Los Angeles Personal Injury Lawyer - regulation

"Toxic" Bubble Bath for Kids

Paul Kiesel — Fri, 13 Mar 2009 18:57:08 GMT

Many children's bath products contain chemicals that may cause cancer and skin allergies, according to a report released Thursday by the Campaign for Safe Cosmetics.

Twenty-three of 28 products tested contained formaldehyde, the report says. Formaldehyde — considered a probable carcinogen by the Environmental Protection Agency, — is released as preservatives break down over time in a container.

PRODUCTS TESTED: Full list

Thirty-two of 48 products contained 1,4-dioxane, also considered a probable human carcinogen by the EPA, is a byproduct of a chemical processing techniques used to make petroleum-based ingredients gentler to the skin. Nearly two-thirds of products tested, including Johnson's Baby Shampoo, contained both chemicals, according to the campaign, a coalition of environmental and health groups that includes the Breast Cancer Fund and the Environmental Working Group.

Formaldehyde can trigger allergic reactions in sensitive people, the report says, and Japan and Sweden have banned formaldehyde from personal care products.

_______________________________________________________

Okay, so the big question is: How many other cosmetic products sold throughout the United States contain carcinogenic chemicals like formaldehyde and 1,4-dioxane?

And if Johnson & Johnson/Mitek bought body parts from UCLA (via Ernest Nelson via the UCLA Willed Body Program) in order to perform research and test their products on cadaver parts, why is it they haven't come to the conclusion that these cancer-causing chemicals, whether the company labels its products disclosing the chemicals' presence, CAN potentially cause cancer?

Below is the partial list of products tested for formaldehyde:

Product Name and Company	1,4-dioxane (in parts per million)	Formaldehyde (in parts per million)
Lotions

American Girl Hopes and Dreams Shimmer Body Lotion (Bath & Body Works)	ND*	310

Baby Magic "Soft Baby Scent" Baby Lotion (Ascendia Brands, Inc)	ND*	570

Baby Magic "Soft Baby Scent" Baby Lotion (Ascendia Brands, Inc)	0.92	610

Baby Magic "Soft Baby Scent" Baby Lotion (Ascendia Brands, Inc)	ND*	330

Johnson's Bedtime Lotion Natural Calm Essences (Johnson & Johnson Consumer Companies)	ND*	Not tested for this chemical

Mustela Baby Body Lotion (Laboratories Expanscience)	ND*	Not tested for this chemical

Tinker Bell Body Lotion (Goldie LLC)	ND*	220

Shampoos

CVS Baby Shampoo (CVS/Pharmacy)	0.92	350

Johnson's Baby Shampoo (Johnson & Johnson Consumer Companies)	ND*	200

Johnson's Baby Shampoo (Johnson & Johnson Consumer Companies)	1.1	210

L'Oreal Kids Extra Gentle 2-in-1 Fast Dry Shampoo — Burst of Cool Melon (L'Oreal USA)	0.95	260

Suave Kids 2-in-1 Shampoo — Wild Watermelon (Unilever)	0.69	ND*

Liquid Shower Soaps

American Girl Hopes and Dreams Glistening Shower and Bath Wash (Bath & Body Works)	14	Not tested for this chemical

American Girl Real Beauty Inside and Out Shower Gel — Apple Blossom (Bath & Body Works)	6.3	210

American Girl Real Beauty Inside and Out Shower Gel — Apple Blossom (Bath & Body Works)	5.7	220

American Girl Real Beauty Inside and Out Shower Gel — Apple Blossom (Bath & Body Works)	18	150

American Girl Real Beauty Inside and Out Shower Gel — Sunny Orange (Bath & Body Works)	35	ND*

Bath Washes

Aveeno Baby Soothing Relief Creamy Wash (Johnson & Johnson Consumer Companies)	1.4	Not tested for this chemical

Aveeno Baby Soothing Relief Creamy Wash (Johnson & Johnson Consumer Companies)	1.7	Not tested for this chemical

Aveeno Baby Soothing Relief Creamy Wash (Johnson & Johnson Consumer Companies)	4.6	Not tested for this chemical

