Financial Choices, UAE’s Mission to Mars, and Trial Lawyers Lose
Here’s What You Need To Know
While most of the attention on Capitol Hill this week will be focused on former FBI Director James Comey’s testimony before the Senate Intelligence Committee, the House is set to vote on sweeping Wall Street reform legislation – the Financial CHOICE Act. The bill, sponsored by House Financial Services Committee Chairman Jeb Hensarling (R-TX), is the first legislative step in Republican efforts to radically scale back the Dodd-Frank Wall Street Reform and Consumer Protection Act.
So what does the bill do? It has two key components:
- Regulatory Restructuring: The bill creates a new, two-tiered regulatory framework that better protects small community banks from burdensome regulation intended to target larger banks and financial institutions. While the higher tier would keep most of Dodd-Frank rules in place, the lower tier exempts banks from Dodd-Frank regulations if they hold the financial “equivalent of 10% of their assets in capital,” allowing banks to choose the level of regulation they face.
- CFPB Reorganization: The measure also fundamentally restructures the Consumer Financial Protection Bureau, which was created by Dodd-Frank. The bill renames it the Consumer Law Enforcement Agency, and makes it answerable to the President and accountable to Congress through the appropriations process. The bill also drastically curtails the level of regulatory discretion the agency has, reducing its authority to only enforcing pre-existing consumer protection laws. Effectively, the bill makes the CFPB much more of a tradition executive enforcement agency.
What’s Going To Happen Next? While the bill is likely to pass the full House of Representatives, it is also likely to be a vote along party lines and some havesuggested its chances of passing the Senate are slim-to-none. However, the Senate Banking Committee is already working on legislation to focus on regulatory relief for community banks and – with the Courts ruling the CFPB’s framework unconstitutional – it is likely Congress will need to restructure the agency soon either way.
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Even with these prospects, Chairman Hensarling has argued the measure will create real momentum toward meaningful banking reform aimed at correcting unintended consequences of Dodd-Frank. It is also worth noting that the White House has vocally supported the bill and could enact some of its key provisions through executive action if legislation is not forthcoming.
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ARABS IN SPACE
Last week, Sheikh Mohammed bin Rashid al Maktoum, Vice President and Prime Minister of the United Arab Emirates, announced the country’s intent to have a fully functioning city of 600,000 people on Mars in one hundred years. This announcement marks the latest effort undertaken by a country that has been able to outpace many of its neighbors in ambition and investment, thanks largely in part to their plentiful oil resources and stable rule by their monarchy. The Mars project is only part of a much larger effort within the UAE to build out a robust science and technology sector. While at first glance the project may appear absurd, it may prove to be a savvy strategy to place the country among the top tier of nations when it comes to scientific advancement – both in image and in reality.
THE NOT-SO-GOLDEN AGE OF ENTREPRENEURSHIP
Despite the prominence of startups and entrepreneurship in today’s popular culture, a new study from the Economic Innovation Group (EIG) found that America is actually creating fewer new businesses than in previous eras. This lack of new business growth is a large contributor to lack of new job growth. So what can help put the American economy back on track? EIG argues more industries need to be opened up to more competition and entrepreneurial disruption by rolling back onerous occupational licensing requirements that prevent people from entering professions as straight forward as selling flowers or becoming a cosmetologist, and refocusing tax incentives to encourage investment in struggling areas. New business creation is a vital part of growing the American economy, but it cannot happen without the right policies in place.
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WINNERS AND LOSERS IN THE ROBO-ECONOMY
The rise of robots and automation in countless industries has spurred a growing conversation about whether the trend is positive or negative. But the reality seems to be less binary than some might want to see it. In the developed world, some like venture capitalist Marc Andreessen argue automation will create greater efficiency and respond to the real problem developed labor markets are facing: a lack of people to fill jobs. Others, like MIT economist Daron Acemoglu, claim in the developing world, where cheap labor has long been seen as a way to build middle classes, automation could spell doom to their fast-growing manufacturing economies. Not all economies are equal, and industries, governments, and society will have to thoughtfully consider the impacts pf automation innovations in different parts of the world.
THE FORUM SHOP IS CLOSED
In an 8-1 decision last week, the U.S. Supreme Court ruled against out-of-state plaintiffs seeking to sue their employer, railroad company BNSF, for damages after they were allegedly exposed to carcinogens. The Court held the plaintiffs could not file suit in Montana when the company wasn’t incorporated there, the plaintiffs didn’t live there, and the injuries didn’t occur there. This ruling means trial attorneys will face more difficulty pursuing a legal strategy called “forum shopping,” in which plaintiffs’ attorneys seek out state courts known for friendlier juries and heftier verdicts for cases with only the most tenuous connection to that court’s jurisdiction. Writing for the majority, Justice Ruth Bader Ginsberg noted the Fourteenth Amendment’s Due Process Clause does not permit a state to call in an out-of-state corporation before its courts to adjudicate a matter that occurred elsewhere. The decision is a major blow to trial lawyers, who have used this strategy extensively.
FEAR AND LOATHING IN SILICON VALLEY
As new technologies are developed, so too does the fear surrounding them. As The Wall Street Journal’s Holman Jenkins Jr. points out, it often falls to CEOs to guide society’s adjustment to life altering technologies. Most recently, the public called on Facebook CEO Mark Zuckerberg to create algorithms to prevent Facebook users from live-streaming violent crimes. Jenkins says self-driving cars are next in the list of industries having to deal with the public’s fear factor. Despite the benefits that self-driving cars can bring to the elderly, disabled, children, and other riders for whom this would be the optimal form of transportation, “whole academic and media careers are being built on the threat it poses.” These innovations are by in large good things, but the innovators who shepherd them into existence don’t always see how consumers will view them at first. Thinking about how these radically new concepts are presented to consumers ahead of time will help CEOs preempt the fears the public might have before those fears cause a backlash against the company.