Home / Daily Dose / The Week Ahead: CFPB Updates Congress On Tuesday, March 10, the Senate Committee on Banking, Housing, and Urban Affairs will hold a hearing to examine the Consumer Financial Protection Bureau’s (CFPB) semi-annual report to Congress. The U.S. Supreme Court heard opening arguments Tuesday in Seila Law v. the Consumer Financial Protection Bureau—a case that could decide the constitutionality of the Bureau.The CFPB was designed to rein in abusive practices in consumer credit marks, such as home mortgages and credit cards. CNBC states it returned $12 billion to consumers between 2011 and 2017 but stopped pursuing enforcement actions under President Donald Trump.The CFPB has been the subject of several lawsuits, most recently by the California-based Seila Law. Seila Law alleges the CFPB’s insulation from presidential control is unconstitutional. The law firm challenged the agency after the CFPB targeted the firm 2017, CNBC states.Kannon K. Shanmugan, attorney for Siela Law, who argues the CFPB was constructed against the U.S. constitution, had a clear message for the Supreme Court.“The structure of the CFPB is unprecedented and unconstitutional,” Shanmugan said. “Never before in American history has Congress given so much executive power to a single individual who does not answer to the President.”He added that by limiting the President’s ability to remove the CFPB’s director, Congress violated the “core presidential prerogatives” to exercise the executive power that laws are faithfully executed.Shanmugan continued his opening remarks by saying the Solicitor General contends that the Supreme Court should rewrite the Dodd-Frank Act, giving the president the power to remove the CFPB’s director.“But the constitutional question, in this case, arises in the context of a defense to an enforcement proceeding and not a facial challenge,” he said.Here’s what else is happening in The Week Ahead:Financial accounts of the U.S. (March 12) in Daily Dose, Featured, Market Studies, News Subscribe The Week Ahead: CFPB Updates Congress Governmental Measures Target Expanded Access to Affordable Housing 2 days ago Related Articles Print This Post Previous: Seven Major Mortgage Servicing Tech Trends Next: CFPB Proposes Whistleblower Award Program Share Save March 8, 2020 1,090 Views Demand Propels Home Prices Upward 2 days ago Servicers Navigate the Post-Pandemic World 2 days ago Data Provider Black Knight to Acquire Top of Mind 2 days ago 2020-03-08 Seth Welborn Servicers Navigate the Post-Pandemic World 2 days ago About Author: Seth Welborn Governmental Measures Target Expanded Access to Affordable Housing 2 days ago Demand Propels Home Prices Upward 2 days ago Seth Welborn is a Reporter for DS News and MReport. A graduate of Harding University, he has covered numerous topics across the real estate and default servicing industries. Additionally, he has written B2B marketing copy for Dallas-based companies such as AT&T. An East Texas Native, he also works part-time as a photographer. The Week Ahead: Nearing the Forbearance Exit 2 days ago The Best Markets For Residential Property Investors 2 days ago Data Provider Black Knight to Acquire Top of Mind 2 days ago Sign up for DS News Daily The Best Markets For Residential Property Investors 2 days ago
Allan Sloan is an editor-at-large reporting about business and finance for ProPublica. Read his recent story on pension bonds, “When Wall Street Offers Free Money, Watch Out.“Researcher Derek Kravitz contributed to this report. By Allan Sloan, ProPublicaThis story was co-published with the Washington Post.Wealth, jobs and pay inequality are big political issues this presidential primary season, and they’re bound to become bigger once the parties pick their nominees. In the plethora of plans candidates tout for tackling these problems, one favored tool stands out: the federal tax code.But trying to legislate corporate behavior and economic fairness — however you define fairness — through the tax system is a lot trickier than it sounds.Consider the supposed solution to an equality and social-justice issue debated six elections ago — a law designed to limit how much companies could deduct from their taxable income for lush pay packages to high-paid executives.In 1992, as now, key electoral issues included inequality and the spectacle of American jobs moving overseas — underscored by a gaping disparity between executives making multiple millions and ordinary workers with stagnant wages.The idea was to give companies a tax incentive to rein in executive pay or just shame them into it. But a new study done for ProPublica and The Washington Post by S&P Global Market Intelligence shows that the law has had little effect. In fact, the titans of American industry and commerce shrugged off the statute and moved to pay top executives way more than the deductibility limit.Bill Clinton, the not-yet-a-household-name Arkansas governor, proposed limiting deductions for what he called “excessive executive pay” during his first presidential campaign in the early 1990s. The concept had kicked around Washington for several years and was one of the planks that helped him win the Democratic nomination and deny George H.W. Bush a second term. In 1992, Bush had vetoed a budget bill containing a provision to limit how much companies could deduct for high-paid people.Clinton’s victory and a Democratic Congress resulted in a tax law change that limited companies’ deductions for executives’ compensation to $1 million per executive per year. That’s the amount that Clinton proposed for chief executives in “Putting