Committing To Protecting Main Street, Not Wall Street

The Trump administration is rushing to gut a common-sense rule that protects investors from Wall Street greed.

02/16/2017 05:31 pm ET | Updated Feb 17, 2017
KENA BETANCUR via Getty Images
National Economic Council director and former Goldman Sachs executive Gary Cohn at Trump Tower, Jan. 2, 2017.

Last year, the Obama administration finalized our “conflict of interest” rule, requiring that retirement advisers provide advice in their customer’s’ best interest. This common-sense rule is projected to save retirement savers at least $17 billion each year.

Although the rule is overwhelmingly popular with consumers – most of whom already thought financial advisers were prohibited from enriching themselves at their clients’ expense – Wall Street spent tens of millions of dollars fighting us. They lobbied Congress; lodged objections during the rulemaking process; and filed nearly half a dozen lawsuits after the rule was finished. They tried to create the ultimate false choice – you can have bad advice or no advice, but not fair advice.

Last week, a federal judge in Texas published a comprehensive opinion rejecting a challenge by the Chamber of Commerce, the life insurance industry, and others. The court said we proved that under the rule the industry “can continue to serve middle income investors using all types of compensation models.” She didn’t believe the industry’s cry of “wolf” – that they would walk away from their customers just because they could only make a lot of money from them, but not unfair amounts of money.

If the Trump administration is truly independent of its Goldman Sachs handlers, the rule should not be changed.

The rule’s opponents also brazenly tried to cloak their self-interest in the cover of the First Amendment. They argued it was unconstitutional to require financial advisers to disclose when they were giving bad or misleading advice. The judge rejected this laughable claim.

For those keeping score at home, that means the Labor Department is batting 1000 in court – five different challenges to the rule have all been rejected by federal judges around the country.

But the Trump administration appears committed to carrying the water for Wall Street even where the bankers have failed in court, in Congress, and in public opinion. The administration announced last week that it intends to conduct a new review of the rule, with the goal of gutting it once that review is complete. And the administration isn’t even waiting for the results of an objective review before announcing their conclusions – Press Secretary Sean Spicer said last week that the “rule is a solution in search of a problem,” and National Economic Council director Gary Cohn, a former top exec at Goldman Sachs criticized the rule for “putting only healthy food” on the menu. Apparently, Cohn’s colleagues at Goldman Sachs prefer the good old days when they had no obligation to tell clients what was really in all the unhealthy options Wall Street was serving. The judge gave all the objective review that the administration should need – the rule is already working to serve the interests of hardworking Americans trying to save for their golden years.

Doing away with the conflict of interest rule would be misguided, unnecessary, and wrong. Financial firms are already making changes to comply with the rule and better serve their customers. Clients are already benefiting from lower fees, better investment options, and clearer disclosures. Some firms are even advertising their embrace of the rule as a competitive advantage – because to quote Jack Bogle, the founder and former chief executive of Vanguard, “It simply doesn’t seem like a good business practice for Wall Street to tell its client-investors, ‘We put your interests second, after our firm’s, but it’s close.’”

Most Wall Street firms and insurance companies already promise in their marketing materials to put their customers first – the conflict of interest rule takes that marketing slogan and makes it the law. If the Trump administration is truly independent of its Goldman Sachs handlers, the rule should not be changed. Any steps to delay or dilute the rule will be yet more evidence that Mr. Trump is committed to protecting Wall Street, not Main Street, and further shows that Trump is only helping his friends, as he has admitted before.

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