Last week Paul Kanjorski issued a press release touting his role in H.R. 4173, the Wall Street Reform and Consumer Protection Act of 2009, which passed in the House by a vote of 223-202.
He makes the claim that his "too big to fail" amendment will empower Federal regulators to rein in and dismantle financial firms that are so large, inter-connected, or risky that their collapse would put at risk the entire American economic system, even if those firms currently appear to be well-capitalized and healthy. By ensuring that financial companies cannot become so big that their failure would pose a threat to economic stability, we will protect American taxpayers from future bailouts. By outlining clear and objective standards for regulators to examine financial companies, we will also reduce the level of risk their activities pose to our financial stability and our economy.
Not so fast Paul. Nakedcapitalism exposes the "trojan horse" in Kanjorski's amendment that protects the bank entities from breakup and thwarts the consumer protections Kanjorski wants credit for.
Two weeks ago as the Financial Reform Bill was wending its way through Congress, Paul Kanjorski emerged as the champion of breaking up too-big-to-fail financial institutions. After seeing trillions of dollars in taxpayer money go to backstopping, propping up and guaranteeing the liabilities of weak financial institutions, It looked like we were going to see some draconian action.
The Congressman got his way and the Kanjorski Amendment to the the Financial Stability Improvement Act passed late last week with a vote of 38-29. Congressman Kanjorski was satisfied with the result.
But, wait one minute. Is this really the holy grail of financial stability and improvement? Of course it isn’t. In fact, it makes things worse. On page 7 of the Kanjorski Amendment, there is an enormous loophole that virtually eliminates the ability of regulators to take prompt corrective action in seizing and shutting down a bankrupt financial institution.
Here’s what the bill actually says:
(h) JUDICIAL REVIEW.—For any plan required under this section, a financial company subject to stricter prudential standards may, not later than 30 days after receipt of the Council’s notice under subsection (e)(5), bring an action in the United States district court for the judicial district in which the home office of such company is located, or in the United States District Court for the District of Columbia, for an order requiring that the requirement for a mitigatory action be rescinded. Judicial review under this section shall be limited to the imposition of a mitigatory action. In reviewing the Council’s imposition of a mitigatory action, the court shall rescind or dismiss only those mitigatory actions it finds to be imposed in an arbitrary and capricious manner.
Translation: we the bankrupt financial institution can sue in court to stop our being shut down by regulators. Hello litigation. Bye bye, prompt corrective action.
This is a Trojan horse.
This tactic is not new to Kanjorski. He committed the same skewed representation of the Ney-Kanjorski "Responsible Lending Act" in 2005. Predtaory Lending Bill A Ruse, Consumer Groups Charge
The bill would preempt state laws proven effective at curbing abusive lending and replace them with a weak federal standard.
"The numerous loopholes in this bill show a lack of understanding of how predatory lending steals the home equity of thousands of American families every year," said Mark Pearce, president of the Center for Responsible Lending, a nonprofit, nonpartisan policy and research guru.
Civil Rights and Consumer Advocates' Comments on Ney-Kanjorski Bill
Maude Hurd, President, ACORN: "The new Ney bill is still unacceptable. It would eliminate all state laws, including important limits on prepayment penalties that are in effect in more than 30 states.
Goldstein Statement: Ney-Kanjorski Would Gut State Laws, 9/7/05
This year Representatives Ney and Kanjorski have introduced a bill that claims to protect consumers, but in fact guts strong state laws, replacing them with a bill that fails to provide meaningful protections for homeowners and weakens an already inadequate federal law.
ACORN was against Kanjorski but supported him for reelection. What a dysfuntional organization.
Kanjorski reminds me of Wimpy. "I'd gladly pay you Tuesday for a hamburger today." That was Wimpy's way of securing a free lunch, something Kanjorski has been doing for years.
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