Andy Morrison is the campaigns coordinator for New Economy Project.
Last Friday, hours before signing an executive order that put the Dodd-Frank financial reform law on the chopping block, President Trump name-checked Chase CEO Jamie Dimon. “There’s nobody better to tell me about Dodd-Frank than Jamie,” he said.
Translation: there’s no one better than Dimon to help gut Dodd-Frank. Chase has for years aggressively lobbied members of Congress to undermine financial reform. Now that Trump has packed his administration with Wall Street fat cats — including six Goldman Sachs alums — the table is set for a return to the pre-recession days when Wall Street wrote its own rules. We know how well that worked out.
Banks’ systematic peddling of toxic loans brought down the U.S. economy, wiping out an estimated $19.2 trillion in household wealth and 8.8 million jobs. Losses were especially devastating for people of color, whose neighborhoods were targeted by predatory mortgage lenders. Researchers at Brandeis University found half the collective wealth of African-Americans and more than two-thirds for Latinos stripped away.
Dodd-Frank was intended to protect people from discriminatory financial abuse and to prevent recurrent financial collapse. It imposed vital restrictions on risky derivatives, required that banks hold more capital to withstand shocks and authorized the government to liquidate the largest banks in the event of grave failures.
Perhaps most important, Dodd-Frank put a much-needed consumer cop on the beat. Since its inception in 2011, the Consumer Financial Protection Bureau has returned $11.7 billion to 29 million consumers cheated by financial services companies.
Through enforcement actions, the agency has protected people from discriminatory lending, abusive debt collection, deceptive marketing, unfair billing and much more.
If anything, Dodd-Frank does not go far enough, especially when it comes to addressing systemic risk. As the financial reform bill moved through Congress, industry lobbyists worked to kill it line by line. The four too-big-to-fail banks that received the most bailout money from taxpayers are bigger now than they were before.
Stopping Trump’s economic agenda will mean standing up to powerful interests that have plenty to gain from decimating Dodd-Frank. New Yorkers must urge their members of Congress to oppose them, and Trump, at all costs.
But local action is also needed to ensure that these same powerful forces do not threaten New York’s consumer protections. While Trump takes a hatchet to federal financial reform, a handful of Albany legislators is poised to open the floodgates to predatory lending in New York.
Last month, East Harlem Assemblyman Robert Rodriguez reintroduced the Community Financial Services Access and Modernization Act. The bill is merely the check-cashing industry’s latest attempt to legalize usurious lending. It would allow New York check cashers to make high-cost loans, with no underwriting requirements, to mom-and-pop, family- and immigrant-owned businesses . Sound familiar?
In the state Senate, members of the Independent Democratic Conference, which caucuses with the Republicans, have advanced this and similar bills in the past.
If New York’s legislators are serious about ensuring access to affordable loans in underserved neighborhoods, they should support community development financial institutions, including low-income credit unions, which have a track record and mission of serving immigrants, small businesses, and communities that banks have long failed adequately to serve.
In 2007, New York established a fund for CDFIs, modeled after the federal CDFI Fund, which provides loans, grants, and investments in support of community development. New York has yet to allocate actual dollars to this state program. Given threats to the CFPB and to financial reform more generally, Gov. Cuomo should amend his proposed budget to breathe life into the state CDFI Fund, and send a clear signal that the check-casher bill is a non-starter.
Resisting Trump’s economic agenda will not be easy. Yes, it will mean fiercely defending Dodd-Frank and the CFPB. But it will also mean pushing New York’s electeds to support solutions grounded in economic and racial justice. Establishing a robust state CDFI Fund is an obvious place to start.