In perhaps no area of federal policy has Rep. Richard Neal shown more allegiance to corporate special interests than on the issues of banking and financial regulation. Here Rep. Neal’s fealty to Wall Street is complete and obedient. As Illinois Sen. Dick Durbin put it in April 2009 about the finance lobby “they are still the most powerful lobby on Capitol Hill. And they frankly own the place.”
When Rep. Neal arrived in Congress in 1989, he was assigned to the Committee on Banking, Housing and Urban Affairs (now renamed Committee on Financial Services). He quickly fell in line doing the bidding of the banking lobby voting for a bill backed by President George H.W. Bush to throw $50 billion of taxpayer money to close and liquidate insolvent savings and loan associations and to restructure the thrift industry after the S&L debacle which occurred in the mid-1980s before Neal was elected. On August 4, 1989, the day the House approved the conference report on the bill, four Democratic committee chairmen (Rep. Conyers of Government Regulations, Rep. Panetta of Budget, Rep. Dingell of Energy & Commerce and Rep. Rostenkowski of Ways & Means) sent a letter to their fellow Democrats urging them to oppose the conference report because of the financing provisions of the bailout. Only 82 of 217 Democrats voted yes and Rep. Neal was one of them.
Two years later, Rep. Neal voted for Federal Deposit Insurance Corporation Improvement Act a bill to allow the FDIC to borrow up to $30 billion to cover losses of failed banks. That legislation was ultimately passed a week later. That same session, Rep. Neal opposed a motion by then-Rep. Ed Markey (D-MA) to pass the Government Securities Offering Enforcement Act of 1991, legislation to strengthen the anti-fraud provisions of federal securities laws, extend the Security and Exchange Commission’s (SEC) authority to prescribe specific anti-fraud and anti-manipulation rules, require government securities brokers to develop internal controls, require reports of large concentrations of positions in the Treasury market, and take other measures to prevent false and misleading statements concerning the offerings of government securities.
In 1992, Rep. Neal was caught up in the House Bank scandal (also known as Rubbergate) when it came to light that the U.S. House of Representatives allowed members to overdraw their House checking accounts without risk of being penalized by the House bank. In the 1994 election, Neal’s colleague, former Rep. Joseph Early of Worcester, who had 124 bounced checks, lost his seat to a Republican. Rep. Neal, who had 87 overdrafts, stuck to a script that he repeated claiming that people in his district were more worried about improving the economy and the job situation than his overdrafts. However he did get tagged with the nickname “RubberRichie” for his part in the scandal.
By 1993, Rep. Neal had left the Banking Committee for the more-powerful Committee on Ways & Means. But he still showed his loyalty to the banking industry by voting to shovel even more taxpayer money to failed banks. This time it was the Resolution Trust Corporation Completion Act, a bill providing $18.3 billion for completing the savings and loan bailout. The Resolution Trust Corporation would use the money to dispose of 80 bankrupt thrifts it was then keeping open. That brought to about $105 billion the appropriations approved by Congress since 1989 to reimburse lost deposits at more than 700 failed thrifts. Congress also granted authority to borrow more than $100 billion for working capital that the agency was expected to repay by selling off S&L assets.
When the Republicans took over the House in 1995, they got busy trying to enact pieces of their Contract with America platform. One of their top priorities was a bill called the Private Securities Litigation Reform Act, a bill making it more difficult for shareholders to bring securities-fraud suits against companies. Opponents called the bill the “Crooks and Swindlers Protection Act” and said it stripped away basic legal protections and limited the ability of those defrauded to recover their money. Nonetheless, Rep. Neal voted for the conference report and after President Clinton vetoed the bill, Rep. Neal voted to override the veto giving Wall Street an early Christmas present.
If Rep. Neal took a benign view toward bailing out failed banks, he took a much harsher tack when it came to the plight of his constituents on dealing with bankruptcy. As Sen. Elizabeth Warren has shown in her research prior to coming to the Senate, most people file for bankruptcy because of a catastrophic health event or loss of job rather than gambling too much at the racetrack. For single women head of household and people of color who earn less wages than white men, the impact is even more severe.
