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

Failing Bridges Hold Public Hostage

From the USW

From tumbledown bridges to decrepit roads and failing water systems, crumbling infrastructure undermines America’s safety and prosperity. In coming weeks, Union Matters will delve into this neglect and the urgent need for a rebuilding campaign that creates jobs, fuels economic growth and revitalizes communities.

The Seattle Department of Transportation (SDOT) gave the public just a few hours’ notice before closing a major bridge in March, citing significant safety concerns.

The West Seattle Bridge functioned as an essential component of  the city’s local and regional transportation network, carrying 125,000 travelers a day while serving Seattle’s critical maritime and freight industries. Closing it was a huge blow to the city and its citizens. 

Yet neither Seattle’s struggle with bridge maintenance nor the inconvenience now facing the city’s motorists is unusual. Decades of neglect left bridges across the country crumbling or near collapse, requiring a massive investment to keep traffic flowing safely.

When they opened it in 1984, officials predicted the West Seattle Bridge would last 75 years.

But in 2013, cracks started appearing in the center span’s box girders, the main horizontal support beams below the roadway. These cracks spread 2 feet in a little more than two weeks, prompting the bridge’s closure.

And it’s still at risk of falling.  

The city set up an emergency alert system so those in the “fall zone” could be quickly evacuated if the bridge deteriorates to the point of collapse.

More than one-third of U.S. bridges similarly need repair work or replacement, a reminder of America’s urgent need to invest in long-ignored infrastructure.

Fixing or replacing America’s bridges wouldn’t just keep Americans moving. It would also provide millions of family-supporting jobs for steel and cement workers, while also boosting the building trades and other industries.

With bridges across the country close to failure and millions unemployed, America needs a major infrastructure campaign now more than ever.

 

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There is Dignity in All Work

There is Dignity in All Work