A Fighting Chance

KNIVES COMING OUT AGAINST ELIZABETH WARREN?: Zach Carter, “Are Treasury’s Knives Coming Out Against Elizabeth Warren?,” AlterNet, October 29, 2010.

in a couple of days he nearly doubled his money: In his book Throw Them All Out, Peter Schweizer found that from July to November 2008, “[Congressman] Bachus engineered no less than forty options trades, betting that the market, a sector of the market, or an individual company would go up or down at critical times” and reported $50,000 in capital gains during this period. Peter Schweizer, Throw Them All Out (2011), 25. He accused Bachus of exploiting his role as a policymaker by relying on insider information about the state of the financial market when trading (25–32). As just one example, Schweizer pointed to a September 2008 incident in which Bachus traded short options—effectively betting against the market—the day after a closed-door meeting with then Treasury secretary Paulson and then Federal Reserve Bank chairman Bernanke, with the result that he almost doubled his money (Bachus bought the options for $7,846 and sold them for over $13,000) (28–29). Schweizer notes: “Congressman Bachus was not the only one actively trading stocks while setting policy during the financial crisis. But he was particularly aggressive with options; others merely cashed out of positions that were just about to worsen,” and he implicated ten other lawmakers (33–34). CBS broke the story in a 60 Minutes special, and several other media outlets reported it thereafter. See “Congress Trading on Stock Information?” 60 Minutes, June 11, 2012. The reaction to the reports in the public and in Congress was quick and negative. For his part, Bachus denied allegations of insider trading, noting “you would have to be living under a rock not to know by September 18, 2008 that the economy was in bad shape.” See Tim Mak, “Spencer Bachus Letter to ‘Insider Trading’ Publisher,” Politico, November 16, 2011. Of course, his comment ignored the fact that for every trade in which the congressman profited, there was someone who didn’t get confidential briefings and lost money. The Office of Congressional Ethics ultimately cleared Bachus of insider trading on April 30, 2012. See Scott Higham, “Congress Ethics Office Clears Bachus of Insider Trading,” Washington Post, April 30, 2012. While Members of Congress were exempt from most insider trading laws at that time, Congress subsequently made the rules more stringent.

which banks had the fewest complaints: Since the CFPB began amassing and posting information about consumer complaints in 2011, some groups have in fact started analyzing the data, shedding important light on how financial institutions treat their customers. For example, the US PIRG Education Fund found “… thousands of consumers with errors on their credit reports are getting relief through the Consumer Financial Protection Bureau (CFPB). The report also found that credit reporting agencies vary widely in how they respond to consumer complaints…” “Big Credit Bureaus, Big Mistakes,” US PIRG Education Fund, November 19, 2013.

In another study, PIRG analyzed CFPB complaint data about banks: “The CFPB’s searchable complaint database is the newest of a set of federal government consumer complaint databases that help consumers make better economic and safety choices by reviewing others’ experiences and searching for problems or product recalls. The transparency also helps firms improve their products and services. In short, transparency improves the way markets work.” “Big Banks, Big Complaints,” Florida PIRG Education Fund, September 17, 2013.

In a separate study, the National Community Reinvestment Coalition (NCRC) found racial disparities in terms of both the source of complaints and banks’ response to complaints, raising questions about the inequality of financial services and fair lending practices. Danielle Douglas, “Consumer Group Finds Racial Disparity in Bank Complaints,” Washington Post, October 8, 2013.

The work of PIRG, NCRC, and other consumer groups in analyzing the CFPB data and expanding the audience for the data is critically important to the success of the agency, and the organizations’ willingness to make constructive criticism about the ways the data could be enhanced are even more important. These organizations are a critical counterbalance to the big banks, helping keep the agency focused on its mission.