Round 1: Consumer Financial Protection Bureau Fails to Stand Up For Consumers

Rakim Brooks

Consumers expressed outrage when Bank of America announced that it would begin charging $5 per month for debit card use. Good for them. Working families are strapped. Median incomes are declining, food prices are rising, and the labor market is stagnant. Five dollars per month means a lot to Americans these days, especially the 45 million Americans who now rely on food stamps to make ends meet. But I hope the outcry is even greater when the word spreads that the Consumer Financial Protection Bureau knew about BoA’s plans and did nothing to stop it.

According to recent reports, the BoA officials who met with the CFPB to discuss the plan brazenly admitted that this is the financial industry’s response to the Dodd Frank Act. BoA, which is the largest US financial institution, has publicly claimed to be under siege. Its credit rating has been cut, stock prices have suffered, and lawsuits are being filed against them at a dizzying pace. Add to that the Durbin Amendment of the Dodd Frank Act, which limited the amount banks could charge merchants, and BoA spokespersons claim they are like a turtle on its back: just looking for a hand up.

No wonder BoA has an image problem. This “embattled institution” participated directly in the mortgage crisis but still received $45 billion through TARP and, as of August 2011, has received another $500 million from Fannie Mae to offset the losses associated with their toxic mortgage portfolio. All the same, the fees keep coming. That is unless you have at least $20,000 banked, a small business, a BoA mortgage, or accounts linked to the Merrill Lynch brokerage. After all that America has done for this bank, BoA still doesn’t treat ordinary citizens as valued customers.

This is what class warfare really looks like, betrayals of public trust, accompanied by maddening distortions. This transaction fee is neither Senator Durbin’s fault, nor is it a legitimate response from the financial sector. The Durbin Amendment, contrary to industry and GOP commentary, was a wise piece of legislation. Prior to its enactment, merchants were charged roughly 400 percent the cost of processing a debit card transaction. That equaled, on average, 44 cents per transaction. Senator Durbin’s amendment capped those fees at 24 cents, a figure that was determined by the Federal Reserve. This move is expected to reduce bank profits by $6-10 billion, with BoA absorbing $2 billion of those losses. But note that banks are still able to charge merchants more than 215 percent of the transaction cost. While that rate is still exorbitant – more than most loan sharks charge – it’s at least fairer than it was previously.

There is also a good economic rationale for the Durbin Amendment. Cutting transaction fees, just like the payroll tax cuts favored by the GOP before Obama proposed them, will save businesses money and give them more capital to invest in hiring and growing. Additionally, lowering the average cost of transactions makes processing debit cards more attractive to other businesses that have not yet made the transition from cash only to plastic. Debit cards, like ATM machines, make transactions more efficient and thus improve the quality of businesses. All in all, the Durbin Amendment is not only a smart financial regulation but it actually should have promoted economic growth, even if it does hurt BoA’s profits.

Yet, BoA, and the other major banks – JP Morgan, Citibank, Wells Fargo & Co – that have or intend to experiment with debit card fees are too self-centered to recognize levelheaded reform. Prior to the recession, BoA boasted $21 billion in profits. Today, the financial giant is in a panic, having reported a $2 billion annual loss in 2010. Looking for some way to steady themselves quickly, BoA intends to fire 30,000 workers and raise more fees on consumers.

The message to America’s working families: We are going to gouge the little guy because Dodd Frank won’t let us gouge merchants anymore. That’s the way things work around here. You put even an inch between us and our profit and we’ll tighten the vice on working Americans.

Sadly, strategies like these work. Hours after announcing the debit card fee, BoA stock price rose 3 percent and somewhere the millionaires were heard saying “Amen.” This is exactly the kind of corporate greed that Occupy Wall Street has been trying to confront every day in Zuccotti Park. “Banks got bailed out, we got sold out.”

Many of us had hoped that the CFPB would be an ally in this fight and maybe they still can be. But their first shot went center right. They affirmed the bank’s entitlement to do anything that is not explicitly against the law rather than upholding standards that protect average Americans. Seven House Democrats are now demanding that the Justice Department investigate whether the big banks are effectively organizing to raise consumer fees in violation of anti-trust laws. Whatever comes of this demand, hopefully the CFPB will stand firm with the lawmakers in defense of the working class, many of whom are marching as we speak.

City Cops To Obama: We Don’t Want To Enforce Broken Immigration System

Afton Branche

In a recent White House meeting, President Obama and an eclectic group of administration officials, business and law enforcement leaders, former and current elected officials and other “stakeholders” discussed current prospects for comprehensive immigration reform, one of Obama’s notable and still unfulfilled campaign promises.

According to official records of the gathering, big-city law enforcement leaders relayed their concerns that “without reform, enforcing federal immigration laws is a distraction from their important public safety and crime fighting mandates to keep their local communities safe.” In other words, using city and county resources to enforce outdated federal immigration laws compromises the ability of local police to do their jobs.

In the face of objections from both immigrant advocates and law enforcement experts, state legislatures across the country continue to consider Arizona-style laws that seek to involve local police in verifying immigrants’ citizenship status. And despite its failure to achieve comprehensive immigration reform, the Obama administration supports a host of programs explicitly designed to delegate immigration enforcement duties to local authorities.

287(g), the Criminal Alien Program and Secure Communities, three programs run by Immigration and Customs Enforcement (ICE), leverage partnerships between local law enforcement agencies and federal immigration authorities to identify and eventually deport non-citizens. In a new report, The Cost of Failure: The Burden of Immigration Enforcement in America’s Cities, the Drum Major Institute for Public Policy argues that these programs impose staggering fiscal, public safety and civic costs on the nation’s cash-strapped cities.

