Tag: corporations

Gutting the Consumer Financial Protection Bureau

You know things have gotten bad for the banking industry when even the bankers themselves are beating up on their own. After the Consumer Financial Protection Bureau (CFPB) announced back in early September that it was fining Wells Fargo nearly $200 million—the largest fine ever levied by the Bureau—for the “widespread illegal practice” of opening dummy accounts, filling them with depositors’ funds without their knowledge or authorization, and then cashing in on the accounts by assessing consumers’ fees and other charges, you could almost hear the bankers of the world collectively throwing up their hands. “Not that Senator Elizabeth Warren needed more ammunition to protect the CFPB,” grumbled Jaret Seiberg of the Cowen Group, a leading financial services company, “but she has it now.” Camden Fine, president of the Independent Community Bankers of America (ICBA), put it even more bluntly. “Wells’ greed has made it much more difficult for ICBA to get much needed regulatory relief,” Fine groused.

An invention of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB was created to rein in the bottom-feeders of the financial community. But the revelation that the largest bank in the world by market capitalization had just been caught with its hand in the cookie jar was not what really bothered Fine and Seiberg. Rather, it was the extraordinarily poor timing of the news that rankled them most of all. On the very same day the CFPB issued its consent order against Wells Fargo, the House Financial Services Committee announced that it would begin hearings on a new piece of legislation, the Financial Choice Act, introduced by Republican Committee Chairman Jeb Hensarling of Texas. Hensarling, one of Wall Street’s most contentedly kept men on Capitol Hill (to the tune of $1.2 million in campaign contributions during the 2016 election cycle alone), drafted the Financial Choice Act in effect to gut or destroy the regulatory provisions put in place by Dodd-Frank, and especially Elizabeth Warren’s brainchild, the CFPB (no wonder, then, that Warren has called the bill “Congressman Hensarling’s wet-kiss to the Wall Street banks”). So when Wells Fargo CEO John Stumpf found himself hauled before the public to confess sheepishly that “we make mistakes,” just as Hensarling was beginning the campaign to bring the Financial Choice Act to a floor vote, the ICBA’s Fine grimly rued the inopportune coincidence: “Much-needed CFPB reform is basically DOA,” he acknowledged by way of a postmortem. A little more than a month later, Stumpf himself was DOA—victim of an unceremonious early retirement package that included a “claw back” of nearly $41 million in previously awarded stock bonuses.

If that turns out to be the fate of the Financial Choice Act as well—which, among other things, would replace the CFPB’s existing “consumer watchdog” executive structure with a bipartisan commission subject to the unpredictable currents of congressional appropriations, while repealing its ability to ban financial products deemed to be abusive—it will not have been the first attempt to curtail the Bureau’s regulatory effectiveness. Nor is it likely to be the last. Ever since the 2010 passage of Dodd-Frank, the CFPB has been a perennial target for the banks and financing companies that fall under its umbrella. And with the ready assistance of hired guns like Hensarling, a proliferating array of industries that manufacture increasingly novel (and frequently quite predatory) financial products, which often remain just outside of that umbrella, have been fighting toothand-nail to keep the CFPB out of its turf.

Take, for instance, the world of for-profit educational companies. A state-subsidized boondoggle of alarming proportions, the degree-mill industry has raked in as much as $32 billion annually in taxpayer dollars in recent years, even as the Department of Education reports that 72 percent of for-profit colleges produce graduates who earn less on average than the typical high school dropout in the overall population. For that dubious honor, another study concluded, the typical University of Phoenix or DeVry graduate leaves school “ripped off, unemployed, and deep in debt,” and six times more likely to default on her student loan than a graduate of a non-profit or public college.

