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Category: Obama administration

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Obama taps ex-Treasury official, Harvard economist for Fed Board

Harvard economist Jeremy SteinPresident Obama on Tuesday nominated a former Treasury official and a Harvard economist to fill two vacancies on the Federal Reserve Board of Governors.

The nominees, Jerome H. (Jay) Powell and Jeremy C. Stein, would serve 14-year terms on the board if they are confirmed by the Senate.

"I am grateful that these individuals have agreed to serve their nation at this important time for our economy," Obama said. "Their distinguished backgrounds and experience coupled with their impressive knowledge of economic and monetary policy make them tremendously qualified to serve in these important roles."

Powell is a visiting scholar at the Bipartisan Policy Center in Washington, D.C. He served as  undersecretary of the Treasury for Finance under President George H.W. Bush. Stein is on the economics faculty at Harvard. In 2009, he served on the staff of the National Economic Council and was a senior advisor to Treasury Secretary Timothy F. Geithner.

Obama is trying to get the seven-member Federal Reserve Board back to full strength for the first time since mid-2010 after running into difficulty with one of his nominees this year. Nobel Prize-winning economist Peter Diamond was nominated in 2010 along with Janet L. Yellen and Sarah Bloom Raskin.

Yellen and Raskin were confirmed by the Senate, but Diamond ran into strong opposition from Republicans and withdrew in June.

RELATED:

Fed puts off any new policy action until 2012

Peter Diamond withdraws as Federal Reserve nominee

Obama to nominate three for Fed

-- Jim Puzzanghera in Washington

Photo: Harvard economist Jeremy Stein. Credit: Bloomberg.

 

Justice Department opinion allows states to offer online gambling

Montana lottery
The Justice Department has opened a window for states to offer their residents online gambling, saying such activity would not violate existing federal law.

The legal opinion could be a boon for states looking for ways to expand their lotteries to help close large budget deficits.

Assistant U.S. Atty. Gen. Virginia A. Seitz  said that proposals from state lotteries in Illinois and New York to sell tickets to adult residents online would not violate the 1961 federal Wire Act because they do not involve sports betting.

The 13-page legal opinion was issued Sept. 20 and quietly released by the Justice Department last week.

The Poker Players Alliance, which has been working for years to get Congress to make online poker legal, said the Justice Department opinion was "a much needed clarification of an antiquated and often confusing law."

"This will provide policy makers at both the state and federal level with the legal confidence to move forward with licensing and regulation of online poker and other non-sporting activity within their respective jurisdictions," said the group's executive director, John Pappas. He called on Congress to enact federal regulation of online poker to avoid a patchwork of different state laws.

State-run online lotteries also would not violate a controversial 2006 law, the Unlawful Internet Gambling Enforcement Act, which was meant to crack down on online poker sites. That law prohibits "unlawful Internet gambling," which is defined as placing, receiving or transmitting a bet via the Internet in a jurisdiction where federal or state laws make such bets illegal.

The 2006 statute allows bets "initiated and received or otherwise made exclusively" within a state that allows gambling and specifically says that the "intermediate routing of electronic data" does not factor in determining the location of the bet.

RELATED:

FBI shuts down Internet poker sites

Full Tilt Poker built Ponzi scheme, federal prosecutors say

California may benefit from legalizing sports betting, state senator says

 -- Jim Puzzanghera in Washington

Photo: A lottery machine in a Montana grocery store. Credit: Eliza Wiley Independent Record / Associated Press

 

 

U.S. Mint to stop making presidential $1 coins to save taxpayer money

Washington $1 coin
Washington has hit on a new way to save taxpayer money -- stop making some of it.

The U.S. Mint said Tuesday it will stop producing $1 presidential coins for public circulation because there are plenty of them already and the move will save $50 million a year.

There are 1.4 billion surplus dollar coins in the vaults of Federal Reserve Bank vaults, because the demand for each new coin drops significantly after it is introduced and financial institutions ultimately return about 40% of them, said Deputy Treasury Secretary Neal. S. Wolin.

That's enough coins to meet the current circulation demand for more than a decade, he said.

"Minting $1 coins that ultimately end up sitting in Federal Reserve Bank vaults –- and serve no useful purpose for businesses, financial institutions, and consumers -– is simply not a prudent use of taxpayer resources," Wolin said.

