- D.C. Circuit’s en banc decision upholding constitutionality of CFPB disappointing but not surprising. On to SCOTUS [Ilya Shapiro, Aaron Nielson, Jonathan Adler]
- Big thinking under way at the SEC could replace securities class action sector with free contract: “The SEC should authorize mandatory arbitration of shareholder class action lawsuits” [Bainbridge, Benjamin Bain/Bloomberg News (noting that broker dealers have long been free to use arbitration clauses)]
- Milberg Weiss founder Melvyn Weiss dies at 82 [ABA Journal, our coverage over the years of Weiss and his firm, @PaulHorwitz (“Give generously, and to the right people, so that your NYT obit can be a glowing apologia despite a few inconvenient facts.”)]
- Here come the shareholder derivative suits over sleazy-boss #MeToo scandals [Kevin LaCroix] “NERA: 2017 Securities Suits Filed at ‘Record Pace'” [same]
- Rogoff rebuttals: “More Evidence of the High Collateral Damage of a War on Cash” [Lawrence White, Cato, earlier] “Money as coined liberty” [David R. Henderson]
- Quotas/targets for percentages of women, disabled and indigenous persons on Canadian corporate boards? [Terence Corcoran/Financial Post, more]
Megan McArdle writes at Bloomberg on the downfall of the CFPB’s anti-arbitration rule, and why the results of most class actions, though expensive to provide, are not greatly valued by consumers. She also quotes me on one reason why surveys find (paradoxically or otherwise) higher consumer satisfaction with the experience of arbitration that you’d think from the campaign against it:
The alternative to lawsuits, arbitration, is supposed to follow the same laws as courts, and to do so more quickly and without a lot of the costly procedure. As a result, says Walter Olson of the Cato Institute, consumers are in general surprisingly satisfied with the arbitration experience, because it provides the kind of justice we imagine courts will: You sit down and tell your story in your own words. In court, by contrast, everything has to proceed according to complicated rules of evidence, with opposing counsel interrupting to tell the court that you can’t say certain things.:
More on the recent Congressional rejection of the CFPB’s regulation: Thaya Brook Knight. And in a new paper, David Noll (Rutgers) finds the new administration’s rollback of anti-arbitration rules to be piecemeal in nature and of only middling success so far. Earlier here.
- Sources: Treasury intelligence division has unlawfully spied on and collected Americans’ private financial information [Jason Leopold and Jessica Garrison, BuzzFeed]
- “A majority of Americans oppose the idea of regulating CEO pay.” [Thaya Brook Knight, IBD]
- “Senate should vacate the harmful consumer banking arbitration rule” [Keith Noreika (acting U.S. Comptroller of the Currency), The Hill]
- “Derivative litigation mainly serves as a means of transferring wealth from investors to lawyers.” Is there a case for abolishing it? [Stephen Bainbridge]
- U.S. government files false affidavit, stages splashy raid, destroys business. Tough luck apparently [Ira Stoll on Second Circuit finding of qualified immunity for prosecutors in David Ganek case]
- “Look in the Mirror: Why the Number of Public Companies & IPOs are in Decline” [Patrick A. Reardon, CrowdFund Insider]
- “The Rise of Financial Regulation by Settlement” [Matthew C. Turk, Columbia Law School Blue Sky Blog]
- Before buying into the idea that fractional reserve banking has some sort of fraudulent roots, consider the common law concepts of detinue, bailment, and debt [George Selgin, Cato]
- Cato files brief urging Supreme Court to clarify constitutional status of SEC’s use of in-house administrative law judges [Thaya Brook Knight on Lucia v. SEC]
- Between FATCA and the Patriot Act, American extraterritorial banking rules keep wreaking havoc on other countries [Ernesto Londoño, New York Times on Uruguay legal marijuana businesses]
- “Congress Can Rescind the CFPB’s Gift to Trial Lawyers” [Ted Frank, WSJ]
- “Absent Reform, Little Relief in Sight from Chronic “Merger Tax” Class-Action Litigation” [Anthony Rickey, WLF]
Why it should go [Rafael Mangual and Jarrett Dieterle, Investors Business Daily] And Thaya Brook Knight, Cato:
If customers were really upset about arbitration, it seems they would have presented a terrific market for a company that would offer them contracts free of arbitration clauses. The trade-off would likely have been slightly higher fees for their products to off-set the costs. That is, effectively the trade-off the new rule presents: no arbitration clause, but higher costs. To my knowledge, no one offered this trade-off. Given the competitiveness of the market, it seems that if there were customers willing to pay for a product, banks and credit card companies would have offered it. The fact that no one did suggests to me that arbitration clauses are not that important to consumers. Not important enough, at least, to justify higher costs. This makes the rule a bit strange. It forces on consumers an option they never chose, all in the name of protecting their best interests.
Hello, AP? The relevant “wanting” here is done by lawyers, not consumers. (“When consumers want to create or join a class-action lawsuit…”) And that’s kind of emblematic of how you miss the point on the Consumer Finance Protection Board’s big announcement of a rule yesterday rescuing many class action lawyers from the arbitration clauses to which their putative clients would otherwise have given legal consent.
The industry reaction was swift, with Wall Street and its advocates warning of unintended consequences of the rule within hours of the CFPB proposing it on Thursday.
