U.S. Congressman Jamie Raskin long has been a proponent on increased consumer protections. As a member of the House of Representatives, Raskin voted to defend retirement benefits packages for federal workers, and remains a staunch supporter of the U.S. Department of Labor’s “fiduciary rule,” a catalyst for safer retirement investing. In Rebalance’s retirement protections Q&A, Congressman Raskin talks about why stronger Wall Street regulations are needed, and how the fiduciary rule will help curb dishonest brokers.
Scott: Our next speaker is Congressman Jamie Raskin. Thank you so much for being with us. Those of us who live in Montgomery County, he’s our Congressman, new to the job. Congressman Raskin had a bruising primary battle, was the underdog, and won an incredible primary election. He’s also quite a fighter. Congressman Raskin has a unique combination of boyish charm, and intellect and is very media savvy. Progressive politics, makes him a rising star in the democratic party; he’s one of the people of the moment.
Prior to being a U.S. Congressman he was a very successful Maryland State Senator with a litany of accomplishments, and also for the past 25 years he’s been a professor at American University Law School in constitutional law.
Congressman Raskin: Scott, thank you very much. Thank you for organizing this and inviting me, and allowing me to participate in the conversation. I thought, originally, when you invited me you were looking for my wife because she was the Deputy Secretary of the Treasury Department and she knows all about this, and knows Elizabeth and Phyllis.
Congressman Raskin: And was involved with these guys and it’s great to hear both Elizabeth and Phyllis describe their work. Phyllis said she was on the Hill for 16 years, and I’ve been on the Hill, I think, for 16 weeks, but it feels like 16 years. And, but look, the work that everybody up here has done has been essential to making sure that the marketplace is not [00:39:00] an arena of scams and ripoffs and predatory action against consumers and investors. That’s what it’s all about.
I think most of us as Americans believe in a market economy. Not necessarily a market society, not everything should be governed by market principles, but that is how the stock investment business it works, but it has to be regulated because if it is not, you get what happened in the 1920s and 30s, and you get what happened in 2008. And we’ve seen every time what happens with the deregulation and then the bubbles blowing up, and the scam artists, and the predatory activity, and then the whole thing explodes, and middle class people across the country are left holding the bag.
The 2008 crisis cost 10 million people their jobs, and threw 13 million people out of their homes, and it cost the people of the country trillions of dollars in their retirement savings, in their pensions, in their home equity values. And so, joblessness, homelessness, profound economic dislocation and uncertainty that a lot of people still haven’t recovered from. It’s serious business and I did watch the Madoff movie last night in advance to see the whole thing, and I mean, it’s just a terribly sad thing that one vindictive, narcissist, sociopath could cost so many people their life savings and their fortunes.
And by the way, one thing that I’ve noticed by being involved in the government, is that people often trust those in their community (ethnic or religious); for instance, people will organize in their church or their synagogue and so they trust those within that space. They don’t ask the hard questions and then thousands of people, like in the Madoff case, just end up bankrupted or busted because of somebody who everyone said, “Oh, yeah. That’s a good guy. He does so and so’s business, he …”
So, the fiduciary rule is a very big deal and a great accomplishment. I’d noticed that the new Secretary of Labor, Mr. Acosta, is already attacking it before it’s even come into existence, which is extraordinary, and seems to want to be reviving the APA process to issue a rule revoking it. I would not be surprised if they attempt to legislatively destroy the rule because that’s basically the kinds of legislation we’ve been voting on ever since we took office in January. Although, I would recommend to my friends across the aisle that they not get involved with this one because you know, when the public wakes up to what this means.
And you guys have done a great job of explaining to this group, but when the public wakes up to the fact that well now, their investment advisors have to have a fiduciary duty to them, which means that’s legally enforceable. It’s binding. Previously, they could say, “Oh, well I didn’t have a fiduciary duty to you, so I didn’t give you the best or second best or third best, but I gave you the fourth best advice and it didn’t work out, but it was reasonable.”
Congressman Raskin:“It was suitable.” Then suddenly they had a legal escape hatch, but not now under the fiduciary rule. If we go to the American people and we say,”Well, do you want your investment advisors to have a fiduciary obligation to you or fiduciary obligation to their own business or to some other businesses?” I think that 99% of the people are going to say, “We want the fiduciary duty to run to us.” And so, but it could very well happen because, and the reason I know that is because we’re voting on what’s arguably even a more evil and sweeping piece of legislation this week, which is the so-called Choice Act, which would basically overturn the Dodd-Frank Act, which was the most important piece of consumer protective financial legislation enacted in the United States of America in 75 years.
It created the Consumer Financial Protection Bureau. It instituted a whole host of protections for people’s investments across the board, and Wall Street has been agitating for its destruction and it got out of the Financial Services Committee on a party line vote and it is coming; the first vote we did today (a procedural vote) but they want to vote on it this week to overturn Dodd-Frank. So, let me just tell you quickly what’s in this legislation.
It does wipe out the Consumer Financial Protection Bureau, which was actually consolidation. It used to be really fragmented and all over the place. It was at the Fed, it was the Comptroller of the Currency, here and then they said, let’s create one bureau that would be a watchdog for consumers against financial scams and ripoffs and hidden fees and so on. And it has already saved 36 billion dollars for 12 million people. 12 million people have saved 36 billion dollars in scams and ripoffs.
And that’s pretty extraordinary that it’s benefitting millions of Americans already. And why would we want to get rid of it? It doesn’t make any sense. It would also get rid of the Financial Stability Oversight Council, the FSOC, which is a forum for regulators to exchange information about risks in the financial system. It would do away with the so-called Orderly Liquidation Authority. You remember what happened with the financial meltdown, the subprime mortgage crisis was that the choice was either they would let a bank just completely go bust or they would bail it out, right?
That was a terrible choice and so, the Orderly Liquidation Authority creates another possibility, which is not an overnight debacle, but a staged liquidation authority. Dodd-Frank also instituted a series of protective measures to make sure banks don’t get to that situation by increasing the capitalization requirement, so that they’ve got to have more money within them and guaranteeing that the banks themselves are engaged in safe practices.
There’s the FOCA rule, which basically said that commercial banks could not engage in speculative bets, but had to be engaged in the traditional business of banking. All of this, including stress tests by the way, on the banks to make sure that they’re financially solid. All of this now is up for grabs with this so-called Choice Act. Essentially it’s legislation to turn the clock back on the law to what existed before the 2008 mortgage meltdown crisis and so far it is passing with flying colors on a total party line vote. As we try to defend the gains that were made for consumers and investors and retirees, and pension holders during the Obama Administration.
So, look, we need a massive campaign for financial literacy in America and we need it for two reasons. One, is so people can protect their own investments and understand what it is that they’re getting their money into and they can make shrewd and prudent, and strategic choices consistent with what their financial goals and agenda are. But two, we need massive financial literacy so people as citizens and as policy makers can make the right decisions about legislation and about regulation. And so, I’m glad that you’re conducting this and I do seize upon every opportunity I can to tell people that the Consumer Financial Protection Bureau has saved tens of millions of people money and it has saved billions of dollars from scams and ripoffs and unfair charges that are out there.
And so, we need to stop this Choice Act. We’ve got to get the word out there about that and you know, the great irony of course, is that the president campaigned against Wall Street, campaigned against Goldman-Sachs and of course, Goldman-Sachs and Wall Street are exceedingly well-represented in his administration and we have a political program, which is really at odds with the interest of the vast majority of the American people who are either retirees or planning for their retirement or beneficiaries of retirement plans or trying to figure out what to do with their own investments. So, thank you for having me and thank you for the great work that all of you guys have done.