In 1998, Rep. Neal voted for the conference report on a bill opposed by the Clinton White House to revise the nation’s bankruptcy laws by forcing most debtors to file for Chapter 13 relief, instead of Chapter 7, if they have an above median-income and the ability to pay off at least 25 percent of their debts over five years. Seven of the then 10-member Massachusetts House delegation voted no. The next year, Rep. Neal voted against the Democratic substitute to the Bankruptcy Reform Act of 2000 which was stricter toward lenders than the competing Republican bill by seeking to include various consumer bankruptcy revisions; providing a means test that uses the debtor’s income and expenses instead of IRS allowances for living expenses; eliminated provisions to make credit card debt non-dischargeable; and specified that family support had priority over state and local governments child support enforcement payments. The substitute was backed by the Consumer Federation of America and opposed by the American Bankers Association. After helping to kill his own party’s legislation, Rep. Neal voted to pass the Republican bill that made it more difficult for bankruptcy filers with financial means to shirk their debt. Debtors with capacity to pay would be required to file under the bankruptcy code Chapter 13, which entails some repayment, rather than Chapter 7, which requires little or no repayment. Eight of the then 10-member Bay State House delegation voted no.
By the late 1990s with the dot com boom fully underway, Rep. Neal began to gulp down the financial deregulation Kool Aid being mixed and served by Wall Street’s largest banks and financial services behemoths. In November 1999, after having voted for it twice, Rep. Neal helped pass the Gramm–Leach–Bliley Act, also known as the Financial Services Modernization Act of 1999. It tore down a Depression-era law, the Glass–Steagall Act of 1933, removing barriers in the market among banking companies, securities companies and insurance companies that prohibited any one institution from acting as any combination of an investment bank, a commercial bank, and an insurance company. With the bipartisan passage of the Gramm–Leach–Bliley Act, commercial banks, investment banks, securities firms, and insurance companies were allowed to consolidate. Furthermore, it failed to give to the SEC or any other financial regulatory agency the authority to regulate large investment bank holding companies.
In 2000, with Bill Clinton headed for the exit, Rep. Neal voted for another bill on Wall Street’s bucket list, the Commodity Futures Modernization Act. This deregulation bill enabled investors to buy futures contracts on individual stocks. These contracts are the equivalent of bets, or educated guesses, on the future value of a particular stock. Prior to this bill’s passage, most futures contracts concerned the price of agricultural commodities and stock market indexes. This bill deregulated the Commodity Futures Trading Commission’s authority over over-the-counter derivatives transactions. When Clinton signed this bill into law, it was like officially turning Wall Street into a giant casino where the banks could now literally bet on anything from pork bellies to oil futures.
During President George W. Bush’s first year in office, Rep. Neal once again stepped to the plate to help cut pesky SEC fees on Wall Street by voting for the Investor and Capital Markets Fee Relief Act. This goody bag of a bill reduced Securities and Exchange Commission fees by $14 billion over 10 years and allowed for an increase in SEC employee compensation. The measure lowered SEC fees for securities registrations and transactions, merger and tender offers, and single stock future assessments. It also eliminated the Trust Indenture Act filing fee. The measure required the agency to adjust registration and transaction fees annually after fiscal 2002 for changing market conditions. It also changed fees’ budgetary treatment to record them as “offsetting collections.” Four of the 22 ‘no’ votes were from the Massachusetts delegation, Reps Olver, Tierney, Markey and Delahunt.
In 2002, following the widespread fraud by Enron, WorldCom and other corporate accounting scandals during 2000-2002, Congress passed the Sarbanes-Oxley Act, that enacted a comprehensive reform of business financial practices. The law was aimed at publicly held corporations, their internal financial controls, and their financial reporting audit procedures as performed by external auditing firms. During House consideration of the Corporate and Auditing Accountability and Responsibility Act of 2002 (Sarbanes-Oxley), Rep. Dennis Kucinich (D-OH) offered a substitute amendment to the bill that would establish the Federal Bureau of Audits within the SEC to audit annually all publicly traded companies’ financial statements. The SEC would set auditing standards. The bureau would have independence and full powers of investigation, and its employees would be subject to conflict-of-interest restrictions. Rep. Neal voted against it.