This kind of track record of consumer abuse is exactly what the CFPB was created to address, so it was a salutary development when the Bureau secured a $530 million judgment against Corinthian Colleges, one of the industry’s worst offenders, in the fall of 2015, while forcing Corinthian out of business in the process. A similar outcome resulted when the CFPB went after the ITT Technical Institute, which announced it was closing its doors in September 2016. But when the CFPB attempted to push its regulatory authority still further into the workings of the for-profit education industry, the industry pushed back. Noting that forprofit institutions become eligible to participate in massively lucrative federal financial aid programs by being accredited by a recognized agency, the Bureau issued a civil investigative demand— effectively a comprehensive subpoena preliminary to a full investigation—to the century-old Accrediting Council for Independent Colleges and Schools (ACICS), requesting information on how the process had worked for low-performers like Corinthian.

The ACICS responded by refusing to turn over the requested information, while appealing the CFPB’s demand on the legal grounds that the Bureau was “delving into accreditation oversight, not consumer financing, and is overstepping its bounds into an area that is exclusively under the control of the Department of Education.” Meanwhile, the for-profit educational industry’s political allies swung into action as well. Two powerful Congressional Republicans—Tennessee’s Lamar Alexander, chair of the Senate’s Committee on Health, Education, Labor & Pensions; and Minnesota’s John Kline, chair of the House Committee on Education and the Workforce—sent a scathing letter to CFPB Director Richard Cordray, attacking the Bureau’s “unprecedented overreach” and insisting that it “immediately rescind” the information request.

Alexander and Kline explained their opposition to the CFPB’s move by arguing that “determining the role of accreditors for federal purposes is a congressional responsibility, not yours.” But their unacknowledged connections to the worst offenders in the for-profit college industry surely mattered. Eight of the leading for-profit education corporations, including Corinthian and ITT Tech, have been the subject of state- or federal-level investigations in recent years; Lamar Alexander has received substantial campaign contributions from all eight of them. During the last complete campaign cycle, in 2014, John Kline was among the top three congressional recipients of campaign dollars from five of the eight colleges (or from their ownership groups, if privately held). From three of them, Kline received more campaign contributions than any other individual member of Congress.

The political pressure had its intended effect. In April 2016, a conservative federal judge appointed by George W. Bush denied the CFPB’s civil investigative demand, throwing a significant obstacle in the way of the Bureau’s attempts to extend its watchdog duties into the accreditation process.

The for-profit education racket is not the only place where predatory financial companies and their lackeys on the Hill have been working to impede the Bureau’s more expansive ambitions. In recent months, the CFPB has also been trying to shine a light into the shadowy world of structured settlement purchasing—and with remarkably similar results.

Structured settlement purchasing is one of those ubiquitous industries you have probably never heard of. Recognizable for their familiar “get cash now!” television and radio ads, structured settlement purchasers are companies that give consumers immediate lump sum cash payments at discounted rates, in exchange for future streams of payments usually associated with a settlement in a lawsuit. For instance, Freddie Gray—the Baltimore man whose death while in police custody led to weeks of unrest and trials for six Baltimore police officers— had been the beneficiary of a lead-poisoning settlement when he was a child; by the time he was twenty-three, the Washington Post reported, Gray had sold a Maryland-based financial company called Access Funding $146,000 in future payments, in exchange for just $18,300 in lump sum payouts. And Freddie Gray is far from alone—according to the National Structured Settlements Trade Association, between $8 and $10 billion worth of settlement payments are purchased by companies like Access Funding every year, often at deeply discounted prices that leave desperate consumers like Gray with just pennies on the dollar for what their original settlements would have been worth. After the Post story broke, most of Maryland’s judiciary and the state’s attorney general joined Congressman Elijah Cummings in demanding a deeper investigation into “how private companies make profits buying and selling settlements that are meant to ensure victims have reliable incomes, and how we can best protect vulnerable individuals from predatory and abusive practices.”

The largest player in the structured settlement market, by far, is J. G. Wentworth, a Pennsylvania company that does business across the country under a few different brand names. In September 2015, the CFPB issued a civil investigative demand to J. G. Wentworth, which the company refused to comply with on the dubious grounds that, because the company does not lend money to consumers (i.e., provide them with credit) but rather purchases outright their future payment streams, structured settlement payouts are “not a consumer financial product” and, therefore, outside of the CFPB’s purview. The CFPB rejected J. G. Wentworth’s petition to set aside the information request, but the company still refused to comply, throwing the decision to the courts once again and hoping for a favorable ruling like the one that spared the ACICS.

