A law that tells businesses to act in their customers' best interests? Seriously?

[LJ_Reloaded]

Financial bill has big loophole for Wall Street, expert warns

Financial bill has big loophole for Wall Street, expert warns
By Greg Gordon, McClatchy Newspapers Greg Gordon, Mcclatchy Newspapers Tue May 4, 7:39 pm ET

WASHINGTON — A Columbia University expert in securities law urged Congress Tuesday to patch "a fundamental hole" in financial regulatory revamp measures by imposing a legal requirement that investment banks act in the best interests of their clients.

"Conflicts of interest played a key role in causing and intensifying the 2008 financial crisis," law professor John Coffee told a panel of the Senate Judiciary Committee chaired by Pennsylvania Democratic Sen. Arlen Specter .

Several other legal experts, however, argued that there is no need for such a standard, one cautioning that it could create enough uncertainty to hurt financial markets.

Specter, a recently converted Republican who's in a tightening Democratic primary race with Rep. Joe Sestak , is pushing legislation to deter the kinds of abuses blamed in the current crisis.

His amendment would impose a legal duty on broker-dealers or their agents to disclose all conflicts of interest when advising clients on the sale of securities, including exotic instruments, and establish maximum jail sentences of 25 years for willful violations.

To emphasize his concern about conflicts, Specter placed into the record a November 2009 McClatchy article describing how Goldman Sachs had sold more than $40 billion in risky mortgage securities in 2006 and 2007 while secretly betting on a housing downturn that would sink their value.

On April 16 , the Securities and Exchange Commission filed a civil fraud suit accusing Goldman and one of its vice presidents of allowing a longtime client to rig an offshore deal and then reap $1 billion in profits by betting against it. Goldman has denied wrongdoing.

Witnesses Tuesday included Lanny Breuer , the chief of the Justice Department's Criminal Division, who voiced support for jail sentences to deter securities fraud, but didn't take a position on the bill. Pressed by Specter, Breuer couldn't offer examples of major criminal prosecutions of Wall Street figures in what led to the 2008 meltdown.

Barbara Roper , the director of investment protection for the Consumer Federation of America , and told the subcommittee that Goldman executives who testified last week before a separate Senate panel "seemed bewildered. In their world, it seems that customers who can't look out for their own interests are simply sheep waiting to be shorn."

Andrew Weissman , a New York -based partner in the law firm of Jenner & Block who previously headed a Justice Department task force that investigated massive fraud in the collapse of energy firm Enron Corp. , said that willful misconduct could be prosecuted under existing laws. He said he's not convinced that "all — or even the core — of the conduct that we find most troubling on Wall Street " was systemic fraud or could properly be considered criminal.

Larry Ribstein , a University of Illinois professor, called the bill "the wrong tool" for addressing the problem, and J.W. Verret , an assistant professor at the George Mason University law school said it would "chill the securities markets ... at a time when they're under severe strain."

In response, Coffee dismissed what he called "a laundry list of Chicken Little reasons telling us that the sky will fall in if we mandate that you act in the best interests of the customer."

Come on, really now.

This proposed change to the financial reform law is overwhelmingly obvious in its benefit to the country, but let's look at the bigger picture here.

There ain't too many companies now that ever act in their customers' best interest. Sure, they want to avoid scandals and bad PR, but that's pretty much the extent of their "Customers' best interest". Even when your competitor forces you to cater to your customers' desires, it's only because you want to survive. It's not about the customer at all, it's about keeping your sales strong and predators off your turf. Soon as the competition goes away, guess what, it's screw the customer time again.

Hell, in the insurance industry I could make as much as 2-3 million a year - up to double what I do now - if I cut a few corners. Don't think it hasn't crossed my mind more than a few times to tell someone "State Fund is the lowest rate I could get you" when I could get a drastically lower one from First Comp, or hint that they'd get better claim handling service from a more expensive one when they really wouldn't. Competitors do it all the time and as I said, a few of 'em make twice as much as me. (I don't need 2-3 million a year to live though.)

You go to the grocery store, they don't care about you, they care about their bottom line. You get sick off their food, they're going to first think about blaming someone else, and if they can't do that, THEN they'll hold you off with attorneys and fight the case. They won't pull a Toyota and just fall on their sword.

This proposed change to the financial reform laws is fighting against investment companies acting against the interests of their customers - but in reality, not giving a shit about the interests of customers until it's useful or necessary is a fact of every day capitalism.

Corners will always be cut when a business can get away with it. Humans are fallen creatures and are given to prey on one another: it's going to take FAR MORE than one little law to change that. If every man woman and child could profit off stocks the way Goldman Sachs did, 80% of America would be scrambling to do it. And that 80% is a CONSERVATIVE estimate. I'd put a solid bet on 99%.

 

[kamuikamui]

by design.

 

[LJ_Reloaded]

by design.

Which makes you wonder why we ever even bothered to build a civilization.

Republicans want us to wallow in this dog-eat-dog mentality. They deserve to live in cages, or at least far away from society.