CVS Kids Body Wash — Blueberry Blast (CVS/Pharmacy)	0.75	54

Equate Tearless Baby Wash (Wal-Mart Stores, Inc.)	0.63	290

Gentle Naturals Eczema Baby Wash (Del Pharmaceuticals, Inc.)	6.4	Not tested for this chemical

Grins & Giggles Milk & Honey Baby Wash (Gerber Products Company)	2.8	400

Huggies Naturally Refreshing Cucumber & Green Tea Baby Wash (Kimberly-Clark)	3.2	410

Johnson's Moisture Care Baby Wash (Johnson & Johnson Consumer Companies)	3.9	Not tested for this chemical

Johnson's Oatmeal Baby Wash — Vanilla (Johnson & Johnson Consumer Companies)	4.2	Not tested for this chemical

Mustela Baby Shampoo (Laboratories Expanscience)	2.8	Not tested for this chemical

Mustela Dermo-Cleansing Gel for Hair and Body Newborn/Baby (Laboratories Expanscience)	3.9	Not tested for this chemical

Night-time Bath Baby Wash (Target Corporation)	3.6	Not tested for this chemical

Bubble Baths

Barbie Berry Sweet Bubble Bath (Water-Jel Technologies)	0.65	440

Dora the Explorer Bubble Bath (MZB Personal Care)	1.5	130

Hot Wheels Berry Blast Bubble Bath (Water-Jel Technologies)	2.8	100

Mustela Multi-Sensory Bubble Bath (Laboratories Expanscience)	1.7	ND*

Sesame Street Bubble Bath — Orange Mango Tango (The Village Company)	2.8	340

Tinker Bell Scented Bubble Bath (Goldie LLC)	11	420

Baby Wipes

Huggies Naturally Refreshing Cucumber & Green Tea Baby Wipes (Kimberly-Clark)	ND*	Not tested for this chemical

Huggies Soft Skin — Shea Butter (Kimberly-Clark Global Sales Inc)	ND*	100

Kirkland Signature Premium Unscented Baby Wipes (Costco Wholesale Corporation)	ND*	Not tested for this chemical

Pampers Baby Fresh (Procter & Gamble)	ND*	Not tested for this chemical

Pampers Calming — Lavender (Procter & Gamble)	ND*	Not tested for this chemical

Hair Relaxers

Dark & Lovely Kids Beautiful Beginnings No-Mistake Nourishing No-Lye Creme Relaxer, Normal to Course Hair (SoftSheen-Carson, owned by L'Oreal USA)	ND*	Not tested for this chemical

Dark & Lovely Kids Beautiful Beginnings No-Mistake Nourishing No-Lye Children's Relaxer System, Fine Hair Types (SoftSheen-Carson, owned by L'Oreal USA)	ND*	ND*

Soft & Beautiful Just for Me! No-Lye Conditioning Creme Relaxer, Children's Super (Alberto-Culver Company)	0.27	ND*

Hand Soaps

Pampers Kandoo Foaming Handsoap — Magic Melon (Procter & Gamble)	0.49	310

Sun Blocks

Banana Boat Kids UVA & UVB Sunblock Lotion SPF 30 (Sun Pharmaceuticals Corp.)	ND*	Not tested for this chemical

No-Ad Sun Pals SPF 45 UVA/UVB Sun Protection (Solar Cosmetics Labs Inc.)	0.46	Not tested for this chemical

Toothpastes

Colgate Kids 2-in-1 Toothpaste and Mouthwash — Strawberry (Colgate-Palmolive Company)	ND*	Not tested for this chemical

* Not detectable.

Originally posted at InjuryBoard by Paul Kiesel

NYT: Bush Aides Hurry to Pass Contentious Labor Department Rule

Paul Kiesel — Tue, 02 Dec 2008 14:25:06 GMT

President Bush has said that he wants to work with President-elect Obama to make the transition process as smooth as possible. Logically, this makes sense for the greater good of the country, regardless of political ideology: We are in the middle of two wars, an economy that is in a recession, record foreclosure levels, levels of unemployment that haven't been seen in almost 20 years, and an anticipated turbulent first half to 2009.

