The Center for Public Integrity

The Obama administration today threatened to veto a House spending plan that would limit fiscal 2012 funding for the Securities and Exchange Commission and Consumer Financial Protection Bureau.

The Office of Management and Budget said it would recommend that the president veto a financial services spending bill that has been approved by the Republican-led House Appropriations Committee and is still making its way through Congress, The Hill reported. The House bill would limit CFPB funding to less than half the $550 million the Dodd-Frank law set as its funding, a cut that OMB said would “severely undercut” its ability to police consumer financial services.

The House bill would keep SEC funding flat in 2012, rejecting a $222 million increase requested by the White House to pay for the agency's additional Dodd-Frank responsibilities. The SEC is funded by fees that it assesses on financial transactions, and the agency now generates more in fees than it spends.

Kill Dodd-Frank, kill the economy - The Dodd-Frank reform law is necessary to protect the U.S. economy in the future, a top Treasury Department official said today.

"Scaling back or repealing major parts of the Dodd-Frank Act, or not providing regulators with the funds they need to implement the Act, will leave our economy exposed to a cycle of collapses and crises," said Mary Miller, Treasury’s assistant secretary for financial markets.

Miller spoke at a Securities Industry and Financial Markets Association regulatory reform event to mark the July 21 one-year anniversary of the Dodd-Frank Act.

With the 2012 presidential election visible on the horizon, the Obama administration is renewing efforts to revive the housing market amid weak demand and a stream of foreclosed properties, the Wall Street Journal reports.

Policy options include having mortgage giants Fannie Mae and Freddie Mac relax their lending rules to investors; allowing investors to purchase excess property; and having Fannie and Freddie rent foreclosed homes to ease the property glut.  The administration could also offer incentives for banks to reduce the principal of mortgages for borrowers who owe more than their house is worth.

So far, the administration has focused on helping borrowers avoid foreclosure by refinancing or modifying their loans, but economists and consumer groups say those efforts have fallen short. The Home Affordable Modification Program (HAMP), launched soon after President Barack Obama took office, has so far helped only about 600,000 borrowers. Another 4 million borrowers are either in foreclosure or far behind in their monthly payments.

Blame Fannie Mae - A Republican member of the now-defunct Financial Crisis Inquiry Commission is trying to revive the argument that Fannie Mae and government housing policies – not greedy Wall Street banks and lax regulation – are to blame for the 2008 financial meltdown.

Mortgage servicing will be one of the Consumer Financial Protection Bureau's top priorities when it opens for business on July 21, an agency official told Congress today.

Raj Date, associate CFPB director for markets and regulation, said the agency "will use its authorities to help ensure that all mortgage servicers have adequate systems and procedures to ensure compliance with federal law." The bureau will work with HUD, banking regulators and the Treasury Department to prepare national mortgage servicing standards, he told a House Financial Services subcommittee hearing.

Julie Williams, chief counsel of the Office of the Comptroller of the Currency, said the standards would require applying borrower payments to principal, interest, taxes and insurance before fees; give borrowers adequate notices about late payments and delinquencies; set a single point of contact for borrowers to get questions answered; require prompt responses to borrower complaints; and require good faith efforts to modify delinquent loans and prevent foreclosures.

Foreclosure rules eased for jobless - Beginning on August 1, the Federal Housing Administration will give out-of-work homeowners a full year of forbearance on their mortgage payments, up from a current forbearance period of three to four months. 

"Providing the option for a year of forbearance will give struggling homeowners a substantially greater chance of finding employment before they lose their home," said Housing and Urban Development Secretary Shaun Donovan.

Lenders must give more information to consumers who are denied a loan or charged a higher interest rate because of their credit score, the Federal Reserve announced today.

The Fed's new regulation requires a lender to disclose the numerical credit score used in its decision; the range of possible scores under the credit score model used; up to 4 key factors that adversely affected the consumer credit score; the date the credit score was created; and the name of the entity that provided the credit score.

It applies to lenders using "risk-based pricing," a practice which sets the price and terms of a loan to reflect the risk of nonpayment by that consumer. The rule will "help ensure that consumers receive consistent disclosures of credit scores" and related information, the Fed said.

Get ready for next financial crisis - The lessons of the 2008 financial collapse have not been learned, writes MarketWatch columnist Brett Arends, who offers his Top 10 list of why another crisis is already on the horizon.