By September 2008, the years of regulatory rollbacks pursued by Rep. Neal and his fellow lawmakers came home to roost in the great financial collapse. So what did Rep. Neal do? He voted for the Emergency Economic Stabilization Act of 2008 more commonly known as the Troubled Asset Relief Program or TARP which shoveled $700 billion of taxpayer funds to the banks and financial services firms who caused the economic meltdown. During House debate on the bill, Rep. Neal compared the need for TARP to disaster aid for victims of hurricanes, forest fires or blizzards saying “The national principle here is at stake. If there’s a hurricane in Louisiana, we all come to the aid of the American family. If there’s a forest fire in California, we all come to the aid of the American family. If there’s a blizzard in New England, we all come to the aid of the American family. And that’s precisely what this legislation does today.”
The big banks which feasted at the TARP trough must seem like members of Rep. Neal’s family considering the campaign contributions they have showered on him over the years. There is American International Group Inc. (AIG), once one of the world’s largest insurance companies, which in February 2006 agreed to pay a fine of $1.64 billion to resolve allegations that it used deceptive accounting practices to mislead investors and regulatory agencies. Massachusetts received $33 million under that settlement. In 2010, after it was revealed that AIG was lavishing millions of their $67.8 billion in TARP funds on bonuses to their top executives, Rep. Neal took to the House floor to express his outrage. Rep. Neal neglected to mention that in 2008, he began receiving campaign donations from AIG which would total $8,000 by 2014.
Bank of America, which walked away with $45 billion in TARP money has also been very generous to Neal’s campaigns, donating $69,000 to him over his career. In August 2009, Bank of America paid a fine of $33 million levied by the SEC for failing to disclose the bonuses Merrill Lynch paid employees after being acquired by Bank of America in December 2008. And in April 2014, Bank of America was ordered by financial regulators to pay $772 million in fines and restitution for illegal credit card practices. The bank used deceptive marketing practices in an attempt to sell add-on services to about 1.4 million consumers while another 1.9 million consumers were illegally charged for credit monitoring and reporting services they never received according to the Consumer Financial Protection Bureau.
Citigroup Inc. which also feasted on $45 billion in TARP money, has been a major contributor to Rep. Neal’s donating $83,450 over the years. In June 2018, Citigroup agreed to repay customers $335 million to settle U.S. Consumer Financial Protection Bureau claims that the bank cheated customers by failing to review and adjust credit card interest rates. CFPB said the firm violated the federal Truth in Lending Act by failing to conduct reevaluations and reduce annual percentage rate for about 1.75 million customers over an eight-year span.
JPMorgan Chase and Morgan Stanley are two of America’s largest banks and they both have a soft spot for the gentleman from Springfield. Both banks have also done some really dodgy things. In April 2007, Morgan Stanley set up a $46 million claims pool to settle a sex discrimination lawsuit and pledged to put in place new policies to help women succeed as financial advisers. Morgan Stanley wolfed down $10 billion in TARP handouts and over the course of Rep. Neal’s tenure has shelled out $52,000 to his campaigns. In October 2013, JP Morgan Chase paid an eye-popping fine to the Justice Department of $13 billion to settle charges that it misled Fannie Mae and Freddie Mac about mortgage quality leading up to the 2008 financial crisis. JP Morgan Chase walked away with $25 billion in TARP funds and has given Rep. Neal $47,550 in campaign contributions over his career.
In the years following the TARP bailout, Rep. Neal has continued to dutifully vote the way Wall Street wants even if that means inflicting pain on the main streets of his communities back home in central and western Massachusetts. In 2011, Rep. Neal voted against and helped kill an amendment to a continuing appropriations bill that sought to increase the funding provided for the transfer from the Federal Reserve to the Consumer Financial Protection Bureau by $63 million and decrease funding for IRS enforcement activities by an equal amount. Neal was the only Massachusetts House delegation member to vote no.
In 2013, when the House considered a bill on cost-benefit analysis for SEC regulations, Rep. Waters (D-CA) offered a motion to recommit the bill to the House Financial Services Committee and report it back immediately with an amendment that would stipulate that the bill does not reduce the ability of the SEC to protect pensions for first-responders, teachers and retirees against fraudulent and deceptive practices. It would also allow for provisions to enforce securities laws to prevent takeovers of U.S. businesses by non-U.S. persons, including government-owned corporations from China. Rep.Neal took a walk and did not vote while all the other Massachusetts delegation members voted ‘yes’ except Rep. Markey who did not vote because he was campaigning for the U.S. Senate special election to fill the seat held by then-Secretary of State John Kerry.