At this writing, the outcome of the CFPB’s efforts to extend its regulatory oversight into the market for structured settlement purchasing also remains up in the air. And that is exactly why so much of the financial community was so frustrated with the poor timing of the Wells Fargo fiasco. By cutting the CFPB off at the knees, the Financial Choice Act is the banking lobby’s most significant effort yet to roll back the regulatory reforms that emerged from the financial crisis of 2008—a crisis that began, remember, because of the lawless and predatory behavior of an industry selling a particularly ubiquitous consumer product. No wonder, then, that JLL Partners, the private equity firm that has owned a majority stake in J. G. Wentworth since 2006, has given more money to Jeb Hensarling than any other member of Congress in each of the last two election cycles.

Assuming Wells Fargo and their ilk can avoid tripping over their own feet, Hensarling, Alexander, Kline, and the rest of their cronies on the Hill know exactly what they need to do to keep the money flowing.

Corporations Call for “Net Zero” Emissions: Do They Know How to Get There?

In the months leading to the December 2015 Paris Climate Conference, representatives of global institutional investors and multinational corporations made headlines after they demanded that world leaders adopt radical emissions reduction targets, among them “net zero” emissions by 2050. Examples include the Global Investor Statement on Climate Change, which was signed by 409 investors representing more than $24 trillion in assets, and the Prince of Wales’ Corporate Leaders Group (which includes the likes of Shell Global and Heathrow Airport Holdings Limited). Following the Statement’s adoption in Paris, a cluster of corporate heads led by Virgin Group’s Richard Branson (calling itself the “B Team”) demanded that all governments turn the Paris net zero emissions target into national-level laws.

What are we to make of this? The practical implications of the net zero target adopted in Paris—if it is seriously pursued—are nothing short of revolutionary, opening up a “system crunch” scenario when the forces of growth, profit, and accumulation that presently propel capitalism collide with the political imperatives required to reach virtually total “decarbonization” in little more than a generation.

Paradoxically, the corporate push to adopt net zero by 2050—a target that is unprecedented in terms of its ambition—merely draws attention to the fact that the corporate elite has no clear or convincing idea about how it might be achieved. The capitalist spirit is progressively willing, but the flesh grows all the time steadily weaker.

Thus, the Paris Agreement can be a clarifying moment for labor, the climate movement, and the broader left in that, more than ever before, it exposes the gulf between what needs to be done from a scientific standpoint and what the global corporate and political elite are actually able to deliver.

Elite Consensus

Corporate statements on climate change invariably attract media attention, but it is worth remembering that major institutions such as the International Monetary Fund (IMF), the World Bank, and the International Energy Agency (IEA)—all of them unswervingly loyal to the corporate neoliberal agenda—have for some years been sounding the alarm about climate change and have urged, in fact demanded, bold action. As a result, the Paris Agreement included the goal of net zero emissions by 2060-2070. This is more or less consistent with what is required to control global warming. With still more emissions projected in the years ahead, it is virtually certain that the world will approach and perhaps exceed dangerous temperature thresholds. The adoption of net zero therefore reflects a consensus held by the majority of the world’s business and political elite that the situation is serious; the science needs to be acknowledged, and determined action at the global level is required.

The Paris Contradiction

The problem, however, is not a lack of consensus on the need to dramatically reduce emissions; it is, rather, the inability to actually act on the consensus that has already been achieved. To illustrate this, we need look no further than the Paris Agreement itself. It acknowledges the need for global warming to stay “well below 2 degrees Celsius” and states that efforts should be made to limit warming to 1.5°C. However, the “intended nationally determined contributions” (INDCs) that lie at the heart of the agreement—even if they are fully achieved—will set the world on a pathway toward 2.7°C to 3.5°C of warming (and that assumes a comparable level of ambition after 2030). The 1.5°C threshold will therefore be breached long before the Agreement’s 2030 expiration date. Thus, the Agreement acknowledges the scientific reality and then institutionalizes “contributions” that are not even close to being consistent with that reality.