Contrary to President Bush's words, his actions over the last few weeks do not signal a smooth transfer of power.

Below is an article from yesterday's New York Times that displays how Bush is doing his best to leave his imprint on the presidency for months if not years after he's left office (i.e. Bush is pushing through a ruling that will make it more difficult for women to get contraceptives. The loosening of restrictions makes it easier for health care workers to conscientiously object to filling birth control prescriptions), and the difficulty the Obama administration will have reversing new "midnight hour" regulations.

From The New York Times:

WASHINGTON — The Labor Department is racing to complete a new rule, strenuously opposed by President-elect Barack Obama, that would make it much harder for the government to regulate toxic substances and hazardous chemicals to which workers are exposed on the job.

The rule, which has strong support from business groups, says that in assessing the risk from a particular substance, federal agencies should gather and analyze “industry-by-industry evidence” of employees’ exposure to it during their working lives. The proposal would, in many cases, add a step to the lengthy process of developing standards to protect workers’ health.

Public health officials and labor unions said the rule would delay needed protections for workers, resulting in additional deaths and illnesses.

With the economy tumbling and American troops fighting in Iraq and Afghanistan, President Bush has promised to cooperate with Mr. Obama to make the transition “as smooth as possible.” But that has not stopped his administration from trying, in its final days, to cement in place a diverse array of new regulations.

The Labor Department proposal is one of about 20 highly contentious rules the Bush administration is planning to issue in its final weeks. The rules deal with issues as diverse as abortion, auto safety and the environment.

One rule would make it easier to build power plants near national parks and wilderness areas. Another would reduce the role of federal wildlife scientists in deciding whether dams, highways and other projects pose a threat to endangered species.

Mr. Obama and his advisers have already signaled their wariness of last-minute efforts by the Bush administration to embed its policies into the Code of Federal Regulations, a collection of rules having the force of law. The advisers have also said that Mr. Obama plans to look at a number of executive orders issued by Mr. Bush.

A new president can unilaterally reverse executive orders issued by his predecessors, as Mr. Bush and President Bill Clinton did in selected cases. But it is much more difficult for a new president to revoke or alter final regulations put in place by a predecessor. A new administration must solicit public comment and supply “a reasoned analysis” for such changes, as if it were issuing a new rule, the Supreme Court has said.

As a senator and a presidential candidate, Mr. Obama sharply criticized the regulation of workplace hazards by the Bush administration.

In September, Mr. Obama and four other senators introduced a bill that would prohibit the Labor Department from issuing the rule it is now rushing to complete. He also signed a letter urging the department to scrap the proposal, saying it would “create serious obstacles to protecting workers from health hazards on the job.”

Administration officials said such concerns were based on a misunderstanding of the proposal.

“This proposal does not affect the substance or methodology of risk assessments, and it does not weaken any health standard,” said Leon R. Sequeira, the assistant secretary of labor for policy. The proposal, Mr. Sequeira said, would allow the department to “cast a wide net for the best available data before proposing a health standard.”

The Labor Department regulates occupational health hazards posed by a wide variety of substances like asbestos, benzene, cotton dust, formaldehyde, lead, vinyl chloride and blood-borne pathogens, including the virus that causes AIDS.

The department is constantly considering whether to take steps to protect workers against hazardous substances. Currently, it is assessing substances like silica, beryllium and diacetyl, a chemical that adds the buttery flavor to some types of microwave popcorn.

The proposal applies to two agencies in the Labor Department, the Occupational Safety and Health Administration and the Mine Safety and Health Administration.

Under the proposal, they would have to publish “advance notice of proposed rule-making,” soliciting public comment on studies, scientific information and data to be used in drafting a new rule. In some cases, OSHA has done that, but it is not required to do so.

The Bush administration and business groups said the rule would codify “best practices,” ensuring that health standards were based on the best available data and scientific information.

Randel K. Johnson, a vice president of the United States Chamber of Commerce, said his group “unequivocally supports” the proposal because it would give the public a better opportunity to comment on the science and data used by the government.