After examining the impact of these partnerships in major cities, we find that local immigration enforcement programs are costly for city budgets and local economies struggling to close budget gaps and preserve core services. As cities spend limited resources jailing and detaining immigrants in service of federal immigration priorities, they receive inadequate support in return. For example, one Government Accountability Office survey indicated that 62 percent of 287(g) enrolled law enforcement agencies received zero funding from the federal government for operating the program.

In addition, the report shows how local immigration enforcement can be counterproductive to protecting public safety. Using police officers to perform immigration duties and enforce civil immigration laws diverts time and resources away from criminal investigations. Local enforcement also compromises police-community relations necessary to policing city streets. When immigrants fear that contact with local police could expose them to federal immigration authorities, they hesitate to come forward to police when they are victims or witnesses of crime.

ICE maintains that immigration enforcement at the federal and local levels focuses on “criminal aliens” and immigrants who pose a threat to our public safety and national security, but evidence from cities around the country indicates otherwise. Too often, local immigration enforcement results in the deportation of immigrants that are never convicted of any crime. Since 2008, the Secure Communities program alone has resulted in the removal of over 52,000 non-criminal immigrants from the country, according to ICE figures.

It’s encouraging that the Obama administration is committed to getting immigration reform back on the Congressional agenda. Though the best way to fix the system is through legislative action, Obama can still take the advice of law enforcement experts and end the costly involvement of local police in enforcing federal immigration laws in such desperate need of repair.

(Re)calculating the Economic Benefits of Immigration Reform

Afton Branche

Last week, Rep. Mike Honda (D-CA) made a compelling case for comprehensive immigration reform in Poltico, pointing out the various economic benefits of a legalization program. In response, Heritage Foundation analyst Jena McNeill fired off a sharp rebuttal which advanced several common immigration myths.

McNeill starts by saying “the left” never argues that “amnesty” will improve the economy, but insist comprehensive immigration reform will boost the economy. She’s absolutely right: supporters of comprehensive immigration reform like Rep. Honda maintain that it will yield significant economic benefits, but only if a path to legal status for undocumented immigrants (what McNeill calls amnesty) is part of the deal.

No one argues that legalization alone can solve the problems of our broken immigration system, because it won’t. Nor will enacting an enforcement-only immigration bill, similar to the one put forward by Sen. Orrin Hatch (R-UT). Comprehensive immigration reform will fully benefit the nation’s economy only if it measures up to its name. In addition to legalization and border enforcement measures, a comprehensive solution should include provisions for families and future workers to enter the country legally.

McNeill goes off track when she declares that comprehensive immigration reform is actually a “code phrase for amnesty,” invoked because Americans are against it. I’m all for decoding long-winded immigration terms, but this is wildly inaccurate. Comprehensive immigration reform is not a euphemism for “amnesty.” The phrase refers to a package of policies, in which a legalization plan is but one controversial component. According to the author, immigration reformers are playing word games because Americans “by and large don’t support amnesty. That’s why Americans supported the attempt by Arizona to actually enforce the law.” But this isn’t the full story. Several polls show that Americans who backed Arizona’s law also think undocumented immigrants living here should be able to do so legally, after paying fines and meeting other requirements. Americans want elected officials to combine enforcement measures with a firm but fair path to legal status. Sound familiar?

This approach would add a staggering $1.5 trillion to the U.S. GDP over the next ten years, according to an influential Center for American Progress study. In his op-ed, Honda also explains how newly legalized immigrants are likely to find better paying jobs, spend more in consumer dollars, and pay higher taxes. Indeed, research on the flawed 1986 legalization bill revealed lower poverty rates, higher homeownership rates and generally improved socioeconomic situations among legalized immigrants.

McNeill claims these economic gains are “likely obliterated” in light of low-skilled immigrants’ use of lavish “local, state and federal benefits, education, and services” which will continue even after “amnesty.” To support this assertion, McNeill cites a Heritage report from 2006 that finds low-skilled immigrants consumed more in services than they paid in taxes. Like most right-leaning studies of immigration’s fiscal impact, Heritage includes the costs of educating U.S. citizen and legal immigrant children in its accounting (The Congressional Budget Office, for example, does not). Obviously, public education costs money, but it isn’t a sunk cost; children in immigrant families who are students today will be workers and taxpayers down the road.

What about non-educational benefits? Actually, newly legalized immigrants under any comprehensive bill won’t be eligible to get means-tested benefits, like food stamps or student loans, for many years. Under the terms of a recent comprehensive bill introduced by Sen. Robert Menendez (D-NJ), most undocumented immigrants legalized today will wait eight years to become legal permanent residents, then as LPRs, must wait another five years to be eligible for most forms of assistance. At any rate, weighing the potential burden of new immigrants on the public benefits system is old news. Back in 2006, CBO and the Joint Committee on Taxation estimated that enacting the Comprehensive Immigration Reform Act of 2006, which included a legalization provision, would raise $66 billion in revenue for the federal government over ten years, much more than the $54 billion in projected federal spending.

Rep. Honda and other reform-minded members of Congress should continue to tout the real economics of a comprehensive immigration overhaul. Despite claims to the contrary, it’s clear that arguments against comprehensive immigration reform based on overhyped fiscal concerns don’t hold water.