Instead of reducing emissions, the INDCs in the Paris Agreement will result in an increase in emissions—albeit at a slower rate than would be the case according to the “business-as-usual” scenario. The IEA notes, “There is no peak in sight for world energy-related CO2 emissions in the INDC Scenario: they are projected to be 8 percent higher than 2013 levels in 2030 while primary energy demand grows by around 20 percent.”1

The elite consensus around the net zero goal is solid enough, but when the discussion turns to considering how the target might be reached the consensus breaks down and differences emerge. Three perspectives can be distinguished. For convenience, these three can be labeled the “Gaia Capitalists,” the “Carbon Traders,” and the “Adaptationists.” Each of the three can tell us something different about the kind of responses that the system’s representatives are considering.

Go Gaia

The term Gaia Capitalism was apparently the creation of Richard Branson. Just prior to the Paris talks, the Branson-led B Team—adherents to “Plan B,” described as an ecologically focused alternative to “Plan A” profit-based ‘business as usual’—issued the call for net zero emissions by 2050. But the statements issued by the B Team and similar groups are largely devoid of details as to how this can be achieved. Branson’s group assures us that once governments turn the Paris commitment into national laws, it will, in Branson’s own words, “unleash new innovations, mobilize large-scale investment, and reshape consumer behavior, all of which will create new jobs and economic growth.”2

However, for the Gaia Capitalists, laws will not be enough. Reaching net zero will also require corporations to embrace a new ethic, one that combines ambition with altruism. The defining trait of the capitalist—making money—can be turned into a humanitarian act if CEOs can embrace a new set of values. The world needs a new form of capitalism—one that is not driven exclusively by concern for the bottom line.3 This new capitalism must recognize that the earth is one large living organism, and all life is connected. Before the Paris conference, the Plan B group issued an awkwardly phrased rallying cry to other corporate heads, one that urged them to embrace “people and planet . . . alongside profit.”

It is hard not to see this group as heirs to the paternalistic anti-union “welfare capitalists” of the early period of the twentieth century, among them John D. Rockefeller, George Pullman, and J. P. Morgan. As Naomi Klein reminds us, a decade ago Branson said he would commit $3 billion to green investments, of which less than 10 percent materialized (mostly in biofuels) and then dried up altogether.4 During the same period, Branson opened new airline companies and the aviation business is presently booming as a result of cheap oil.

Branson’s group attracts a level of media attention but, one or two exceptions aside, the companies identifying with this approach are not major players in the global economy. And in common with “green growthers” everywhere, the problem of decoupling economic growth from emissions is simply brushed aside.

Trader Woes

The most important camp of climate-concerned capitalists is the “Carbon Traders.” Carbon pricing lies at the heart of neoliberal climate policy—the “primary mitigation mechanism” according to the IMF and the World Bank, and think tanks like the Stern Commission.5

Carbon Traders (the Traders) represent a hard-nosed subset of investors and corporate CEOs, most of whom probably look at the narcissistic hubris of Branson’s “B team” with disdain and perhaps some embarrassment. For them, net zero is needed to preserve their assets and investments, but reaching the target will require governments to introduce a global price on carbon to drive and incentivize the low-carbon economy. Governments need to “take carbon out of competition.”

The Traders understand that capitalists primarily respond to the laws of capitalist competition. Singing from the Milton Friedman songbook, they take seriously the idea that the fiduciary responsibility of a corporation or bank is to provide a return on investment regardless of the social and ecological implications. As the Prince of Wales group candidly admitted, “The private sector invests trillions of dollars . . . but in most cases the goal of reducing Greenhouse Gas (GHG) emissions does not guide such spending.”6 Therefore, “a clear, transparent, and unambiguous price on carbon emissions” is needed.7 Similarly, in February 2015, British Petroleum’s chief economist Spencer Dale described how, over the next twenty years, the use of oil and gas would grow 25 percent and, therefore, climate goals could not be reached. “Policy makers may wish to impose additional policies,” principal among them being a “meaningful global price for carbon.”8

