Wall Street Reform Update
It's happened. After a year and a half of partisan wrangling, Congress has finally passed Wall Street Reform.
The law includes strong consumer protections for working families and small businesses.
• Protects families from predatory bank practices. Working families will now have an independent advocate that will eliminate the deceptive practices related to mortgages, payday loans and checking accounts. Credit cards and mortgages will offer terms in plain language and will reduce hidden or unnecessary fees.
• No more sub-prime mortgages. Banks can no longer trick consumers into the sub-prime mortgages that caused the housing crisis in the first place. Consumers are protected from abusive loan fees.
• Ends the Wall Street Casino. Banks will be barred from gambling with your money and will have to separate some of their derivatives trading operations into affiliates.
• Preventing foreclosures: $1 billion will be available to help unemployed homeowners.
Wall Street spent millions lobbying against this bill. According to the most recent lobbying disclosures,
• Goldman Sachs spent $1.6 million
• Wells Fargo spent $1.3 million
• Bank of America spent $1.1 million
• the US Chamber of Commerce spent $9.5 million
• the Financial Services Roundtable spent $1.6 million
in lobbying fees just in the three months ending June 30, 2010. Remember, this is the same industry that needed the $700 billion bailout through the Troubled Asset Relief Program (TARP) less than two years ago.
Wall Street's reckless actions crashed the economy - and then they fought against reform, and delayed this bill with the help of Senate Republicans who kept the filibuster going as long as they could.
Last week, a majority of Congress - including our Senator Jeanne Shaheen, and Representatives Carol Shea-Porter and Paul Hodes - stood up for the working families who funded TARP, and approved the Wall Street Reform bill. You can read more about the law here.
Why is this new law so important for SEA?
Most SEA members are also members of the NH Retirement System. Public employees and employers contribute to the NHRS; the NHRS invests those contributions and pays a defined benefit after retirement. Historically, NHRS investments have quadrupled the value of contributions: of every dollar paid in benefits, about 75 cents is attributable to investment returns. But the NHRS Trust Fund lost 10% of its value after the 911 attack, during the recession of 2001-02 - and so far, the Trust Fund has lost 18% of its value during the current recession.
Nationwide, public pension funds lost staggering amounts of money to a variety of Wall Street schemes.
• Last week, Ohio's Attorney General announced a $725 million settlement with AIG on behalf of retirement funds for state employees, teachers, police and fire fighters. The settlement resolves allegations of AIG's wide-ranging fraud from October 1999 to April 2005 involving anti-competitive market division, accounting violations and stock price manipulation.
• Last month, Alaska's Attorney General recovered $403 million from a consultant to the Alaska Public Employees' Retirement System to settle claims of malpractice, breach of contract and unfair trade practices.
• In May, Countrywide Financial and KPMG agreed to pay a total of $624 million to six New York public employee pension funds. The settlement resolved claims that the mortgage giant made misstatements about its lending practices, artificially inflating the price of its securities.
• In April, Michigan's Attorney General announced a $117 million settlement with the financial services firm UBS, to resolve allegations that UBS perpetrated a financial fraud against investors, including the Michigan Pension Fund, by misrepresenting HealthSouth's financial condition.
New Hampshire has been somewhat buffered from the worst of Wall Street excesses. The NHRS Board of Trustees includes union representatives who, as public employees, are themselves members of the Retirement System. The Trustees have traditionally followed a very conservative investment strategy - by avoiding risky investments, that strategy has produced unusually high investment returns over the long run. But NHRS is now under renewed pressure to increase investment returns, so that it can cut the contribution rate for public employers.
Wall Street Reform will help protect retirement security for public workers across America.
In the past few years, new accounting standards focused media attention on unfunded long-term liabilities - at the same time that public pension funds were losing a trillion dollars in value, largely due to Wall Street greed.
Anti-government pundits used the situation to attack public sector pensions and call for pension "reform".
Lost in all the rhetoric was one basic fact: the trillion dollars in unfunded public pension obligations which pundits now find so alarming were mostly the same trillion dollars of public pension funds lost to Wall Street abuses.
It will take decades for public pension funds - including the NH Retirement System - to recover from the effects of the 2008 financial meltdown. We want to make sure it doesn't ever happen again.