In 2005, Congress passed the Presidential $1 Coin Act mandating that the U.S. Mint issue four new presidential coins each year from 2007 to 2016. The coins began with George Washington, and ultimately there will be a coin for every deceased president, but they haven't proved to be much more successful than earlier attempts to establish the $1 coin.

The U.S. Mint will continue to produce the coins, as required by law, but they will not be put into circulation. Collectors and others who want to obtain them will be able to do so directly from the U.S. Mint during specific periods.

The next coin in the series, for Chester A. Arthur, will be released in the spring, and the number produced will be set based on collector demand.

Wolin said the decision to suspend production of the coins for public circulation was part of President Obama's effort to cut government waste.

Some members of Congress have questioned the cost of the program in an era of soaring budget deficits, and legislation has been introduced to suspend the program.

Ironically, other lawmakers have suggested that the $1 coins could be a way to save taxpayer money because they last much longer than paper dollar bills -- 30 years compared with 18 to 40 months for the old-fashioned greenback. A group called the Dollar Coin Alliance formed to advocate phasing out paper dollars and replacing them with coins.

RELATED:

Series aims to end $1-coin curse

Andrew Johnson gets his own $1 coin

Replace the dollar bill with a $1 coin, lawmakers propose

-- Jim Puzzanghera in Washington

Photo: The George Washington $1 coin. Credit: Associated Press

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

  Richard Cordray, nominee to head the Consumer Financial Protection Bureau

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.] 

RELATED:

Obama's pick for consumer agency doesn't end controversy

Obama urges Senate to OK Richard Cordray as financial watchdog

Senate Republicans vow to block any appointee to head consumer protection bureau

-- Jim Puzzanghera and Christi Parsons in Washington

Photo: Richard Cordray, the nominee to head the Consumer Financial Protection Bureau. Credit: Getty Images

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
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.

RELATED:

White House to urge GOP backing for Richard Cordray

Consumer agency logs 5,000 credit card complaints in first months

Timothy Geithner urges Senate to confirm consumer bureau nominee

-- Jim Puzzanghera

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

Geithner headed to Europe to meet with Sarkozy and key officials

Treasury Secretary Timothy Geithner
Treasury Secretary Timothy F. Geithner will head to Europe next week to meet with French President Nicolas Sarkozy, new Italian leader Mario Monti, and other key government officials to discuss their efforts to resolve the debt crisis

Geithner, who has been urging European leaders to take more forceful action, will travel there for three days beginning Tuesday "for discussions with his counterparts on their efforts to reinforce the institutions in the Euro area," the Treasury Department said Friday.

In addition to meetings with Monti and Sarkozy, a key player along with German Chancellor Angela Merkel in trying to address the European debt crisis, Geithner will meet with European Central Bank President Mario Draghi and Jens Weidmann, president of Germany's central bank.

Geithner also has meetings scheduled with the finance ministers of Germany and France, as well as with Mariano Rajoy Brey, the prime minister-elect of Spain.

The Federal Reserve joined with the European Central Bank and four other central banks this week to ease the crisis. In a coordinated move, the central banks made it easier for European leaders to access U.S. dollars cheaply in hopes of avoiding a freeze in credit markets.

Geithner told reporters Thursday that he supported the action.

"I think this was a responsible, sensible way for the Federal Reserve and other central banks to try to diminish some of the pressures you're seeing on European financial institutions," he said. The U.S. has an interest in doing that to reduce the need of European banks to shed assets, which could harm global economic growth, Geithner said.

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Deal by Fed eases Europe credit fears

Unemployment drops sharply to 8.6%; job gain is modest

Timothy Geithner urges Senate to confirm consumer bureau nominee

-- Jim Puzzanghera in Washington

Photo: Treasury Secretary Timothy F. Geithner, left, French Central Bank Governor Christian Noyer and French Finance Minister Francois Baroin at the G20 finance summit in Paris in October. Credit: EPA

Timothy Geithner urges Senate to confirm consumer bureau nominee

Treasury Secretary Timothy Geithner and Consumer Financial Protection Bureau officials

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.

RELATED:

Consumer agency will defend service members' pocketbooks

Obama urges Senate to OK Richard Cordray as financial watchdog

Senate Republicans vow to block any appointee to head consumer bureau

-- Jim Puzzanghera in Washington

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

Many Americans confused by credit-card terms, consumer agency says

MasterCardMany Americans are confused by credit-card terms, the Consumer Financial Protection Bureau said in releasing information about more than 5,000 complaints the agency received in its first three months of operation.