The problem for the Traders—a problem they have thus far refused to acknowledge—is that carbon pricing has failed to have an impact on emissions and is going nowhere. The World Bank’s detailed assessment of carbon markets reported that, in 2015, only 12 percent of global GHGs were covered by a price. “A global average carbon price,” the Bank reminds us, “of between US$80 and US$120—per ton of carbon dioxide equivalent (CO2e)— . . . would be consistent with the goal of limiting the global warming to 2 degrees Celsius.”9 The average carbon price is today around $10 per ton. So more than twenty years after the Kyoto Agreement established pricing carbon as the principal policy instrument for reducing emissions, still 88 percent of global GHGs are not covered by a price, and the price on the emissions that are covered is so low as to be completely useless. The World Bank cannot point to a single instance where carbon trading has had more than a barely measurable impact on emissions levels.

The prospects for carbon markets are poor. Corporations do not want to pay for their pollution because it cuts into the bottom line. Any anxieties with regard to the long-term viability of the system are almost invariably trumped by short-term competitiveness concerns of an individual company. Meanwhile, unloading the net zero responsibility on to governments allows corporations to continue more or less on a “business-as-usual” course. If the Traders were to face up the failure of carbon pricing, they would need to offer something different—the most obvious solution being decisive government interventions, ranging from heavy and restrictive regulations to all out social ownership of key economic sectors. But this would require an ideological shift away from neoliberal groupthink—and there are few signs that this is going to happen absent sustained pressure from social movements.

Adapting to the Future Normal

The “Adaptationists” resemble something of a secret society. And while few corporate heads will openly admit it, there is a growing belief that the net zero target will not be reached by 2060-2070. The INDCs submitted in Paris already reflect the distance between the scientific consensus and the declared intentions of governments, many of whom are mere mouthpieces for business interests. Net zero will require full decarbonization of the global economy in just four or five decades. At that point, any GHGs released—to generate electricity; make products; power cars, trucks, ships, and airplanes; heat and cool buildings; raise and slaughter billions of animals, and so forth— must somehow be offset or “neutralized.” In the case of CO2 , this can be done by enhancing photosynthesis through reforestation and expanding the amount of vegetation on the surface of the planet. However, at present, some forty-six to fifty-eight thousand square miles of forest are lost each year—equivalent to fortyeight football fields every minute.10 Currently, the global economy emits roughly fifty-seven billion tons of CO2 per year; almost twice the annual emissions levels of the mid-1990s.11 Emissions from fossil fuel use have risen a staggering 61 percent since 1990 and will continue to rise, albeit more slowly.12 Furthermore, the global economy is expected to be three times larger in 2050 than it is today.13

Aware of these realities, the Adaptationists have concluded that the chances of reaching net zero amounts to, well, practically zero. And rather than adopt a politically dangerous or untenable target that could become a lightening rod for discontented radicals, they are trying to shift the policy focus toward dealing with the effects of warming, and the need for building resiliency. This perspective is presently expressing itself via important pro-corporate think tanks—perhaps a clear sign that CEOs are also thinking in similar terms. According to the World Economic Forum,

Advocating for greater attention to be paid to adaptation is controversial in some quarters as it is interpreted as a tacit admission that mitigation efforts are no longer worth pursuing. However, the less effective mitigation efforts are, the more pronounced adaptation challenges will become.14

Using stronger language, in a 2013 report titled Too Late for Two Degrees? the pro-corporate PricewaterhouseCoopers (PwC) noted, “This year (2013) we estimated that the required improvement in global carbon intensity to meet a 2 degrees warming target has risen to 5.1 percent a year, (every year) from now to 2050.” Governments’ ambitions to limit warming to 2°C, it noted, therefore “appear highly unrealistic.” The PwC report concluded, “businesses, governments and communities across the world need to plan for a warming world—not just 2°C, but 4°C, or even 6°C.”15 Such levels of warming are, in the words of one of the world’s leading climate scientists, Kevin Anderson, “incompatible with an organized global community.”16

How we can actually plan for global chaos remains something of a mystery—but the key message of the Adaptationists is valid. PwC’s report makes this point: “The only way to avoid the pessimistic scenarios will be radical transformations in the ways the global economy currently functions.”17 Such radical transformations would threaten the system itself—which is a political “no-no.” Therefore, we need to suck it up and hope for the best.