The change likely will result in higher litigation costs for banks, which they will offset either by raising the costs of consumer-loan products or reducing services, said Nessa Feddis, senior vice president for consumer protection and payments at the American Bankers Association, an industry group.
House Financial Services Committee Chairman Jeb Hensarling (R., Texas) called the proposed rule “a big, wet kiss to trial attorneys.”
And: Omri Ben-Shahar, Forbes:
While the overall effect on consumers depends on the balance between meritorious and frivolous class actions, one prediction can be made with confidence. Firms will now take greater care in drafting even longer fine print agreements, where everything is fully “disclosed.” Since many class actions allege violations that can often be corrected through more comprehensive legal disclosures and warnings, firms will lawyer up and write longer and even less readable boilerplate. The “asterisk” will be the winner — the routine disclaimers that accompany advertisements, as in: “Footlong is an average; reasonable variations may apply.” In the end, the CFPB’s proposed regulation will not improve the value of financial services to consumers. It will instead lavish upon people even longer and more excruciating small print.
- Trying to buy gift cards in bulk as an employee bonus, Coyote discovers anew that the government hates cash;
- Initial public offerings are drooping again, regulation one reason [Thaya Knight, Cato]
- A dissent from the lamentations, here and elsewhere, on the decline of small community banks [Ira Stoll] “Fed’s Tarullo says looking into smaller banks’ concerns” [Business Insider]
- Berned out? Financial transactions tax “one of the more overrated ideas in American Progressive political discourse” [Tyler Cowen, Wikipedia on Sweden’s experience via @aClassicLiberal on Twitter] And Sen. Sanders continues to express incredulity on Twitter about college loans’ carrying higher interest than home mortgages do, despite attempts to enlighten him on the whole topic of secured lending and collateral [@tedfrank]
- Video of Federalist Society convention panel on constitutionality of administrative law judges at SEC and elsewhere with John S. Baker, Jr., Stephen Crimmins, Todd Pettys, Tuan Samahon, moderated by F. Scott Kieff;
- Consumer Financial Protection Bureau ban on contractual arbitration will help class action lawyers, few others [Todd Zywicki, Mercatus]
- “How US policies to stop terrorist financing end up hurting innocent families abroad” [Dylan Matthews, Vox] Money laundering regs, “de-risking” result in many bank closures in U.S.-Mexico border areas, hassles result for local residents and businesses [Kevin Funnell]
Unveiling a plan to ban the use of arbitration clauses that rule out class actions, the federal Consumer Financial Protection Bureau behaves as a Plaintiff’s Lawyer Protection Bureau [Andrew Pincus, Chamber’s Institute for Legal Reform] More: Boston Globe, Alison Frankel, Reuters. Earlier and related here, here, here (California) and generally. And regarding news reports that Chrysler offers a $200 discount to car buyers who accept pre-dispute arbitration, Ted Frank:
Chrysler willing to split savings of avoiding courts with buyers: $200 discount. Lawyers upset that it's disclosed what they cost consumers.
— tedfrank (@tedfrank) October 8, 2015
- Stock analyst in India puts out a “sell” recommendation, is arrested and jailed [W$J, compare Argentina economists]
- Dear Mayor Bill de Blasio, Messrs. Dodd, Frank, & Co.: London thanks you! (It’s now back on top over NYC as most-desired financial center.) [Business Insider]
- Amid court setbacks, SEC says it might tinker with its use of in-house administrative judges after all [David Michaels, Bloomberg]
- “The Consumer Financial Protection Bureau’s Arbitration Study: A Summary and Critique” [Jason Scott Johnston and Todd Zywicki, SSRN]
- “Rand Paul and Five Expats Sue the Feds Over FATCA” [Matt Welch, Reason, earlier on this exceedingly bad law]
- Sen. Elizabeth Warren (D-Mass.) came to Cato and spoke, that’s not a punch line setup but a real thing that happened [Tom Clougherty, more on Warren-Vitter and “too big to fail”]
- Use credit responsibly? Sucker! NYC first city to follow state trend toward banning employer use of credit history in hiring [Jennifer Mora, David Warner, and Rod Fliegel, Littler this spring]
- Cato Book Forum tomorrow (Wednesday, May 13): Paul Mahoney, “Wasting a Crisis: Why Securities Regulation Fails” [register or watch online]
- “When The SEC Pays Your Lawyer For Informing On You, Is That A Good Thing?” [Daniel Fisher]
- “Unfortunately for the CFPB’s ideological imperative, Ballard Spahr concludes otherwise: ‘In fact, the study confirms that arbitration does benefit consumers.'” [Kevin Funnell]
- Which “established members of the business establishment” brought the AIG prosecution to Eliot Spitzer’s desk, and from what motives? [Ira Stoll]
- Dodd-Frank “say on pay” failed to slow rise in CEO compensation, and it would help to understand why [Marc Hodak vs. James Surowiecki]
- “One-Third of Americans Living Abroad Have Thought Actively About Renouncing Citizenship Due to Tax-Filing Requirements” [Matt Welch, followup, earlier on FATCA] Rand Paul bill would repeal the law, and there’s also a constitutional challenge in the works [TaxProf]
- “What’s the point of the implied covenant of good faith? Other than generating fees for lawyers?” [Prof. Bainbridge]