After a regulation is drafted and formally proposed, Mr. Johnson said, it is “all but impossible” to get OSHA to make significant changes.

“Risk assessment drives the entire process of regulation,” he said, and “courts almost always defer” to the agency’s assessments.

But critics say the additional step does nothing to protect workers.

“This rule is being pushed through by an administration that, for the last seven and a half years, has failed to set any new OSHA health rules to protect workers, except for one issued pursuant to a court order,” said Margaret M. Seminario, director of occupational safety and health for the A.F.L.-C.I.O.

Now, Ms. Seminario said, “the administration is rushing to lock in place requirements that would make it more difficult for the next administration to protect workers.”

She said the proposal could add two years to a rule-making process that often took eight years or more.

Representative George Miller, a California Democrat who is chairman of the House Committee on Education and Labor, said the proposal would “weaken future workplace safety regulations and slow their adoption.”

The proposal says that risk assessments should include industry-by-industry data on exposure to workplace substances. Administration officials acknowledged that such data did not always exist.

In their letter, Mr. Obama and other lawmakers said the Labor Department, instead of tinkering with risk-assessment procedures, should issue standards to protect workers against known hazards like silica and beryllium. The government has been working on a silica standard since 1997 and has listed it as a priority since 2002.

The timing of the proposal appears to violate a memorandum issued in early May by Joshua B. Bolten, the White House chief of staff.

“Except in extraordinary circumstances,” Mr. Bolten wrote, “regulations to be finalized in this administration should be proposed no later than June 1, 2008, and final regulations should be issued no later than Nov. 1, 2008.”

The Labor Department has not cited any extraordinary circumstances for its proposal, which was published in the Federal Register on Aug. 29. Administration officials confirmed last week that the proposal was still on their regulatory agenda.

The Labor Department said the proposal affected “only internal agency procedures” for developing health standards. It cited one source of authority for the proposal: a general “housekeeping statute” that allows the head of a department to prescribe rules for the performance of its business.

The statute is derived from a law passed in 1789 to help George Washington get the government up and running.

The Labor Department rule is among many that federal agencies are poised to issue before Mr. Bush turns over the White House to Mr. Obama.

One rule would allow coal companies to dump rock and dirt from mountaintop mining operations into nearby streams and valleys. Another, issued last week by the Health and Human Services Department, gives states sweeping authority to charge higher co-payments for doctor’s visits, hospital care and prescription drugs provided to low-income people under Medicaid. The department is working on another rule to protect health care workers who refuse to perform abortions or other procedures on religious or moral grounds.

Originally posted at InjuryBoard by Paul Kiesel

The New Yorker: Bush's Midnight Hour of Deregulation

Paul Kiesel — Mon, 17 Nov 2008 20:35:46 GMT

Below is an article from this week's New Yorker on President Bush's last-minute push to pass everything he has can in the final days of his presidency, between now and January 20, 2009, which is known as the "Midnight Hour." Per Bush's agenda, it should be known as "Midnight Deregulation." The former term is eponymous with what John Adams did in the final hours of his presidency (literally), appointing several judges before his successor, Thomas Jefferson, assumed the role of president the following day.

Bush's midnight hour, based on his proposed changes to consumer protection laws and environmental laws, promises to be a very dark time and one that will rollover into the Obama Administration.

The New Yorker, November 24, 2008

When President Jimmy Carter lost his bid for reëlection, in November, 1980, he had lots of unfinished business that he did not intend to leave that way. Carter’s Administration spent the next several weeks generating regulations at an unprecedented rate, until, in its last month in office, it published more than ten thousand pages of new rules. These rules, which, like most issued by federal agencies, needed no congressional approval, touched on everything from crash tests for cars to access to medical records, and a phrase was coined to describe them. They became known as “midnight regulations,” after the “midnight judges” appointed by John Adams in the final hours of his Presidency.