Capital’s Conundrum and Climate Justice

These differences of approach among the global corporate elite are unlikely to lead to open conflict, at least not yet. But it is already clear that none of these perspectives warrant the support of labor and other social movements. The Paris Agreement expresses the distance between what the science says is needed and the “best we can do” reality offered by those who work within the ideological and systemic confines of competition and accumulation.

To get even close to net zero in the time agreed will require dramatic changes in the global political economy. The capitalist paradigm of extraction, accumulation, and consumption, wrapped up in the ideology of growth, is incompatible with true ecological sustainability or a stable climate.

For labor, climate justice, and other social movements, capital’s climate conundrum is an opportunity. We need to continue to develop our own proposals to pursue radical emissions reductions by way of deep restructuring of the global political economy; to reassert the need for extending democratic control, advancing “public goods” approaches to essential needs and services; and to implement a just transition based on mass popular participation in key economic decisions.

Declaration of Conflicting Interests

The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding

The author(s) received no financial support for the research, authorship, and/or publication of this article.

 

Notes

  1. International Energy Agency (IEA), “World Energy Outlook 2015 Special Report on Energy and Climate Change” (Paris: International Energy Agency, 2015), available at http:// www.worldenergyoutlook.org. The IEA also reported that the Paris Agreement would see electricity generation from coal grow by 24 percent by 2040, available at http://www. worldcoal.org/signing-ceremony-paris-agreement-what%E2%80%99s-next.
  2. https://www.virgin.com/richard-branson/ climate-opportunity-paris.
  3. People and planet alongside profit available at http://bteam.org/the-b-team/watch-the-b-teamdeclaration/Branson in Guardian, http://www .theguardian.com/environment/2015/dec/06/ paris-climate-change-summit-richard-branson? CMP=twt_a-environment_b-gdneco.
  4. http://www.theguardian.com/environment/ 2014/ sep/13/greenwashing-sticky-business-naomiklein.
  5. For example, see May 29, 2015, letter to the United Nations Framework Convention on Climate Change (UNFCCC) Secretariat and the COP21 Presidency, available at http://s08 .static-shell.com/content/dam/shell-new/local/ corporate/corporate/downloads/pdf/media/ speeches/2015/letter-to-unfccc.pdf.
  6. Carbon Price Communiqué (first issued 2012). Statement available at http://www.climatecommuniques.com/Carbon-Price.aspx.
  7. Ibid.
  8. 2015 BP Energy Outlook 2035 (published February 26, 2015). Presentation by BP Chief Economist Spencer Dale energy trends, available at https://www.youtube.com/watch?v=fy PBww4o_Do.
  9. World Bank, State and Trends, page 23. How much more the price would need to be to limit warming to “well below 2°C” or even 1.5°C per the Paris Agreement has still to be calculated, but perhaps $150 per ton seems a fair estimate.
  10. https://www.worldwildlife.org/threats/ deforestation.
  11. http://www.globalcarbonproject.org/carbonbudget/15/files/GCP_budget_2015_v1.02.pdf.
  12. Intergovernmental Panel on Climate Change, “IPCC Fifth Assessment Synthesis Report,” available at https://www.ipcc.ch/pdf/assessment-report/ar5/syr/SYR_AR5_FINAL_full .pdf.
  13. http://www.pwc.com/gx/en/issues/the-economy/assets/world-in-2050-february-2015.pdf.
  14. http://reports.weforum.org/global-risks-2013/ risk-case-1/testing-economic-and-environmental -resilience/#view/fn-10.
  15. https://www.youtube.com/watch?feature =player_embedded&v=ct6cJc G5o1M.
  16. http://www.slideshare.net/DFID/professorkevin-anderson-climate-change-going-beyonddangerous.
  17. http://www.slideshare.net/DFID/professorkevin-anderson-climate-change-going-beyonddangerous.