In a report Wednesday on the credit-card complaints, the agency found that banks and other issuers reported 74% were resolved. About 13% of consumers disputed the way credit-card companies resolved the complaints.

"When consumers contact us, we get a snapshot of how the consumer-finance markets are working," said Raj Date, the special Treasury Department advisor who is running the bureau until the Senate confirms a director. "And we are learning that there is a lot of consumer confusion about credit-card terms."

The agency has made handling complaints a priority. After its formal launch July 21, the agency began taking complaints about credit cards and the report covered those received through Oct. 21.

The agency said it plans to expand its complaint system to cover mortgages and home-equity loans by the end of the year.

"Many complaints show consumers struggling to understand the terms of credit cards and associated products like debt-protection services," the report said. "These complaints show a mismatch between consumer expectations and the way the product functions."

From July 21 to Oct. 21, the agency received 5,074 complaints about credit card. It sent most of them -- about 84% -- to the card issuer to try to resolve them. The rest were either incomplete or the consumer requested the complaint not be sent to the issuer.

Billing disputes were the most common problem, accounting for 13.4% of the complaints, followed by disputes about interest rates at 11% and complaints about identity theft and other fraud issues with 10.8%.

The American Bankers Assn. said that resolving customer complaints was the priority of financial institutions and the data showed the industry is doing a good job.

"There are more than 383 million credit-card accounts in the U.S., and less than one-10th of 1% of those have submitted a complaint to the bureau," said Kenneth Clayton, the trade group's chief counsel.

RELATED:

Consumer bureau nominee Richard Cordray backed by 37 state AGs

Consumer agency will fight to defend service members' pocketbooks

Consumer Financial Protection Bureau to open without a director

-- Jim Puzzanghera in Washington

Photo: A MasterCard sticker on a store door in New York. Credit: Associated Press.

Fitch reaffirms U.S. AAA credit rating, but outlook now negative

Fitch Ratings
Fitch Ratings on Monday reaffirmed its AAA rating for U.S. government debt, but revised its long-term outlook to negative because of the failure of the congressional "super committee" to agree to deficit cutting measures.

Fitch said the U.S. retained its top rating because of "still strong economic and credit fundamentals," including the dollar's status as the world's reserve currency. But the ratings company downgraded its long-term outlook from stable because of "declining confidence" that policymakers will enact "timely fiscal measures necessary to place U.S. public finances on a sustainable path."

The outlook downgrade means there is a slightly greater than 50% chance that Fitch will downgrade the U.S. credit rating over the next two years.

Fitch's announcement came after the other two leading credit rating companies, Standard & Poor's and Moody's Investor Service, said last week that the failure of the super committee would not lead to a cut in their ratings on U.S. debt.

Moody's continued to give U.S. debt its highest AAA rating, but had downgraded its outlook to negative in August following the contentious debate over raising the nation's debt ceiling. S&P roiled financial markets a few days later by downgrading its U.S. credit rating to AA+ because the company said the deal to raise the debt ceiling fell short of what was needed to stabilize the country's long-term finances.

Later in August, Fitch reaffirmed its AAA rating but warned that the failure of the super committee to strike a deal this fall would affect the company's long-term outlook for U.S. debt.

Fitch said Monday that an agreement on a major deficit reduction package after the 2012 elections would "relieve downward pressure" on the U.S. credit rating. But the company noted that the size of such a package would have to be greater than it would be this year because of the delay in enacting cost-cutting measures.

Fitch warned that "failure to reach agreement in 2013 on a credible deficit reduction plan and a worsening of the economic and fiscal outlook would likely result in a downgrade" of the U.S. credit rating.

RELATED:

No cut in U.S. debt rating despite deficit-deal failure, S&P says

Super committee fails to agree on deficit-reduction plan

S&P downgrades U.S. credit rating

-- Jim Puzzanghera in Washington

Photo: Fitch Ratings offices in New York. Credit: Associated Press.

Bank debit card fee plans face Justice Dept. antitrust review

Bank of America

The Justice Department said Tuesday it is reviewing banks for possible antitrust violations in decisions to charge fees for debit card use.

The department is "reviewing the statements and actions by banks and their trade associations regarding possible increases in consumer fees for using debit cards," Assistant Atty. Gen. Ronald Weich wrote to Rep. Peter Welch (D-Vt.).

"Please be assured that if it finds that individuals, banks or other parties may have violated the antitrust laws, the Department will take appropriate action," Weich said in the letter, which was released by Welch.