People First,” a campaign book that he co-authored with Al Gore.The compensation deduction limit, known to tax techies as Section 162(m) of the Internal Revenue Code, was adopted in a 1993 bill that also increased taxes on higher-income Social Security recipients and reduced deductions for business meals.The legislation, however, was stuffed with loopholes. It covered only companies with publicly traded stock; it applied to only five (and since 2007, four) “named executive officers” who aren’t necessarily the highest-paid; and it exempted “performance-based” compensation, including stock options, and huge bonuses based on easily attained goals, allowing unlimited deductions for them.Section 162(m) fulfilled a campaign promise. But, in hindsight, it’s clear that it has had little or no influence on corporate behavior. Says Sen. Charles E. Grassley (R-Iowa), a leading congressional tax maven: “Regardless of how you feel about limiting compensation through the tax code, the current law is like a gnat on an elephant in accomplishing its goal. It’s easy to swataway, and that’s exactly what many companies do.”We decided to see whether that was accurate.Our study looked at the history of executive compensation for the 40 members of today’s “Nifty Fifty” — the 50 companies in the Standard & Poor’s 500-stock index with the highest stock market value — that also reported executive compensation information for 1992, the year before the pay-deductibility limits took effect.To compare apples to apples, we eliminated the 10 members of the Nifty Fifty, including Facebook and Alphabet (Google’s parent company), that weren’t publicly traded back then or didn’t exist.In 1992, only 35 percent of the people in our study — executives whose income was reported in companies’ proxy statements — had more than $1 million of income in the categories subject to deductibility limits. (Those are salaries, bonuses and restricted stock that vests over time.) But in 2014, the last year for which corporate salary income is available, the number had risen to 95 percent.(Read our complete methodology.)Given inflation, it’s no surprise that more top execs would breach the $1 million cap. But the numbers also showed something completely unintuitive.From 1992 to 2014, compensation per executive in the limited-deductibility categories rose more rapidly — by about 650 percent, to $8.2 million from $1.1 million — than compensation in categories such as stock options and incentive pay that aren’t subject to deductibility limits. The latter rose by about 350 percent, to $4.4 million from $970,000.“That’s powerful,” Steven Balsam, a leading academic expert on executive compensation practices, said when told what our study showed. Balsam is a professor at Temple University’s Fox School of Business who published a 2012 study on the deduction cap for the Economic Policy Institute. “At best, 162(m) has had a marginal effect,” he said. “It hasn’t had a major impact.”Some of the companies with the most notable increases in compensation subject to the limit include Allergan (to $77.4 million from $378,000), Cisco (to $75.2 million from $1.1 million), Oracle (to $119.4 million from $4.9 million) and Walmart (to $55.4 million from $2.9 million).What happened? It turns out that losing deductibility isn’t all that big a deal to companies — we estimated the effect of lost deductibility on corporate profits at only about 0.2 percent in 2010 for the companies in Balsam’s study. And there’s no reason to think those numbers have changed much.(The 0.2 percent figure is based on Balsam’s estimate that the 7,248 companies in his study paid an extra $2.5 billion of federal tax because of lost deductibility in 2010, and on S&P Global Market Intelligence’s calculation that the 7,722 firms in its slightly larger database had $1.153 trillion in after-tax profits that year.)“Decisions on the pay mix are not guided by the deductibility factor,” said Steven Seelig, executive compensation counsel for Willis Towers Watson, a big consulting firm. “Compensation committees are certainly mindful of the tax rules and meet the deductibility rules when they can. But the decision on the pay mix that’s appropriate is guided by their companies’ unique circumstances.”One of the reasons that the deductibility limit has been so ineffectual is that it was watered down from what was originally proposed.According to coverage by Tax Notes, which tracked the progress of 162(m) in great detail, the intellectual godfather of the legislation was then-Rep. Martin Sabo, a Minnesota Democrat.Sabo, who represented Minneapolis and some of its suburbs, said in an interview that his goal had been to reduce economic inequality. “My proposal was trying to send a message,” he said. “This was a sort of symbolic thing because I felt that those at the top should care about the bottom.” He had pushed for deductibility limits in the 1992 tax bill that Bush vetoed.But what became Section 162(m) a year later wasn’t Sabo’s original concept. “What I proposed was that you couldn’t take a tax deduction if the compensation exceeded 25 times the compensation of the lowest-paid employees,” he said.That idea began life as the Income Disparities Act of 1991. Because it applied to all employees, not just top officers, the legislation would have had a sweeping impact across corporate America. How did it morph into something that affected only a few executives at publicly traded companies?“I don’t know,” Sabo said.A hint of what happened comes from former congressman Tom Downey. The New York Democrat was a member of the House Ways and Means Committee and was involved with Sabo’s 1991 legislation, but he left Congress before 162(m) became law.