Cordray, the agency's enforcement director and President Obama's nominee to be its director. Nearly all Senate Republicans are blocking Cordray from receiving a confirmation vote because they want the Obama administration to agree to changes that would weaken the agency's authority.

Without a director, the bureau cannot exercise any of the new consumer protection powers granted to it in the financial reform legislation enacted last year. The agency has taken over from other regulators the consumer protection responsibility for banks, but cannot enforce new rules for non-bank financial institutions, such as mortgage brokers and payday lenders.

"It makes no sense for us to run a country where in effect there's two Americas for consumer protection," Geithner said. "There's a much higher standard for consumer protection for people who do business with banks, but much weaker standards of protection and enforcement for people who do business with entities that are not banks."

The Obama administration has been trying to pressure Republicans to stop their filibuster of Cordray, a former Ohio attorney general who would be confirmed by the Senate's Democratic majority if a vote were allowed. But Republicans have shown no signs of budging on their blockade, which will probably leave the agency without a confirmed director until after next year's presidential election.

The consumer bureau -- the controversial centerpiece of the sweeping overhaul of financial rules -- began operations in July. It is being headed by Raj Date, a special advisor to Geithner, until a permanent director is confirmed.

Geithner met with Date, Cordray and Holly Petraeus, the head of the agency's Office of Servicemember Affairs, on Thursday to discuss their early efforts, such as streamlining mortgage disclosure forms.

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Photo: Treasury Secretary Timothy F. Geithner, center, meets with Richard Cordray, right, President Obama's nominee to head the Consumer Financial Protection Bureau, and interim director Raj Date. Credit: Getty Images

Wells Fargo says California's economy "in flux" next year

California's economy could stumble next year if the nation slips into a double-dip recession, Wells Fargo Securities warned in a regional economic analysis.

"The downside risks are easy to list," said senior economist Scott Anderson in a note Thursday. "Slower growth in Asia and a stronger dollar will hurt California exports and tech demand.

"A foreclosure and distressed sales backlog and continued weak demand for housing will keep home prices declining, intensifying financial pressure on California consumers at a time when equity prices could also be moving lower."

And those are just part of the Golden State's problems.

The state government could be hit with another round of deep budget cuts because tax revenue is trending $3.7 billion below forecasts for the 2011-2012 fiscal year that ends on June 30, Anderson said.

New cuts, which would be triggered automatically, might range from $600 million to $2 billion.

"For now, we withhold judgment on the California recession question and continue to forecast net job creation in California," Anderson said, "though it is likely to be fewer jobs created than this year, and the pace of job growth in California could slip somewhat below the national average."

The impending budget cuts also could play havoc with local government and school district finances, Moody's Investors Service said in a separate report on the California economy released Thursday.

"The mid-year cuts are all but certain, and the state continues to defer a substantial portion of districts' cash funding from one year to the next," Moody's said. "This creates liquidity and budget challenges for most districts."

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Photo: Wells Fargo Bank in Charlotte, N.C. as the last sign for former Wachovia Bank is removed in October.

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Freddie Mac: Mortgage rates stuck in low at 4%

The mortgage engine seems stuck in low.

For five straight weeks, Freddie Mac's survey of the rates offered by home lenders has averaged at or below 4% for 30-year loans.

The most recent Freddie survey came out Thursday at an even 4% -- a level that would have seemed hallucinatory not so long ago, before the Federal Reserve pulled out the interest-rate stops to support to the economy.

The 15-year fixed loan, at an average of 3.3%, also remains in record low territory, and Freddie Mac said the start rates on adjustable mortgages have dipped to all-time lows.

Something else also appears to be lower, though, despite the record rates: desire for new home loans.

A Mortgage Bankers Assn. count of applications showed an 11.7% decrease last week even after adjusting for seasonal factors such as the Thanksgiving holiday. The previous MBA weekly survey had also shown a decline as the latest wave of refinancings begins to subside.

A Fed report this week on regional economic conditions described residential real estate markets as generally sluggish. But the report also said the economy expanded at a moderate pace in 11 of the Fed's 12 Districts -- a fact that provided encouragement to Freddie Mac economist Frank Nothaft.

"The extraordinarily low mortgage rates of the past month may provide a needed spur to housing activity," Nothaft said, hopefully, in the latest Freddie Mac release.

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File photo: The troubled mortgage business concerns Treasury Secretary Tim Geithner. Credit: Reuters / Jason Reed