Biden wants to ban ripoff “financial advisors”
Big gubmint wants to take away your freedom to starve to death in old age.
I’ll be at the Studio City branch of the LA Public Library on Monday, November 13 at 1830hPT to launch my new novel, The Lost Cause. There’ll be a reading, a talk, a surprise guest (!!) and a signing, with books on sale. Tell your friends! Come on down!
Once, American workers had “defined benefits pensions,” where their employers promised to pay them a certain amount every year from their retirement to their death. Jimmy Carter swapped that out for 401(k)s, “market” pensions where you have to guess which stocks will be valuable or starve in your old age:
https://pluralistic.net/2020/07/25/derechos-humanos/#are-there-no-poorhouses
The initial 401(k) rollout had all kinds of pot-sweeteners that made them seem like a good deal, like heavy employer matching that doubled or even tripled the value of every dollar you put into the market for your retirement. But over the years, as Reaganomics took hold and workers’ power ebbed away, all these goodies were clawed back. In the end, the market-based pension makes you the sucker at the poker table, flushing your savings into a rigged casino that is firmly tilted in favor of finance barons and other eminently guillotineable plutocrats.
Neoliberalism is many things, but most of all it is a cult of individualism. The fact that three generations of workers are nows facing down retirement without pensions that will provide them with secure housing and food — let alone money to see the odd movie, buy birthday gifts for their grandkids, or enjoy a meal out now and then — is framed as millions of individual failures, not a systemic one.
In other words, if you are facing food insecurity and homelessness after a lifetime of hard work, it’s because you saved wrong. Perhaps you didn’t save enough (through a 40-year run of wage stagnation and skyrocketing housing, health and education costs). Or perhaps you saved wrong, making the wrong bets on the stock market. If you can’t afford to run your air conditioner during a heat dome, that’s on you: you should have been better at stocks.
Apologists for this system will say that you don’t have to be good at stocks — you just have to pay an Independent Financial Advisor to pick the stocks for you and you’ll be fine. But IFAs don’t work for free! What if you can’t afford one?
Enter “predatory inclusion” — the practice of offering scammy, overpriced and substandard products to poor people and declaring it to be a good deed, because otherwise, those poor people would have to do without. The crypto bubble relied heavily on this: think of Spike Lee and others shilling for pump-and-dump scams as a way of “building Black wealth”:
More recently, Intuit and other scammy tax-prep services have argued against the IRS’s plan to offer free tax preparation as bad for Black and brown people, because it will deny them the chance to be deceived and ripped off with TurboTax:
https://pluralistic.net/2023/09/27/predatory-inclusion/#equal-opportunity-scammers
Back in 2018, Trump won the predatory inclusion Olympics, when his Department of Labor let the Fifth Circuit abolish the “Fiduciary Rule” for Independent Financial Advisors:
https://www.investopedia.com/updates/dol-fiduciary-rule/
What was the Fiduciary Rule? It said that your IFN had to put your interests ahead of their own. Like, if there were two different funds you could bet on, and one would pay your IFN a big commission, while the other would be a better bet for you, the IFN couldn’t put your retirement savings into the fund that offered them a bribe.
When Trump killed the Fiduciary Rule, he proclaimed it a victory for poor people, especially Black and brown people. After all, if IFNs weren’t allowed to accept bribes for giving you bad financial advice, then they would have to make up the difference by charging you for good advice. If you couldn’t afford that advice, well, you’d have to make bad retirement investments on your own, without the benefit of their sleazy self-dealing.
The Biden Administration wants to change that. Biden’s Acting Labor Secretary is Julie Su, and she’s very good at her job. Last spring, she forced west coast dockworkers’ bosses to cough up the contract they’d stalled on for a year, with 8–10% raises for every worker, owed retroactively:
https://pluralistic.net/2023/06/16/that-boy-aint-right/#dinos-rinos-and-dunnos
Su has proposed a way to reinstate the Fiduciary Rule, as part of the Biden Administration’s war on junk fees, estimating that this will increase retirees’ net savings by 20%:
https://prospect.org/labor/2023-11-07-julie-su-labor-retirement-savers/
The new rule will force advisors who cheat their clients to pay restitution, and will require them to deliver all their advice in writing so that this cheating can be detected and punished.
The industry is furious, of course. They claim that “The Market (TM)” will solve this: if you get bad retirement savings advice and end up homeless and starving, then you will choose a different advisor in your next life, after you are reincarnated (I guess?).
And of course, they’re also claiming that forcing IFNs to stop cheating their clients will deny poor people access to expert (bad) advice. As the Financial Services Institute’s Dale Brown says, this will have a “negative impact on Main Street Americans’ access to financial advice”:
https://www.fa-mag.com/news/legal-challenge-predicted-for-new-dol-fiduciary-proposal-75257.html
Here’s that rule — read it for yourself, then submit a comment expressing your views on it. The government wants to hear from you, and administrative law requires them to act on the comments they receive:
Su is part of a wave of progressive, technically skilled regulators in the Biden administration that resulted from a horse-trading exercise called the Unity Task Force, which divvied up access to top appointments among the progressive wing and the finance wing of the Democratic Party. The progressive appointments are nothing short of incredible — the most competent and principled agency leaders America has seen in half a century:
https://pluralistic.net/2023/10/23/getting-stuff-done/#praxis
But then there’s the finance wing’s appointments, like Judge Jacqueline Scott Corley, who ruled against Lina Khan’s attempt to block the rotten Microsoft/Activision merger (don’t worry, Khan’s appealing):
https://pluralistic.net/2023/07/14/making-good-trouble/#the-peoples-champion
Perhaps the worst, though, is Biden’s Secretary of Commerce Gina Raimondo, a private equity ghoul who did a stint for the notorious wreckers Bain Capital before founding her own firm. Raimondo has stuffed her department full of Goldman Sachs alums, and has sidelined labor and civil society groups as she sets out to administer everything from the CHIPS Act to regulating ChatGPT.
As Henry Burke writes for the Revolving Door Project and The American Prospect, Raimondo’s history as a corporate raider, her deference to the finance sector, and she and her husband’s conflicts of interest from their massive stakes in companies she’s regulating all serve to undermine Biden’s agenda:
https://prospect.org/economy/2023-11-08-commerce-secretary-gina-raimondo-undercutting-bidenomics/
When the administration inevitably complains that its popular economic programs aren’t breaking through the media coverage, they’ll have no one to blame but themselves.
The Unity Task Force gave us generationally important policymakers, but ultimately, it’s a classic “pizzaburger.” If half your family wants pizza, and the other half wants burgers, and you serve them something halfway in between that makes none of them happy, you haven’t made a wise compromise — you’ve just made an inedible mess:
If you’d like an essay-formatted version of this post to read or share, here’s a link to it on pluralistic.net, my surveillance-free, ad-free, tracker-free blog:
https://pluralistic.net/2023/11/08/fiduciaries/#but-muh-freedumbs
