WSJ Suggests SEC's Cases Involving Potential Fraud By Financial Institutions Are Examples Of “Grandstanding”

WSJ: Fraud Suits Brought By The SEC Against Wall Street Firms Are “Grandstanding Cases.” In a November 30 editorial, The Wall Street Journal claimed that the SEC's recent suit and potential settlement with Citigroup was an example of the SEC's “grandstanding cases against the corporate villain of the moment ... Wall Street.” From the editorial:

More broadly, we might learn whether these cases have legal merit or are merely easy attempts to extort a deep-pocketed target. The SEC knows companies want to avoid reputational and legal costs, not to mention the risk of a trial lawyer pile-on. But how many cases would the SEC bring if it knew it had to prevail in court?

A defeat might even cause the SEC to bring fewer of these grandstanding cases against the corporate villain of the moment -- for now, it's Wall Street -- and focus more on real financial criminals like Bernie Madoff. [The Wall Street Journal, 11/30/11]

But The WSJ Often Defends Financial Institutions -- By Attacking Government

WSJ: The CARD Act and Dodd-Frank Law Are To Blame For New Customer Fees. In an October 7 editorial, The Wall Street Journal claimed that the CARD Act and Dodd-Frank law forced banks to impose new levies and fees on customers to ensure profitability. From the editorial:

The entire American financial system now operates under the rules they wrote in 2009 and 2010 when Democrats controlled both houses of Congress.

The predictable consequences of those rules are starting to appear in the marketplace. The 2009 CARD Act made it more difficult for credit-card issuers to raise rates and charge fees. New Federal Reserve regulations limited overdraft charges. Then came the 2010 Dodd-Frank law, which included a provision authored by Mr. Durbin that cut the “swipe fees” that debit-card issuers can charge merchants like Wal-Mart to process transactions.

Don't ask what any of this has to do with preventing the next financial crisis. The new rules and laws achieved Washington's goal of cutting bank revenues, by more than $15 billion per year. But it costs money to provide checking services and electronic payment networks, and the political class is now stunned that banks would seek new ways to profitably serve customers.

Bank of America has announced the famous $5 fee on many debit-card customers. SunTrust and Regions have started charging similar levies, while J.P. Morgan Chase and Wells Fargo are testing fees in particular markets. [The Wall Street Journal, 10/7/11]

For more on Durbin's amendment to the Dodd-Frank law limiting “swipe fees,” SEE HERE.

WSJ Blamed Bank Of America Layoffs On “The Last Two Years Of Washington's Financial Rule-Writing.” In a September 13 editorial, The Wall Street Journal claimed that recent layoffs by Bank of America were “part of the bill for the last two years of Washington's financial rule-writing,” including the Dodd-Frank law and the CARD Act. From the editorial:

What is the cost of overregulation? Bank of America appears to have provided part of the answer by announcing yesterday that the nation's largest bank will cut 30,000 jobs between now and 2014. CEO Brian Moynihan said the bank's plan is to slash $5 billion in annual expenses from its consumer businesses.

Mr. Moynihan didn't say this, but we will: These layoffs are part of the bill for the last two years of Washington's financial rule-writing. After loose monetary policy had combined with insane housing policy to create a financial crisis, the Democrats who ran Washington in 2009 and 2010 enacted myriad new rules that had nothing to do with easy money or housing.

Take the amendment that Illinois Democrat and Senator Dick Durbin (with the help of 17 Senate Republicans) attached to last year's Dodd-Frank financial law. Mr. Durbin's amendment instructed the Federal Reserve to limit the amount of “swipe fees” that banks can charge merchants when customers use debit cards.

How exactly does forcing banks to charge Wal-Mart less money for operating an electronic payment system prevent the next financial crisis? Readers may wait a long time for a satisfactory answer, but the cost of this Dodd-Frank directive is straightforward.

[...]

The new rules take effect on October 1, so BofA seems to have sensible timing as it begins to shed workers from a consumer business that has become suddenly less profitable by federal edict.

Make that the latest federal edict. In 2009, when a comprehensive overhaul of financial regulation was still a gleam in Barney Frank's eye, President Obama signed the CARD Act into law. It limited the ability of banks to increase rates on delinquent borrowers and to charge fees on unprofitable customers. As Washington encouraged card issuers to be more selective in advancing credit and to demand higher rates when they do, interest rates on card customers predictably increased relative to other types of lending in the months after the law took effect. [The Wall Street Journal, 9/13/11, emphasis original]

WSJ: Consumer Financial Protection Bureau Nominee “Show[ed] Hostility Toward Business” By Suing Financial Institutions For Allegedly Dubious Practices. In a July 20 editorial, The Wall Street Journal claimed that Richard Cordray, former Ohio Attorney General and current nominee to head the Consumer Financial Protection Bureau, “showed his hostility toward business” in part by “su[ing] Ally Financial's GMAC Mortgage over its foreclosure practices.” The lawsuit, according to the Journal, helped spawn “an effort to force big banks to cough up billions for Democrats to redistribute.” From the editorial:

In the small favors department, President Obama did not nominate banking scourge Elizabeth Warren to run the new Consumer Financial Protection Bureau. Instead on Monday he nominated one of her protégés, former Ohio Attorney General Richard Cordray, whose career sounds like Mrs. Warren without the charm.

Mr. Cordray, the bureau's current head of enforcement, is a political enforcer in the Eliot Spitzer mold, which is not what the country needs in an ostensibly dispassionate federal regulator. He showed his hostility toward business after becoming AG in 2009 after his predecessor resigned in disgrace, launching an avalanche of litigation.

He sued Ally Financial's GMAC Mortgage over its foreclosure practices -- a lawsuit that helped spawn the national robo-signing uproar, which has mushroomed into an effort to force big banks to cough up billions for Democrats to redistribute. He sued rating agencies for grading mortgage-backed securities as safe investments. He sued Bank of America for purportedly hiding losses and bonuses prior to the Merrill Lynch merger. The list of cases is long. [The Wall Street Journal, 7/20/11, via Media Matters]

For more on Cordray's lawsuit against Ally Financial's GMAC Mortgage, SEE HERE.