Since Jimmy Carter, every President has complained about midnight regulations and, four or eight years later, every President has issued them. On a percentage basis, George Bush senior holds the record: his Administration issued a greater proportion of its rules during the midnight period—generally defined as the last three months in office—than any other President’s. In absolute terms, though, Bill Clinton takes the gold: his Administration, during its midnight phase, published more than twenty-six thousand pages’ worth of rules in the Federal Register. (According to the National Journal, by the time Clinton left office “the journalists who cover the White House had thrown up their hands at the prospect of keeping up.”) President George W. Bush used the timing of these regulations as a rationale for suspending many of them. “I told people pretty plainly that I was going to review all the last-minute decisions that my predecessor had made, and that is exactly what we’re doing,” he declared.

Now, of course, Bush has entered into his own midnight period, and it promises to be a dark time indeed. Among the many new regulations—or, rather, deregulations—the Administration has proposed are rules that would: make it harder for the government to limit workers’ exposure to toxins, eliminate environmental review from decisions affecting fisheries, and ease restrictions on companies that blow up mountains to get at the coal underneath them. Other midnight regulations in the works include rules to allow “factory farms” to ignore the Clean Water Act, rules making it tougher for employees to take family or medical leave, and rules that would effectively gut the Endangered Species Act. Most regulations are subject to public input; such is the sense of urgency that the Administration has brought to the task of despoliation that the Interior Department completed its “review” of two hundred thousand public comments on the endangered-species rules in just four days, a feat that, one congressional aide calculated, required each staff member involved to read through comments at the rate of seven per minute. “So little time, so much damage” is how the Times recently put it.

Why do Presidents wait till the last moment to push through changes they’ve had the power to impose all along? Legal scholars have advanced a variety of explanations; these range from megalomania (each Administration tries to extend its influence into the next) to simple distraction (federal agencies, like ninth graders, have a hard time focussing until they’re up against a deadline). Under the best of circumstances, experts point out, rule-making is a laborious process; many of the regulations published toward the end of the Clinton Administration—such as a rule limiting the amount of arsenic allowed in public drinking water—had been the subject of years’ worth of hearings and scientific review.

But none of these explanations is adequate to the current situation. What distinguishes this Administration in its final days—as in its earlier ones—is the purity of its cynicism. White House officials haven’t even bothered to argue that these new rules are in the public interest. Such a claim would, in any event, be impossible to defend, as just about every midnight regulation being proposed is, evidently, a gift to a favored industry.

Consider, for example, the case of New Source Review. Utility companies have always hated this provision of the Clean Air Act, which requires them to install up-to-date pollution controls when they build new plants or renovate old ones. A new rule being circulated would take a trick that the power company Duke Energy dreamed up for circumventing New Source Review and turn it into law. According to the Administration’s own estimates, this new anti-rule would allow an additional seventy million tons of CO₂ to be released into the atmosphere each year. “If you thought the first hundred days of the Bush Administration were bad, just wait and see what the last hundred could bring,” Representative Edward Markey, of Massachusetts, has warned.

Democratic leaders in the House and the Senate have already indicated that they will try to rescind the most egregious of Bush’s midnight regulations. There are a few ways to do this, all of them difficult. Under an obscure law passed in 1996, Congress has the power to revoke recently imposed rules. That law, though, has been used successfully only once. (President Bush, for all his grumbling—and despite Republican control of Congress for much of his tenure—ended up implementing more than three-quarters of the midnight rules that Clinton had left him, including the one on arsenic, just as they were written.) Alternatively, once in office, Barack Obama could ask his agencies to go through the rule-making process all over again. But, by the time that was finished, a good deal of the damage might already have been done. Once a power plant has been rebuilt, it can’t readily be unrebuilt.

The Bush Administration, probably as a result of its own experience, is now trying to craft rules that are as difficult as possible to reverse. Generally speaking, major federal regulations go into effect sixty days after they are published. On November 20th, it will be sixty days before Bush leaves office. Over at the Federal Register, it’s going to be a busy week.

Originally posted at InjuryBoard by Paul Kiesel

White House to Ease Many Rules Aimed at Protecting Consumers

Paul Kiesel — Fri, 31 Oct 2008 18:41:15 GMT

Media outlets and blogs have been reporting for the past two weeks that the White House is working to enact a wide array of federal regulations, which would strip many government rules that protect consumers and the environment, before President Bush leaves office in January.

