12 months ago Citizen#7 0
Friday, February 3rd President Trump signed an Executive Order to remove the Fiduciary Rule enacted by President Obama.
The fiduciary rule obligates investment professionals to put their clients’ best interest first — not just to find investments that meets the clients’ objectives. The rule would cover professionals who work with defined-contribution retirement plans like 401(k)s and 403(b)s, as well as defined-benefit plans (pensions) and IRAs. The financial industry hates the fiduciary rule because it costs them money in commissions and complying with the regulation which is estimated at around 3 billion per year.
The fiduciary rule sounds great for investors. It would protect millions of investors from paying unnecessarily high commissions on investment products, and from buying investment products and making decisions that aren’t in their best interest. In fact, a 2015 report from the White House Council of Economic Advisers estimates that conflicts of interests by brokers cost retirement investors up to $17 billion per year.
President Trump has appointed a former Goldman-Sachs Chief Operating Officer to the position of National Economic Council and has asked him to come up with an alternative to Dodd-Frank in addition to eliminating the Fiduciary Rule.
Gary Cohn exit package from Goldman Sachs was at least $100 million and $65 million of that is a cash payout. Source
Goldman Sachs has a tradition of exiting executives taking political positions. Henry “Hank” Paulson former Secretary of the Treasury worth an estimated $700 million was at the helm when the financial collapse occurred. He also was the former CEO of Goldman Sachs.
In 1999, Democrats led by President Bill Clinton and Republicans led by Sen. Phil Gramm joined forces to repeal Glass-Steagall at the request of big banks. What happened over the next eight years was an almost exact replay of the Roaring Twenties that led to the Great Depression. Banks originated fraudulent loans and once again they sold them to their customers in the form of securities (Remember Collateralized Debt Obligations-CDO’s). The bubble peaked in 2007 and collapsed in 2008. The estimated cost to taxpayers (you and I) was $19.3 trillion dollars in bailouts and subsidies.
Without the banks providing financing to the mortgage brokers and Wall Street while underwriting their own toxic securities, the entire pyramid scheme would never have got off the ground. Glass-Steagall protection was gone.
Fidelity, the nation’s largest retirement-plan administrator, says the average balance in its customers’ accounts dropped $19,000 in 2008. Those with more than $200,000 lost more than a quarter of their savings, on average, according to an Employee Benefit Research’s Institute analysis of 22 million participants in more than 55,000 employer-sponsored 401(k) plans. Investors in the $100,000 to $200,000 range suffered as well, with an average loss of 21 percent in 2008. The typical account with $50,000 to $100,000 lost 15 percent. Source
Dodd-Frank to the rescue?
Chris Dodd and Barney Frank created with the help of many including Wall Street their signature legislation in 2010 formally known as Dodd-Frank Wall Street Reform and Protection Act is still in the process of being implemented and is over 2,300 pages long.
There is wide spread agreement that Dodd-Frank is complex and the ability to protect consumers against the too-big-to-fail” crowd is not really known but some portions of the legislation have done some good. Banks have to have more cash on hand and operate under more stringent requirements designed to keep them from repeating their greedy mistakes. The Consumer Protection Bureau which recently nabbed Wells Fargo for its predatory practices comes to mind.
In 2014 Thomas Piketty an Economist released his book “Capital in The Twenty First Century” concluded that the U.S. is fast moving to an Oligarchy (a form of government controlled by the rich and powerful few). This conclusion is shared by Nobel laureate Paul Krugman.
President Trump campaigned on the platform that he would work for the working-class people of America. His appointees have a reported collective wealth of over $12 billion dollars the richest cabinet in the history of the U.S.
His appointments and his Executive Order on Friday protects professional investors and the too-big-to-fail crowd and the wealthy elite not working class citizens.
Pay attention to what politicians do not so much to what they say. This Executive Order is not in the best interest of working class America, regardless of what “alternative” facts may be put forth.