The Problem Explained: Never Too Much relatedly:
Springtime for Scammers
Financial predation now has friends in high places
Paul Krugman
Feb 11
Just over two years ago Wells Fargo agreed to pay $3.7 billion — $1.7 billion in penalties and $2 billion in damages — to the Consumer Financial Protection Bureau. As the New York Times report put it, the payments were
to settle claims that it engaged in an array of banking violations over the last decade that harmed millions of consumers
The Times went on to explain:
The consumer protection bureau said Wells Fargo did not record customer payments on home and auto loans properly, wrongfully repossessed some borrowers’ cars and homes and charged overdraft fees even when customers had enough money to cover purchases they made with their bank cards.
This settlement followed earlier scandals at Wells Fargo, notably the “cross-selling scandal” in which, among other things, bank employees opened as many as 2 million accounts in customers’ names without their authorization. Altogether the bank has paid $6.2 billion in penalties since 2016.
Overall, according to Sen. Elizabeth Warren, who conceived of CFPB, the bureau “has returned over $21 billion to families cheated by Wall Street.”
But now the agency that won those settlements has been effectively abolished. On Monday Russell Vought, the architect of Project 2025, the new director of the Office of Management and Budget and now CFPB’s acting head, sent the email above to all of the agency’s staff telling them to stay away from the office and do no work.
What’s this about? Let’s start by asking why CFPB was created.
The truth is that defending oneself against financial fraud is hard work. Do you carefully go through your bank statement every month, looking for possible unjustified fees? I know a few people who do, but most of us have too much else going on in our lives. When you take out a car loan, or invest for your retirement, do you go over the fine print with a magnifying glass, making sure you understand everything? Probably not. People have children to raise, jobs to do, lives to live. Cognitive overload is a real thing, and it’s worse the further down the income scale you go — the cognitive burden of poverty has been extensively documented.
So what we do, most of the time, is trust financial institutions to be relatively honest, if only to protect their reputations. And we expect government regulators to step in when financial players abuse that trust.
What we learned in the aftermath of the 2008 financial crisis was that much of this trust had been misplaced. Corporate cultures in the financial industry came to prioritize short-run profits over long-term reputation. Deregulation and lax regulation permitted widespread abuses. Most notably, the boom in subprime lending led to many families being sold financial products they didn’t understand, with lower-income borrowers receiving the worst treatment. As the late Edward Gramlich, a Federal Reserve official who tried in vain to warn his colleagues about the dangers, wrote:
Why are the most risky loan products sold to the least sophisticated borrowers? The question answers itself — the least sophisticated borrowers are probably duped into taking these products.
But why create a new agency to limit these abuses? Don’t we already have bank regulators? Yes, but these regulators are primarily focused on securing the stability of the financial system. Protecting consumers from fraud is at best an afterthought.
Warren’s insight was that protecting consumers required creating a separate agency with its own institutional imperatives. And she was right: By any reasonable standard, CFPB has been an outstanding success story.
Why, then, rush to shutter the agency? By the way, this action, like much of what the Trump administration is doing, is almost surely illegal. It probably also won’t surprise you to learn that DOGE appears to have illegally been given access to much of the agency’s data.
Well, it’s illuminating to read the section on abolishing CFPB in Project 2025’s Mandate for Leadership. According to the Mandate,
the agency has been assailed by critics as a shakedown mechanism to provide unaccountable funding to leftist nonprofits
Notice the careful wording: The document doesn’t assert that CFPB actually is a “shakedown mechanism” (which might have led to a lawsuit) but merely that “critics” have made that accusation. And if you follow the footnotes, the assault by critics appears to consist solely of three opinion pieces, one in the New York Post, one in the Wall Street Journal and one in Investors’ Business Daily.
Incidentally, that Investors’ Business Daily article accuses CFPB of funneling money to “radical Acorn-style pressure groups.” Does anyone not deeply mired in the fever swamps of right-wing conspiracy theory even remember what Acorn — a political association that was disbanded in 2010 — was?
Overall, Project 2025’s attack on the CFPB bears a family resemblance to Elon Musk’s claim that USAID is a “viper’s nest of radical-left Marxists who hate America.” It’s a bit milder, but equally absurd, and is clearly not the real reason for killing the agency.
So what is the real reason? It seems fairly obvious. CFPB was created to protect Americans from financial predation, and has done a very good job of doing so. But now we have government of, by and for financial predators. Trump has famously left behind a trail of bankruptcies and unpaid contractors, and is furiously grifting even now. Musk has faced multiple lawsuits from vendors and former employees over unpaid debts.
And let’s not forget that crypto, which has gained a lot of influence with this administration, has yet to find a real-world use case other than money laundering.
So the best way to explain the sudden closure of the Consumer Financial Protection Bureau, as I see it, is as part of an effort to make predatory finance great again.
Trump to launch ETFs If any other US president had pulled this type of stunt, they would have hung him on the spot. The words "conflict of interest" means nothing to MAGA, but it should still mean something in a non-fascist society.
Not sure which one we live in now...
I’m trying to sidestep politics on the board, while realizing the current environment makes that difficult. I do think there are some esteemed members here who might wish to invest with the man - a “heads-up” for them. Different strokes for different folks. Not my cup of tea.
