Trump will roll back Obama rule that protected retirees from getting bilked by their advisers

Bryce Covert

Bryce Covert Economic Policy Editor, Think Progress

On Friday, President Trump plans to sign an executive order rolling back protections put in place by the Obama administration to ensure financial advisers can’t give retirees bad advice to enrich themselves.

Before what became known as the fiduciary duty rule was put in place, advisers who help retirees decide where to invest their money were allowed to steer clients toward products that made the advisers money but weren’t in the clients’ best interest. This practice was costing Americans an estimated $17 billion a year.

One of them was Phil Ashburn. When he was offered a buyout after 30 years at Pacific Bell, he turned to a financial broker for advice on how to invest the money, who told him she would make him rich and he’d be set for life. But after she convinced him to put his money in a variable annuity, which fluctuates based on market performance, his original $355,000 investment went down to just $70,000 by 2015.

The broker had goaded him into that product because it made her money: she worked solely on commission and made $900,000 a year off of selling variable annuities.

Now Ashburn is worried about losing his house, and he and his wife can’t afford holiday gifts for their grandchildren. “This is something I wake up thinking about every morning,” he told ThinkProgress. “My stomach is tied in knots. I feel like a failure. It plays on you mentally and physically.”

The Obama administration’s new rule requires brokers like the one who advised Ashburn to adhere to a “fiduciary standard,” meaning that they have to put clients’ interests ahead of their own when they make investment recommendations. A report released by Sen. Elizabeth Warren (D-MA)’s office on Friday morning detailed all of the predatory practices still being used by financial brokers that the rule would eliminate, such as kickbacks for those who sell annuities. The rule is currently set to take effect in early April.

But on Friday, according to a Wall Street Journal interview with White House National Economic Council Director Gary Cohn, Trump will sign a memorandum instructing the labor secretary to consider revising or rescinding the rule. The agency will have 90 days to take action and will have the final say on what road is taken. Trump has nominated fast food CEO Andy Puzder to lead the department, although he has yet to have a hearing amid heavy criticism over his company’s labor record.

Trump will sign the order directly after a meeting with business owners, including the CEOs of Wall Street firms JP Morgan and BlackRock. He has also surrounded himself with people from the banking industry, including Cohn himself, who was president of Goldman Sachs.

Trump aimed criticism at Wall Street on the campaign trail, saying hedge funds were “getting away with murder” and arguing he had been the toughest on banks. But while rolling back the fiduciary rule is the most concrete action the administration will take on banks Friday, Trump will reportedly sign other orders aimed at weakening industry rules. One executive order to be signed the same day will direct federal regulators to put together recommendations for how to revise the reforms put in place by the Dodd-Frank law passed in the wake of the financial crisis.

Trump has previously promised to destroy Dodd-Frank. He can’t do that on his own without Congress, however, so his order will lay the groundwork for more wholesale changes. “This is a table setter for a bunch of stuff that is coming,” Cohn promised.

There are some things Trump can do on his own, and the administration is indicating that he’s already gearing up. His team has said it will seek to make changes to how the Consumer Financial Protection Bureau, a creation of Dodd-Frank that focuses solely on protecting consumers from abusive financial firms, is structured and staffed. The first move appears to be firing the current director, Richard Cordray, even though Cordray’s term won’t end until July 2018 and he has said he has no plans to step down earlier.

Cohn told the Journal that “personnel is policy” and inserting Trump’s own director could help him influence the agency’s policy, which has so far gotten more than $10 billion in relief for 17 million Americans who were defrauded by financial firms.

Republicans in Congress seem eager to help. Earlier this week, Republican senators introduced a bill that would severely hamper the CFPB’s independence and ability to take swift action by putting five people in charge of it, rather than one, and shrink its overall workforce by making it get rid of three employees for every new one. They promise more sweeping legislation on financial regulation will come soon.

***

This was reposted from Think Progress.

Bryce Covert is the Economic Policy Editor for ThinkProgress. She was previously editor of the Roosevelt Institute’s Next New Deal blog and a senior communications officer. She is also a contributor for The Nation and was previously a contributor for ForbesWoman. Her writing has appeared on The New York Times, The New York Daily News, The Nation, The Atlantic, The American Prospect, and others. She is also a board member of WAM!NYC, the New York Chapter of Women, Action & the Media. Follow her on Twitter @brycecovert

Posted In: Allied Approaches

Union Matters

Get to Know AFL-CIO's Affiliates: National Association of Letter Carriers

From the AFL-CIO

Next up in our series that takes a deeper look at each of our affiliates is the National Association of Letter Carriers.

Name of Union: National Association of Letter Carriers (NALC)

Mission: To unite fraternally all city letter carriers employed by the U.S. Postal Service for their mutual benefit; to obtain and secure rights as employees of the USPS and to strive at all times to promote the safety and the welfare of every member; to strive for the constant improvement of the Postal Service; and for other purposes. NALC is a single-craft union and is the sole collective-bargaining agent for city letter carriers.

Current Leadership of Union: Fredric V. Rolando serves as president of NALC, after being sworn in as the union's 18th president in 2009. Rolando began his career as a letter carrier in 1978 in South Miami before moving to Sarasota in 1984. He was elected president of Branch 2148 in 1988 and served in that role until 1999. In the ensuing years, he worked in various roles for NALC before winning his election as a national officer in 2002, when he was elected director of city delivery. In 2006, he won election as executive vice president. Rolando was re-elected as NALC president in 2010, 2014 and 2018.

Brian Renfroe serves as executive vice president, Lew Drass as vice president, Nicole Rhine as secretary-treasurer, Paul Barner as assistant secretary-treasurer, Christopher Jackson as director of city delivery, Manuel L. Peralta Jr. as director of safety and health, Dan Toth as director of retired members, Stephanie Stewart as director of the Health Benefit Plan and James W. “Jim” Yates as director of life insurance.

Number of Members: 291,000 active and retired letter carriers.

Members Work As: City letter carriers.

Industries Represented: The United States Postal Service.

History: In 1794, the first letter carriers were appointed by Congress as the implementation of the new U.S. Constitution was being put into effect. By the time of the Civil War, free delivery of city mail was established and letter carriers successfully concluded a campaign for the eight-hour workday in 1888. The next year, letter carriers came together in Milwaukee and the National Association of Letter Carriers was formed.

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