90 new regulations are in the works, and at least nine of them are considered "economically significant" because they impose costs or promote societal benefits that exceed $100 million annually, according to the Washington Post.

Unfortunately, a lot Bush's regulatory proposals reflect new interpretations of language in federal laws. Other proposals reflect new executive branch decisions in areas where Congress left the president with the ability to "flex" his power and excercise his discretion at will, since Congress is now out of session and focusing on the elections.

Here is White House Chief of Staff Joshua Bolten's memo, that was written May 9, 2008, stressing that everyone (everyone that the memo was addressed to) needs to "sprint to the finish" in order for regulations to be finalized before a set deadline of November 1, 2008.

Below is a chart that displays five proposed regulations, the proposal date, length of comment period (most of the regulations have a comment period around 30 days), and the amount of days the Office of Management and Budget needs to review the regulation before it takes legal effect.

The Bush White House is trying its best to get everything done before the next administration takes office on January 20, 2009, when the next president would be able to void any proposed regulation that is still under review.

Rule Description	Proposal Date	Length of Comment Period	Days under OMB review
Department of Health and Human Services rule which could reduce women's access to federally funded reproductive health services. • Find out more from Reg•Watch, OMB Watch's regulatory policy blog • Proposed rule text	Aug. 26	30 days	Less than 1 day
Department of Labor rule which would change the way occupational health agencies calculate estimates for on-the-job risks. • Find out more from Reg•Watch • Proposed rule text	Aug. 29	31 days	49 days
Mine Safety and Health Administration rule which would require drug testing for miners. • Find out more from Reg•Watch • Proposed rule text	Sept. 8	30 days	84 days
Department of Interior rule which would change the way government agencies comply with the Endangered Species Act. • Find out more from Reg•Watch • Proposed rule text	Aug. 15	31 days	3 days
Department of Justice rule which would allow local law enforcement to engage in domestic spying without good cause. • Find out more from OMB Watch • Proposed rule text	July 31	33 days	70 days

Originally posted at InjuryBoard by Paul Kiesel

The Subprime Mess and Phil Gramm: An Experiment in Deregulation

Paul Kiesel — Tue, 24 Jun 2008 16:12:58 GMT

In 1933, a few years following the stock market crash, Congress passes the Glass-Steagall Act, in hopes that regulating banks will help prevent market instability, particularly amongst Wall Street banks. The purpose of the act is to separate commercial banks that focus on consumers from investment banks, which deal with speculative trading and mergers.

The Glass-Steagall Act provided the proper oversight and entity separation that would prohibit banks and other financial companies from merging into giant trusts (conflict of interests) -- giant trusts or corporations being more powerful, naturally, and having the seemingly limitless capital to lobby their corporate interests, however, with a very myopic scope (particularly when it comes to factoring in potential losses -- most banks, as seen in contemporary times, chose not to anticipate losses in the mortgage market; they presumed home prices would continue to appreciate).

In 1999, former Senator Phil Gramm (who is, incidentally, Senator John McCain's economic adviser and cochairs his presidential campaign) set out to completely gut the Glass-Steagall Act, and did so successfully, replacing most of its components with the new Gramm-Leach-Bliley Act: allowing commercial banks, investment banks, and insurers to merge (which would have violated antitrust laws under Glass-Steagall). Sen. Gramm was the driving force behind the Gramm-Leach-Bliley Act, as he had received over $4.6 million from the FIRE sector (Finance, Insurance and Real Estate donations) over the previous decade, and once the Act passed, an influx of "megamergers" took place among banks and insurance and securities companies, as if they had been eagerly awaiting the passage of Gramm's Act. Everything in between Glass-Steagall and Gramm-Leach-Bliley (i.e. Savings and Loan crisis/bust) was, in large part, the incubation period for what would take place over the nine years that would follow the passage of Gramm's Act: an experiment in deregulation.