The
Trump name is a recognizable brand. Has been for many
years. Love it or hate it. There’s always a big jet with “Trump” painted on the side at LaGurdia whenever we taxi for takeoff. Maybe a relic of an airline he once operated? Or, possibly his personal jet - his having various connections with NYC.
Shucks - This thread seems headed for the Trumpster dumpster!
Interview With George Gatch, CEO of J.P. Morgan Asset Management - Barron’s The following link may work for a limited time - or may not work at all. It’s a thoughtful interview. Some relevant excerpts in case the link fails to work.
https://www.barrons.com/articles/stock-market-investing-risk-jp-morgan-asset-management-e7e3e686?st=quL7MV&reflink=desktopwebshare_permalinkOn Staying Invested:
“Staying invested is the best strategy. If you missed the 10 best days in the past 20 years, you would have cut your return in half.” Best Opportunities Now: “
We see opportunities to broaden toward value in large-cap stocks and across all sectors. And, we see opportunities in mid-caps relative to large-caps …. Fixed income, on a relative basis, is more attractive than equities. We see opportunities in high-yield, where yields are topping 7%, and in securitized credit.”Current Environment:
”There is room in every portfolio for some position in liquidity. In a market like this, we are going to have higher levels of volatility. Having dry powder to redeploy, as you see more volatility and trade-offs, is good.”Next Frontier:
”Multi-asset is one of the next frontiers that hasn’t been fully offered to investors in ETF structures. It is difficult for individual investors to make decisions about relative valuations of asset classes in periods of high volatility.”On Bitcoin & Crypto:
”Bitcoin ETFs and cryptocurrency generally have high levels of volatility. Bitcoin is four times the volatility of the S&P 500 index. There is no income and no intrinsic value, and we don’t see how they would fit into a diversified long-term strategy.”Article Title:
”Investing Offers a Free Lunch, Says This Wall Street Veteran. Take It.”Published in
Barron’s February 10, 2025 issue
The Problem Explained: Never Too Much Part IV: There is a more striking contrast: in Why Globalization Works, he argued that most of the charges of the antimarket critics—whom he called, quoting the economist David Henderson, “new millennium collectivists” and who included people ranging from the British philosopher John Gray to the journalist Naomi Klein to the right-wing demagogue Pat Buchanan—were the result of too little rather than too much globalization. In The Crisis of Democratic Capitalism, he finds that the many problems of today’s rentier economy are “principally the outcome of failures of liberalization—above all, a failure to think through the institutional context for markets. The prevailing assumption was that the free pursuit of self-interest is enough on its own: it is not.” Wolf does not say that any of his earlier critics have been proved right by subsequent events. He was not wrong; “the prevailing assumption” was.
In these moments, Wolf uses the distinctive elite construction that the journalist William Schneider named the “past exonerative.” It’s that unmistakable mix of passive voice and past tense that people with power use to say things like “mistakes were made” or that extrajudicial drone murders “have been authorized.” Wolf does this both when his side has done something horrible that he cannot admit and when the other side has done something undeniably good that he cannot acknowledge. Thus we find that “colonial empires disappeared,” “trade unions have greatly weakened,” and “the factories disappeared in the old industrial locations.” The revolutionary struggles for power that these phrases embody are thus rendered invisible.
Wolf’s favored method of historical investigation is to begin with a reference to the ancient world free of any contextual background, followed by an ideological generalization about the nineteenth or twentieth century. Here’s one:
The principal answer [to the crisis of democratic capitalism] is the hollowing out of the middle classes, identified by Aristotle almost twenty-five hundred years ago as the core constituency for a constitutional democracy.
Or another, but in reverse order:
The idea of the perfectly ecological human is quite as much a delusion as Trotsky’s communist superman. Just consider the mass extinctions that followed humanity’s first arrival in Eurasia and the Americas back in prehistoric times.
These adventures in historical analogy and the frequent absence of any human agent serve to make Wolf’s highly ideological opinions appear to be timeless facts. Policies that might otherwise seem to be expressions of ruthless class interest are reframed as basic truths known or prevailing assumptions held by competent, reasonable people, who served to implement and safeguard them from dreamers and despots. But if they are reasonable truths, Wolf is left unable to explain how they have led to such unreasonable ends and empowered such unreasonable people.
Our elites have not suddenly become morally abhorrent; the financial globalization that Wolf championed has allowed them to remove themselves from democratic accountability, state regulation, and communities of obligation. It has also decimated countervailing powers such as organized labor, working-class political parties, and capital controls. The market never was “permeated” by the values of duty, fairness, and decency: it was constrained by nonmarket forces. Wolf has spent his career arguing that reason and freedom demanded the removal of those constraints. And here we are.
The epigraph to chapter 8 of The Crisis of Democratic Capitalism is Warren Buffett’s famous quote that “there’s class warfare all right, but it’s my class, the rich class, that’s making war, and we’re winning.” In the twenty years since the publication of Why Globalization Works, the rich have won their war on the working class, and as Polybius famously did not write about the Romans at Carthage, they have sown the fields with salt so that nothing can grow. Now their tribune wanders the desert they have made, and urges moderation.
