"The Good Guys"

Yesterday, for those tracking Wall Street reform on the Senate floor, I posted a list of likely lobbyist loopholes designed to weaken the bill. While we continue to keep a watchful eye out for those amendments, fortunately, lobbyists aren’t the only ones paying attention to Wall Street reform. There are also Senators and consumer advocates fighting for ways to strengthen the legislation.

While attention is appropriately focused on some of the major points of debate around the bill, we wanted to highlight today a few simple, straightforward improvements that would further strengthen an already strong bill and really help American families. We'll call them the “Good Guys".  Let’s hope they prevail over the "Lobbyist Loopholes" as the debate moves forward.

1. Investment Advice by Any Other Name.  Today, investment advisors have a fiduciary duty to their clients – that is, they are legally obligated to act in their client’s best interest.  But brokers offering investment advice have no such obligation.  Why does that make sense?  Well… it doesn’t.  If you’re a retiree managing your savings, or a family saving for college, you should be able to trust that the person giving you investment advice has your best interests at heart –whether that person is called a broker or an investment advisor.   It’s that simple. 
2. Serving Those Who Serve Our Country.  As unconscionable as it seems, American military service-members and their families are often the targets of unscrupulous lenders.  In particular, recently enlisted soldiers and sailors who have their first steady paycheck can be lured into easy credit offers.   And there are also many experienced military families struggling with daily expenses such as child care and medical bills in the face of deployments and frequent moves.  To help ensure that we properly serve those who serve, we strongly support the creation of an Office of Military Liaison within the Bureau of Consumer Financial Protection.  
3. Lots of Ways to Make a Living.  Not everyone works the same hours or earns the same amount of money throughout the year.  For example, farmers, fishermen, retailers and people from lots of other professions earn uneven incomes, with significant variation from season to season.   The consumer financial protection bureau will be responsible for writing rules with respect to mortgage lending, but we support making absolutely clear that lenders can take the seasonality or irregularity of income into account when making a mortgage loan.  The lobsterman shouldn’t have his access to credit restricted simply because the lobster season only runs a few months of the year.
4. Preventing Abuses of Private Student Loans.  Educating the next generation of Americans is key to building a strong economic future for our country.   Unfortunately, students are often the victims of unscrupulous practices by private student loan companies.  As a result, they start out their careers weighed down by unnecessary debt.    What can we do to help?  Well, for one thing we can make sure that banks offering private student loans are subject to the examination and enforcement authority of the Consumer Financial Protection Bureau, so that someone is making sure that private student loan companies play by the rules.
5. Dismantling the Payday Loan Trap.  Payday lenders say their loans are meant to provide occasional, emergency funding for folks facing a short-term money crunch.   But the truth is that the vast majority of payday loans are used to repay a previous payday loan.  The payday loan debt trap can be very tough to escape.  That’s why it makes sense to put in place some basic rules for payday lenders – like limiting the number of high-cost loans a lender can provide in a given year or making sure that, if someone does get stuck in the payday loan trap, the lender gives them an extended repayment plan to help them get out.
6. Common Sense Credit Rating Agency Reforms.  Credit Rating Agencies bear a good deal of responsibility for the financial pain we’ve experienced over the past few years, and there are some common sense reforms that would strengthen credit ratings.  The current regulatory regime for credit rating agencies is voluntary – meaning that if the standards are too high, firms are free to escape those standards.  It’s time to impose a mandatory registration requirement on all rating agencies.  In addition, rating agencies should be banned from providing consulting services to issuers that are also rated by the rating agency.  Consulting creates a clear conflict of interest, and we simply can’t afford to let credit rating agencies be compromised.   
7. Helping to Keep Credit Rating Agencies Honest.  All too often, the rating agencies gave a financial firm or a complex “structured product” a Triple A rating, even when there were huge risks buried just below the surface.  And all too often, irresponsible business practices and serious conflicts of interest played a role.  The current bill includes some important reforms – and as noted above, there’s still more that can be done to regulate rating agencies more effectively.  But here’s another fix that makes a lot of sense:   If someone at a credit rating agency has the courage to “blow the whistle” on malpractice at a rating agency, that person deserves the law’s full protection. 
8. No More Paying Them to Decide How Much to Pay You.  In recent years, executive pay practices at big financial companies became increasingly un-tethered from shareholder value.   Corporate boards often justified outlandish bonuses by hiring compensation consultants or other advisors to analyze the market and make pay recommendations.  Sounds fine in theory.  But often, those same compensation consultants are hired by the management to perform other services as well, creating an obvious conflict of interest – and helping inflate executive pay beyond all reason.   One way to fix this problem is to set mandatory standards for the independence of compensation consultants and other comp advisors.  
9. Thinking About the Full Range of Threats to Financial Well-Being.  Social Security numbers are a top target for identity thieves.   But checks cut by federal, state and local governments often includes Social Security numbers.  And even worse, prisoners are sometimes engaged in work that gives them access to Social Security numbers.  While identity theft may not represent a threat to the financial system, part of the purpose of Wall Street reform is to protect everyday Americans from the range of risks that can undermine their financial well-being.  As part of that effort, it makes sense to put in place measures that protect the privacy of sensitive information.
10. Creating a Homeowner Advocate for the Home Affordable Mortgage Program.   Even as the economy recovers from the deep recession of the past two years, millions of Americans continue to struggle with unaffordable or “upside down” mortgages.  With incomes reduced by unemployment or scaled-back hours, it can be hard to keep up with payments.  Continuing to stabilize the housing market is a key part of securing the recovery, and the Home Affordable Mortgage Program is designed to do just that.  By getting servicers to work with borrowers to modify the repayment schedule, modifications help keep families in their homes.   To improve the program’s effectiveness, we support creating a homeowner advocate at the Treasury Department.

Hopefully, we will see these simple, straightforward improvements that strengthen the bill prevail, and not the loopholes that weaken it.

Dan Pfeiffer is White House Communications Director