Shortly after George W. Bush was elected president, Congress and President Clinton were trying to pass a $384 billion omnibus spending bill, and while the debates swirled around the passage of this bill, Senator Phil Gramm clandestinely slipped a 262-page amendment into the omnibus appropriations bill titled: Commodity Futures Modernization Act. It is likely that few senators read this bill, if any. The essence of the act was the deregulation of derivatives trading (financial instruments whose value changes in response to the changes in underlying variables; the main use of derivatives is to reduce risk for one party). The legislation contained a provision -- lobbied for by Enron, a major campaign contributor to Gramm -- that exempted energy trading from regulatory oversight. Basically, it gave way to the Enron debacle and ushered in the new era of unregulated securities. Interestingly enough, Gramm's wife, Wendy, had been part of the Enron board, and her salary and stock income brought in between $900,000 and $1.8 million to the Gramm household, prior to the passage of the Commodity Futures Modernization Act.

In 2003, Gramm left the Senate to join UBS, which had acquired investment house PaineWebber due to his deregulation bill. At UBS, Gramm lobbied Congress, the Fed and the Treasury Department. During Gramm's tenor at UBS and as a lobbyist, Congress passed the Responsible Lending Act, billed as an anti-predatory-lending measure, but was called the "Loan Shark Protection Act" by consumer advocates, as it was designed to preempt stronger state laws against anti-predatory lending. The Fed largely ignored the underlying and growing problems within the subprime mortgage/housing markets, as Bernanke famously acknowledged the housing market in April, 2007 as, "[showing] signs of softening," but said that a "sharp slowdown," is unlikely. Then, according to Mother Jones magazine, Henry Paulson became the Treasury Secretary in July, 2007, when, "In 2005, [at] Goldman [he] securitized $68 billion in residential mortgages and $23 billion in 'other assets' primarily related to CDOs," (Mother Jones, August, 2008). With such self-interest, and a lack of the nation's interest, we can see how this subprime mess was allowed to escalate to such great proportions.

Some justice was served, however, this spring, as UBS became one of the subprime debacle's biggest losers, having to write down $37 billion -- the same amount as their previous four years of profits combined. UBS also made the public aware that two-thirds of its losses were due to reckless investing in collateralized debt obligations (CDOs).

Now, Gramm has a second chance of extending his out-of-touch and ill-performing policies, as Senator John McCain appointed Gramm to be his "economic expert" and cochair of his presidential campaign, last year. Also, it is likely that if Senator McCain were to win in November, Gramm would be our next Treasury Secretary, which means more of the same deregulatory mess and the continuation of failed and insidious economic policies.

Originally posted at InjuryBoard by Paul Kiesel

Lending Regulation Bills to be Voted on in Sacramento

Paul Kiesel — Wed, 18 Jun 2008 20:54:48 GMT

The Banking, Finance and Insurance Committee will be taking a look at various bills related to the subprime mortgage mess, that are being brought to this committee in hopes that it will prevent the severity of what's going on in the financial marketplace from occurring again. The bills will likely have a mild effect on the rising tide of foreclosures (including the pending interest rate resets that prime borrowers will go through; subsequently suffering many of the same pains subprime borrowers have been and still are going through), but the importance of the bills is that they will provide regulations within and more oversight throughout the lending industry (regulations that had not existed before).

As noted in a Los Angeles Times editorial, the bills would "limit prepayment penalties, which can deter borrowers with bad loans from refinancing into better ones, and eliminate a financial incentive for brokers to steer borrowers into loans with higher interest rates. In doing so, it would require borrowers to be given a clear choice between loans and without penalties, and between higher rates or higher upfront fees [. . .] the bill[s] would stiffen the state requirement that lenders not provide larger loans than subprime borrowers can reasonably be expected to pay [. . .] and it would prohibit lenders from refinancing loans unless there's a real benefit to the borrower," (Los Angeles Times, 6/18/08).

It's amazing that pragmatic rules and regulations, such as the ones these bills present, were not in effect when the subprime boom began. How much trouble we could have avoided will never be known, but it is highly implausible to think that the banks and homeowners would be in such precarious situations as they are now, if we had had more oversight five years ago.