One big reason:  Wall Street incentives such as stock options, bonuses, and "too big to fail" remain fully in force, which means bankers are still being paid to behave recklessly with little to lose if things go wrong. Another reason is how financial services companies spend tens of millions of dollars on lobbying along with generous political campaign contributions, says Arends, and offer politicians "500,000 speaker fees and boardroom sinecures upon retirement."  

Meanwhile, the credit bubble is back as U.S. corporations borrow twice as much as they did last year, pushing non-financial companies to a record $7.3 trillion in debt, he writes.

Obama ties to Wall Street - The Obama administration is haunted by the "stunning lack of accountability for the greed and misdeeds" that triggered the 2008 financial crisis, writes Frank Rich of New York magazine. No major bank executives have gone to jail, and the Dodd-Frank reform law has done little to toughen regulation, due to understaffed agencies under attack by banking lobbyists and Congressional funding battles.

Obama's hope for a second term in office may be at stake, Rich says, because his failure to punish Wall Street means much of the American electorate sees him favoring the financial elite over the struggling middle class. "The taxpayers bailed out the elite; now it’s the elite’s turn to return the favor. Massive cuts to the safety net combined with scant sacrifice from those at the top is wrong ethically and politically," he writes.

Leaderless CFPB - The political impasse over leadership at the Consumer Financial Protection Bureau worries some bankers, who say that without a director the agency cannot regulate payday lenders, mortgage companies, credit agencies aned other non-bank financial services companies that compete with banks.

Elizabeth Warren, the Harvard law professor and special adviser to help set up the CFPB, seems nonplussed about her future within the organization, reports the New York Times. Warren's meetings with more than 1,000 banking and consumer repressentatives and at least 70 members of Congress have won her the grudging respect of some bankers.

“The things she is advocating for are things we support,” Daryll Lund, president of Community Bankers of Wisconsin, told the newspaper.

Homeowners who say Congress has failed to do enough to limit foreclosures should “go tell a Republican,” Democrat Barney Frank said at a University of New Haven event on Thursday.

The Massachusetts lawmaker and co-author of the Dodd-Frank financial reform law blamed Republican opposition for the lack of stronger measures to help homeowners work out loan repayments strategies to avoid foreclosures.

Existing anti-foreclosure programs don’t work well but stronger programs have been impossible because of “the ideological opposition on the part of the Republicans,” Frank said, according to a Hamden Patch report.  “You have people now who say you got to cut the deficit, you got to stay in Afghanistan, we got to stay in Iraq, you can’t raise the taxes on Warren Buffet and you have to cut the crap out of everything else.”

Frank is now the top Democrat on the House Financial Services Committee, which is led by Republican Spencer Bachus of Alabama.

Where were the auditors? – Only four accounting firms are big enough to audit the largest public companies and they have looked the other way when faced with financial wrongdoing, says Forbes columnist Francine McKenna.

“Can anyone deny that there are four firms – KPMG, Deloitte, PricewaterhouseCoopers (PwC), and Ernst & Young (auditor to Lehman) – who knew all along what was going on and never told a soul, including the SEC?”

Securities regulators have proposed derivatives market rules that would require big players such as Goldman Sachs Group Inc., JPMorgan Chase & Co., and Morgan Stanley to reveal key information about their deals.

The Securities and Exchange Commission’s five commissioners unanimously agreed to propose a regulation that would give counterparties insight into the material risks, characteristics, incentives and potential conflicts of interest of each deal, reports MarketWatch. The plan "would level the playing field in the security-based swap market by bringing needed transparency to this market and by seeking to ensure that customers in these transactions are treated fairly,” said SEC Chairman Mary Schapiro.

The SEC will collect public comment on its proposal before finalizing the regulation later this year.

The secretive derivatives, or swaps, market was blamed for a large role in the 2008 financial meltdown. Last year, Goldman Sachs paid $550 million to settle the SEC's civil fraud charges that the bank should have told investors in a collateralized debt obligation (CDO) that a hedge fund had helped build the CDO but was now betting against it.

Winners and losers in swipe fee – The Federal Reserve’s decision to cap debit swipe fees at 21 cents may be a big win for banks, but says little about how financial reform efforts as a whole are succeeding, writes Time columnist Stephen Gandel.