Advisers have reason to want a change in how congressional decisions affecting their businesses and clients' finances are made.
The horse-trading we witnessed last week during Congress' attempt to pass an omnibus spending bill and avert a government shutdown was a little too much like watching the sausage being made. Our reporters followed every movement of riders and amendments of consequence to financial advisers, and could gauge by how suddenly those were slipped in — or dropped — the relative importance of each bargaining chip.
Over the preceding weekend, a rider was included in the bill that would effectively stop a Labor Department rule proposal designed to expand the number of financial advisers who must act as fiduciaries to retirement plans, including brokers who sell individual retirement accounts. By Tuesday, it had been scrapped.
Playing fast and loose with a proposal that first arose four years ago, with significant debate since then and a reproposal expected in January, is no way to legislate. Whether or not one thinks investors' retirement savings should be handled by advisers who have their best interests in mind, it's a decision that deserves the light of day rather than backroom shuffling in a last-minute barter with unrelated priorities.
BACKROOM SHUFFLING
An amendment to let trustees of multiemployer pension plans cut benefits for retirees also was tacked on to the appropriations bill. As Brian Graff, chief executive of the American Society of Pension Professionals and Actuaries, said in our spending story last Wednesday, “I can't even think of an example of something so substantial ever being enacted into law this way. This isn't the way to do something as significant and as technical as this.”
It would be naive to think this doesn't happen regularly, particularly in a “do nothing” Congress where individual House and Senate members are probably just as frustrated as the rest of us and jump on any opportunity to pass what they consider an important bill. But some changes create such reverberations for average -citizens that a government created “for the people” cannot fairly legislate without debate and cost-benefit considerations.
There's a reason Congress meets for a year, not a day: These issues deserve thoughtful analysis. No one makes the wisest decisions in the heat of a make-or-break moment. At that point, it's instinct and what issue is most “on fire.”
Another concession jammed into the spending-bill language released last Tuesday night would roll back a portion of the Dodd-Frank financial reform law blocking banks' ability to trade derivatives known as swaps with FDIC-guaranteed deposits — considered a cause of the 2008 financial crisis and succeeding bailouts. With so many other provisions wrapped into the 1,600-page bill, this significant alteration didn't even garner much attention and start to raise hackles until Thursday morning.
Before the bill officially came to a vote, Maxine Waters, D-Calif., ranking member of the House Financial Services Committee, issued a statement about the “unconscionable effort to cram these harmful provisions into a must-pass spending bill ... Even members that supported this as a standalone measure expressed concerns about circumventing the democratic process to ram through such a complex piece of legislation.”
Perhaps Ben White of Politico best described the process in Morning Money last Thursday: “It's legislation by way of the gun.”
TAKE ACTION
Although closed-door bargaining on matters of real consequence to Americans is common practice in Washington, advisers do have recourse for persuading a different route for congressional decisions affecting their businesses and clients' personal finances. Call your representative and senators, and state your objection. Believe it or not, legislators listen to their constituents. If enough people find the action of slipping controversial provisions into a must-pass bill unacceptable — and express that outrage to the lawmakers they vote into office — incremental change is possible.
