Economy

Paul Krugman Exposes Trump's Fraudulent Financial Populism

Trump is ushering in a "Springtime for Scammers."

Photo Credit: YouTube/Bloomberg

Paul Krugman thinks the people who persist in calling Donald Trump a "populist" are seriously confused about the meaning of the word. Unless, somehow populist suddenly means allowing the financial industry to stick it to the little guy, and other longheld Republican desires to deregulate banks, have suddenly come to mean populist in the up-is-down Trumpoverse.

No, Trump and his Republican allies in Congress are doing all they can to restore a predatory banking system, as Krugman summarizes in Monday's column.

Last week Mr. Trump released a memorandum calling on the Department of Labor to reconsider its new “fiduciary rule,” which requires financial advisers to act in their clients’ best interests — as opposed to, say, steering them into investments on which the advisers get big commissions. He also issued an executive order designed to weaken the Dodd-Frank financial reform, enacted in 2010 in the aftermath of the financial crisis.

Both moves are very much in line with the priorities of congressional Republicans and, of course, the financial industry. For both groups really, really hate financial regulation, especially when it helps protect families against sharp practice.

Why, after all, was the fiduciary rule created? The main issue here is retirement savings — the 401(k)’s and other plans that are Americans’ main source of retirement income over and above Social Security. To invest these funds, people have turned to financial professionals — but most probably weren’t aware that these professionals were under no legal obligation to give advice that maximized clients’ returns rather than their own incomes.

If that sounds like populism, we definitely have a bridge to sell you. 

Since GOP-ers in Congress probably don't have enough votes to overturn Dodd-Frank, they may have to settle for crippling enforcement of it, which they can fairly easily do by "undermining the Consumer Financial Protection Bureau, whose goal is to protect ordinary families from financial scams," Krugman points out. The recent Wells Fargo scandal was only revealed because of this entity. 

What gives then? Why are consumer protections in the so-called president's sights? His oh-so populist Goldman Sachs appointee to his National Economic Council, Gary Cohn, made the analogy that the fiduciary rule is like “'putting only healthy food on the menu' and denying people the right to eat unhealthy food if they want it," Krugman writes. And we do know that Trump likes fast food. Krugman thinks the analogy is inapt, however. To him, it is more like "preventing restaurants from claiming that their 1400-calorie portions are health food."

As for Trump's desire to undo financial reform, the reason given is that some of his friends with "nice businesses" have not been able to get loans. Are they "nice businesses" like Trump's that repeatedly default on their loans? A little research reveals that dissatisfaction with loan availability is at a historic low.

Krugman is having trouble coming up for a rationale for the moves, even a twisted one. What he does know is that Trump is helping to "make financial predation great again!"

Hurray.

 

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