GOP Champions of Wall Street in a Tizzy Over Obama’s New ‘Fiduciary Rule’

The new rule, to be unveiled next Wednesday, April 6, and supported by Sen. Elizabeth Warren (D-MA) is designed to protect investors from conflicts of interest of brokers and advisers. President Obama initiated the rule when he directed on February 23, 2015 – in what is difficult to see as anything but a reasonable set of expectations:

“Today, I’m calling on the Department of Labor to update the rules and requirements that retirement advisors put the best interests of their clients above their own financial interests. It’s a very simple principle: You want to give financial advice, you’ve got to put your client’s interests first.” (White House Fact Sheet here)

As the Wall Street Journal explained on Friday,

The rule, originating from the U.S. Department of Labor, has drawn stiff opposition from Wall Street because it could reshape how brokers earn commissions and restrict their ability to sell some higher-fee products. It requires brokers to act as “fiduciaries,” offering financial advice in their clients’ “best interest.” That contrasts with current rules requiring they only offer “suitable” advice, which critics say allows for biased guidance and conflicts of interest.

Even Speaker Paul Ryan admitted that, “The intent of making sure people get sound advice and conflicts of interest (disclosures) is a good idea,” but actually doing something about a real problem is beyond the pale for congressional Republicans since 2008, despite the fact that as the DOL reports,

A White House Council of Economic Advisers analysis found that these conflicts of interest result in annual losses of about 1 percentage point for affected investors—or about $17 billion per year in total.

Naturally, Paul Ryan was very hostile to the idea of fixing actual, rather than imagined, problems, and tweeted back on March 8,

On Friday Ryan called the rule “an April Fools-worthy joke” and announced that,

“The Obama administration has argued that this rule will help people trying to save for retirement, but that’s an April Fools-worthy joke. In reality, it’s going to make it harder for families and businesses—especially those with smaller bank accounts—get financial advice.”

Ryan put together a packet of misinformation about the new rule and presents it as things “you need to know”:

1. It’s another one-size-fits-all regulation. What’s the result? It creates more paperwork and costly recordkeeping requirements for financial planners, restricting access to quality investment advice for upwards of 7 million Americans with IRAs. It results in higher costs for people seeking financial advice, disproportionately hurting families with smaller bank accounts.
 
2. The bureaucrats bullied it through. A report released in February showed the DOL’s utter—and seemingly willful—neglect of the consequences of this rule. It’s a story we’ve heard before: Nonpartisan, professional experts raise concerns, ask for deliberation in the rulemaking process, while politically-appointed bureaucrats bully their way through the process with one thing in mind: a finalized regulation to finish while the president is still in office.
 
3. It’s Obamacare for financial planning. The fiduciary rule is “an example of massive overkill by the federal government,” Speaker Ryan said. “The intent of making sure people get sound advice and conflicts of interest (disclosures) is a good idea,” Speaker Ryan continued. “This rule, however, is such overkill it is destined to put people out of business and making it harder for middle-class investors to get sound financial advice.”

According to Ryan, “House Republicans, led by Reps. Ann Wagner (R-MO), Phil Roe (R-TN), and Peter Roskam (R-IL), are working to protect families from the harmful fiduciary rule. Stay tuned for more Congressional action.”

This is a bit of an April Fool’s Day joke itself, as the only time Congress springs to action since Bush left office is to stop President Obama from doing something – like running the country. Republican champions of Wall Street won’t be alone, as sadly, even some House Democrats have joined Republicans by signing a letter to Labor Secretary Thomas E. Perez, opposing the rule, claiming it “could have a disproportionate impact on lower or middle-income consumers.”

Wall Street never lacks for champions in either part, which is part of the fuel that drives the Sanders revolution, though it must be noted in this case that both Sanders and Clinton support the new DOL rule. On the other hand, the WSJ reported Friday that the American Council of Life Insurers “has retained a law firm” and expects a court battle. Because, don’t come between rich corporations and their profits.

It’s a Republican credo, and Republicans like Paul Ryan will always be there to protect the rich by pretending it makes things better for the middle class. It’s sleight of hand that fools nobody, but it’s the GOP’s story and they’re sticking to it.