Granted, the bills that will be voted on in Sacramento only apply to the State of California, however, if they pass and become law, a venerable precedent will have been set; making it more likely that federal regulators to follow.

Originally posted at InjuryBoard by Paul Kiesel

Why the Mortgage Industry Needs to be Regulated

Paul Kiesel — Wed, 28 May 2008 20:01:05 GMT

Consumer crusader Elizabeth Warren, a Harvard Law professor, has a great blog that particularly focuses on the ambiguities and sometimes "bald-face" fraud that takes place in the mortgage industry.

Below is a story of Ms. Warren, from her blog "creditslips.org," and a client who was facing bankruptcy. However, problems arose when it came to settling the debt of the client's mortgage. She calls the type of mortgage her client was in as: The Magical Mystery Mortgage.

A client in our Southwest Indian Law Clinic had previously filed a Chapter 13, stripped down the mortgage on his mobile home from $28,570 to $12,000, paid $9,000 in principal toward the $12,000, then defaulted. The case was ultimately dismissed and the mortgage company (we'll call it "Voldemort Mortgage," just for fun) came back with a vengeance, threatening repossession or foreclosure, etc. We entered the case and were acknowledged by the mortgage company as the attorneys for the borrower. We then attempted to get Voldemort to take what was left on the bankruptcy payments, rather than insisting on the full pre-bankruptcy loan amount. They agreed, so we thought. In exchange for an extension, the client agreed to pay $1,400 up front and the remaining $1,600 over a period of roughly five months.

Before the terms were memorialized, however, Voldemort sent a loan extension agreement directly to the client for his signature, without first providing it to us for review. I go into all this just so you can see what goes on. It is not pretty. The loan extension agreement did not reflect the terms of the agreement as verbally explained to the client. Instead it set the balance of the loan due at $28,570, not the $3,000 we had negotiated. We only discovered that the new agreement did not reflect the oral agreement, after Voldemort presented it to our client for his signature. Oddly the balance due, the $28,570, supposedly took into account the bankruptcy payments and a $1400 payment made by the client at the time of execution of this agreement. The client then made yet another payment of $800. The new balance? You guessed it…..$28,570.

We called Voldemort, and the student and I and finally reached someone in the bankruptcy department. The conversation went something like this.

Student attorney: We do not appreciate that you scared our client into signing something without our consent when you knew we represented him. You should never contact him directly. You know that right?

Silence.

Student attorney: We are really calling to find out how all the various payments have been applied. Starting out with the $9,000 paid during the bankruptcy….how was that applied? The principal seems not to have moved a penny (literally).

Voldemort: We bought these loans from Chase and they are so tricky. The borrowers have to make the payments in 30 day increments and if they don’t, say they pay on the first and a month is 31 days, the interest rate just skyrockets. Yeah…these are designed to trip people up and they do. It is hard to get ahead with these.

Student attorney: But how was the $9,000 applied?

Voldemort: To the interest. See…the trustee in the bankruptcy did not comply with the 30 day rule and the interest rate just went crazy during the bankruptcy.

Student attorney: Is this the bankruptcy department?

[my sentiments exactly. Since this is a stripdown or cramdown, the trustee clearly need not pay under this funky system…surely we had reached the Chinese culture department instead, right?]

Voldemort: Yes, this department processes all bankruptcies, why?

[explanation of the chapter 13 rules for stripping down loans, which were clearly as much as a mystery to this person as the principal calculations].

Student Attorney: We just want to know why the principal balance does not ever change. Please forward us all the loan documents and the payment history so we can see how this works.

Voldemort: Ok, but seriously, I told you why. Interest. Super-high interest. The rate is just so high, so high it is amazing, isn’t it?

Student Attorney: Amazing.

It is doubtful that this type of mortgage is as prevalent as some of the fraudulent teaser rate mortgages that had been written over the last three years, but, nonetheless, it shows why the mortgage industry, if not the whole lending industry (credit cards, student loans, etc.), needs better oversight and tighter regulations placed on it.

Originally posted at InjuryBoard by Paul Kiesel