Following a flurry of announcements last month of possible debit card fees, Welch asked Atty. Gen. Eric Holder to investigate whether banks and trade associations engaged in price signaling or collusion in reaction to new federal limits on the amount that large financial institutions can charge retailers for processing debit card transactions.

Because of the limits, which took effect Oct. 1, Wells Fargo & Co. and JPMorgan Chase & Co. began testing debit card fees for their customers in some states. And Bank of America said it would begin charging some customers a $5 monthly fee for debit card use.

All have since abandoned those plans amid outrage from consumers and politicians.

“While big banks like Bank of America beat a hasty retreat on their debit card fee strategies, I have no doubt that they will continue their quest to dig deeper into the pockets of struggling consumers," said Welch, who helped lead the push to include the debit fee limits in last year's overhaul of financial regulations. "As they consider their next move, they should be aware that there is a cop actively on the beat.”

 RELATED:

Debit cards poised to get much costlier

BofA cancels plans for $5 a month debit-card fee

BofA debit card fee prompts animosity from coast to coast

-- Jim Puzzanghera in Washington

Photo: The Bank of America building in downtown Los Angeles: Credit: Reuters.

Lawmakers slam Fannie Mae, Freddie Mac CEOs over pay and bonuses

 Fannie Mae CEO Michael Williams and Freddie Mac CEO Charles Haldeman

The chief executives of Fannie Mae and Freddie Mac faced bipartisan outrage Wednesday over multimillion-dollar salaries and large bonuses at the seized housing finance giants, which still owe the government a combined $150 billion in the largest financial crisis bailout.

"Should you profit while the taxpayer is paying the bill?" asked Rep. Darrell Issa (R-Vista), chairman of the House Oversight and Government Reform Committee.

He summoned Fannie Mae CEO Michael Williams and Freddie Mac CEO Charles "Ed" Haldeman Jr. to testify before his committee. The hearing came a day after another House panel voted overwhelmingly to suspend large executive compensation packages at the two companies and align their salaries with that of government employees.

The total compensation for the top six executives at Fannie and Freddie for 2009 and 2010 was $35.4 million, with Williams and Haldeman receiving about half of that. Each of them could take home as much as $6 million apiece in salary and bonuses in 2011.

Rep. Carolyn Maloney (D-N.Y.) said taxpayers were upset because Fannie and Freddie continue to lose money and require additional bailout money.

"It’s hard for them to understand how executives get $6 million in pay for a failing entity," she said.

The salary and compensation were defended by Williams, Haldeman and Edward DeMarco, the latter of whom is the acting director of the Federal Housing Finance Agency, which has overseen Fannie and Freddie since they were put in a government conservatorship in 2008 because they were on the brink of failure.

The three said executive compensation has been dramatically reduced since the companies were seized but that it remained important to attract and keep skilled people to manage the firms' combined $5 trillion in mortgage-backed securities to prevent further taxpayer losses and additional damage to the housing market.

"I understand the outrage," Haldeman said. "We have significantly reduced executive compensation and overall spending at Freddie Mac, but we have tried to do it in a way that does not risk disrupting the functioning of the company."

DeMarco, who earns $239,555 a year as the independent government regulator of Fannie and Freddie, said that the top executives who caused the problems at Fannie and Freddie before 2008 are no longer there and  that it was difficult to find qualified people to help run the companies.

"Others may believe that this sort of talent is easily and quickly hired at compensation far below that of  competing private firms, but I do not," DeMarco said.

But that didn't satisfy some lawmakers, who said Fannie and Freddie should be able to find people who do not need to make six-figure salaries.

Rep. Trey Gowdy (R-S.C.) said that there have been complaints for years about the pay of federal judges compared with that in the private sector and that those jobs are still coveted by lawyers.

"I find it bitterly ironic that the total compensation for the United States Supreme Court justices is less than [what] either of these two men made," Gowdy said.

RELATED:

Fannie Mae loss widens, asks taxpayers for $7.8 billion

Obama administration ramps up mortgage refinancing effort

Fannie Mae and Freddie Mac replacements still uncertain, Treasury says

-- Jim Puzzanghera in Washington

Photo: Fannie Mae Chief Executive Michael Williams and Freddie Mac Chief Executive Charles "Ed" Haldeman Jr. take the oath before testifying before the House Oversight and Government Reform Committee on  Wednesday. Credit: Getty Images

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