While most of the world was consumed with former FBI Director James Comey's riveting Senate testimony last week, the GOP majority in the House of Representatives quietly prosecuted its war on retirement.
House Republicans under the leadership of Speaker Paul Ryan passed a "Financial CHOICE" Act that would roll back multiple Dodd-Frank protections that were put in place after the 2008 crash. These recent "reforms" mean your retirement savings will be more at risk.
Here are three ways this bill will harm your retirement savings efforts:
1) It peels back banking regulations designed to rein in the banking system. That means banks would be emboldened to take on new risks and endanger the global economy (again). Although a simpler way to regulate banks is to separate ultra-risky bank trading operations from the insured deposit business, the new bill doesn't take this "Glass-Steagall" approach.
Even worse for banking customers is the act's proposal to change the funding source of the Consumer Financial Protection Bureau, which has cracked down on myriad banking and credit abuses, which has returned some $12 billion to consumers.
Instead of deriving funds from the politically independent Federal Reserve, the bureau would be subject to Congressional appropriation, which means GOP members could effectively starve and kill it.
2) The Choice Act effectively kills a Department of Labor (DOL) Rule that went into partial effect last week. The "best interest" rule would force brokers and agents to work in the best interest of their clients on retirement advice and products.
That means prohibiting the sale of junk financial products on commission. The securities and insurance industry have been furiously lobbying and litigating to deep-six this rule.
While the newly approved Labor Secretary Alexander Acosta said he declined to delay the rule, the House bill would eliminate the rule entirely.
There is an interesting wrinkle in the retirement savings front, though. The SEC announced last week that it would consider a rule to make securities brokers and agents "fiduciaries," meaning they would be compelled to act in your best interest.
Will the SEC actually draft and pass a fiduciary rule? It was compelled by Dodd-Frank to do so about seven years ago, although it's failed to do so. And if it did come up with its own rule, would it be riddled with industry-friendly loopholes?
The Financial Planning Coalition, a group representing fiduciary financial planners, adds this caution:
“The coalition is pleased that the SEC is open to extending the fiduciary standard to broker-dealers who offer personalized investment advice. We are especially encouraged by SEC Chairman Jay Clayton’s particular interest. However, any work done by the SEC should not stymie or undercut the fiduciary rule that will be implemented by the Department of Labor."
3) The Federal Reserve would be hobbled and dangerously politicized. Conservatives have long sought to politicize monetary policy.
While the Fed's role in the economy is often debated, it's technically independent from partisan politics with a mandate to focus on employment and health of the economy. It pumped billions into the U.S. economy during and after the 2008 crash.
The Financial Choice Act would inject Congressional interference into Fed policymaking.
According to the Economic Policy Institute, a pro-labor movement think tank, "it would lead to a less transparent and less democratically accountable Federal Reserve, and would mandate the Fed follow policy rules that would predictably lead to higher unemployment and less ability to fight deep recessions. It’s hard to imagine a bill that could do more broad-based damage to the future economic security of America’s working families."
The CHOICE Act now goes to the Senate, where it faces an uncertain fate.
Keep in mind that the Senate is also grappling with the House's proposal to downscale health care and throw more than 20 million out of their health insurance policies. So the upper chamber has its work cut out for it. Let them you how you feel.