“There are all sorts of things I did to try to get rich people to pay more in taxes, and none of it worked,” Downey said. All sorts of people were upset by Sabo’s proposal, Downey said, and major attacks “came from my friends in Hollywood.”It’s doubtful that anything resembling Sabo’s proposal would have been adopted. What Clinton proposed in “Putting People First” — a $1 million cap — was a simpler and easier sell.“This is an example of a law that’s so watered down it’s meaningless. It’s still on the books, but it has no value,” said Graef “Bud” Crystal, a compensation consultant and critic of excessive executive pay. “It should be put out of its misery.”Crystal had a 1991 phone conversation with Clinton about limiting deductions for executive compensation that was widely publicized at the time. Crystal said he told Clinton that the proposal not only wouldn’t hold down executive pay, but would hurt shareholders by increasing the after-tax cost of CEO pay packages.Crystal said that when people told Clinton that the legislation was so diminished it would have no effect, “he said, ‘Bud Crystal made me do it.’” Actually, Crystal said, “I told him just the opposite.”What does Clinton think of how ineffectual his legislation has been? That’s a mystery. The former president was campaigning in New Hampshire for his wife, and his spokesman declined to respond to a list of detailed questions.On the campaign trail these days, Republicans say that eliminating the corporate income tax (Sen. Ted Cruz) or cutting it sharply (Donald Trump) will set off a hiring boom. Democrats say that jacking up tax rates (Sen. Bernie Sanders) or changing capital gains rules (Hillary Clinton) will reduce the advantages that rich people enjoy over the rest of the populace.It’s impossible to know whether any of these ideas will become law. But based on history, it’s a safe bet that if they do, they are not likely to produce the results their proponents predict. Sign up for our COVID-19 newsletter to stay up-to-date on the latest coronavirus news throughout New York ProPublica is a Pulitzer Prize-winning investigative newsroom. Sign up for their newsletter.
THE GOVERNMENT of Kazakstan has approved a comprehensive upgrading plan for the republic’s railways, including new lines to integrate the former SZD West Kazakstan and Almaty regional railways.Top priority in the package are measures to cut the use of imported diesel fuel, which currently accounts for 80% of KR’s operating costs. Wiring of the Almaty – Chu line is due to be completed by the end of 1998, providing an electrified trunk network linking the old capital with its sucessor Akmola, the western city of Kustanai and the Uzbekistan capital Tashkent.Three new cut-offs have been authorised. The links from Djenkazgan to Kyzil-Orda and Chelkar to Beinei will create a new corridor to the southwest, cutting diesel fuel usage by around 10%. South Korean contractors will participate in construction of the Djenkazgan – Kyzil-Orda line. In the northwest, a link from Zhangiz-T
Following an internal investigation pertaining to NCAA rules violations during the 2007-2008 basketball season, the university has imposed sanctions on the USC men’s basketball team for the violation of certain NCAA rules.Avi Kushlan | Daily TrojanThe investigation stemmed from allegations against the handling of former Trojan basketball player OJ Mayo, who played for the school during the 07-08 campaign. At the root of the accusations was an alleged connection between booster Rodney Guillory and the point guard Mayo.Guillory, whose role in Mayo’s recruitment made him a booster in the eyes of the NCAA, allegedly gave the star point guard gifts during his time at USC, which is a violation of NCAA rules.During the university’s investigation of the Guillory-Mayo connection, NCAA rules violations were found and the University has taken action to correct the team’s improprieties.Most immediate of the sanctions will be a self-imposed ban on participation in any postseason tournaments for the Trojans following the 2009-2010 season.The USC men’s basketball team will forego a bid to the Pac-10 Tournament if they were to qualify for the season-ending conference event. The Trojans will also not accept any invitation to any postseason tournament, including the NCAA Tournament and the National Invitational Tournament.The university has also reduced the number of scholarships available to coach Kevin O’Neill by one for the 2009-2010 and 2010-2011 academic years.The sanctions will also extend to the recruiting trail, where the Trojans will be required to reduce the number of coaches allowed to engage in off-campus recruiting by one. The timetable for off-season recruitment — usually 130 days — will also be cut to 110 for the Trojan coaching staff.During Mayo’s single season at USC, the Trojans compiled a 21-12 record and were invited to both the Pac-10 Tournament and NCAA Tournament following the regular season. The Trojans will vacate all 21 of the victories they amassed during that 2007-2008 season and will return all funds that the university received for participating in the two postseason events.“We believe these self imposed sanctions are consistent with penalties imposed at other NCAA institutions that have been cited with similar rules infractions,” USC Athletic Director Mike Garrett said. “Although we are disappointed that rules were violated we look forward to moving past this matter and to the future success of our basketball program.”