July 8, 2010
Host: Ted Simons
Consumer Financial Protection Agency
- Andrei Cherny, a Democratic candidate for State Treasurer and former White House adviser, is credited with helping to develop the idea of the Consumer Financial Protection Agency. Hear what he has to say about this key part of financial reform legislation that’s currently making its way through Congress.
- Andrei Cherny - Democratic candidate for State Treasurer
| Keywords: state treasure
, consumer financial protection agency
Ted Simons: A consumer financial protection bureau is a key part of financial reform legislation making its way through congress. Here to tell us what it's all about is Andrei Cherny, a former White House advisor who's been credited with helping to develop the idea. We should also note that Mr. Cherny is running unopposed in the democratic primary for state treasurer. Thanks for joining us.
Andrei Cherny: Appreciate it.
Ted Simons: The consumer financial protection bureau. What is it?
Andrei Cherny: it actually adds up to a lot. It makes a big difference. It’s really the centerpiece of the big Wall Street reform that's going through congress and looks like it is going to get passed in the next few days and it's a response to what's happening in the country the last few years, the meltdown in the financial sector and all the ramifications that had on main street all over the country. This idea of a consumer financial protection bureau is something a think tank I used to run and help start called democracy developed about four years ago, before all of this happened. The idea was we a consumer products safety commission in the country that says there are certain toasters or microwaves that are so inherently dangerous we're going to keep them off the market the because they'll burn down your house if you buy them. The same is true for credit cards, for mortgages for payday lenders, for some of these other things that are out there that have a big impact on people’s lives.
Ted Simons: Okay this is an independent agency but housed with the fed, how independent can it be?
Andrei Cherny: Well that was part of the big fight that went on in congress and you know there's the line about people watching sausage-making. I think people have had a front row seat at the Jimmy dean factory over the past few months watching this go through, but the compromise is this is a non-agency bureau, this is going to be housed in the federal reserve but have an independent budget and a director appointed by the president, not the people involved in the federal --
Ted Simons: And approved by the senate?
Andrei Cherny: And approved by the senate.
Ted Simons: So you basically write and enforce rules for -- what? -- banks, credit card companies?
Andrei Cherny: Mortgages and all of those things that have a big impact or consumers and their financial history.
Ted Simons: What about the small lenders? There's a concern they could get trampled underfoot.
Andrei Cherny: One of the compromises that went through was limiting it to banks with over $10 billion in assets to make sure small businesses wouldn’t get hurt in the same way. There's a provision that has small businesses take a first look at what's going through so they can have input there. So people have been working to make sure that small businesses are helped by this. In terms of credit card fees and all of the things they're dealing with and not hurt.
Ted Simons: I noticed auto loans weren't included. Why not?
Andrei Cherny: It’s one of these fights that went on there of course where people look at sometimes auto dealers and think there's a bad reputation there, but also they're a big part of a lot of communities around the country. Certainly, here in Arizona. And you've had a lot of lobbyists go through congress on this. I think we’ve had 34 different lobbying firms working on this. A 35th lobbying firm hired just to coordinate their efforts, and they’ve been spending over a million dollars a day in terms of lobbying, it's been a big fight and it's not a perfect bill by any strech but it's a step forward in the right direction.
Ted Simons: And again, we’re talking oversight over previously unregulated instruments.
Andrei Cherny: Well, exactly. Think about all of these aspects of our lives. If you have a Toyota that has a stuck accelerator, we count on the department of transportation to say we need that off the street and if there's Shrek glasses that have a toxic chemical, we have the consumer product safety commission to say McDonald's can't sell them – or with drugs, we have the FDA that says look, this drug causes cancer and birth defects, that has to be off the market. Here's this big area of people's lives. Credit card bills, mortgages lots of, pages and pages of fine print and misleading terms and hidden fees and things like that. This new consumer financial protection bureau is going to look at those and say there's some things so inherently unfair, they shouldn't be allowed on the market.
Ted Simons: You've got regulation here. That's the number one thing. Oversight and regulation. But can there be reform without reforming the regulators? After all, regulators are supposed to be doing their job before and apparently didn't do their job.
Andrei Cherny: We’ve seen a lot of people asleep at the switch over the past decade plus. That's part of price we pay in a democracy. Elections have consequences and If you have somebody elected who is going to appoint someone from a protection agency that's going to have that person be too close to industry or asleep at the switch, that's part of the price we pay. But that doesn't mean we shouldn't have a consumer product safety commission or environmental protection agency, and it doesn’t mean we shouldn’t have this new bureau looking over this area and saying here's an area where we haven't had any regulation. Just people able to do whatever they want and, of course, a lot of people, especially here in Arizona, have been paying a big price.
Ted Simons: I would imagine the regulators will be trained differently and hope, you know, trained to the extent where they don't make the mistakes they did before.
Andrei Cherny: Absolutely, By the very nature of this new bureau that's going to be acting as a watchdog, their mission is to protect the consumers. Not make sure the banks are doing well, not to make sure the credit card bureaus are doing well. We have other regulatory bodies to do that. This whole mission of this bureau is to say what can we do to make sure that consumers are being treated right, that they are not being taken advantage of.
Ted Simons: Folks on the right are saying it's government overreach. Too much bureaucracy. On the left, not tough enough. It's toothless as far as the bureau is concerned. Address both.
Andrei Cherny: Well, you know, on the one side, people are saying it's paternalism and again, nobody really says that when you say anybody should be allowed to buy a toaster. If there's a toaster that's going to burn your house, no one says well if you sign enough fine print and waivers we're going to allow it to be sold. There are certain things like that that make the market work well. That give consumers the confidence to say, I’m going to pick up this toaster or this car seat or this prescription from CVS and I know to a pretty good extent it's not going to cause me harm. On the other side, there's people who wish we went further and everything is a compromise, especially when looking at congress and this is a big step in the right direction. The most far-reaching reform we've had since the great depression. I think there is a lot that we can build on how this works Hopefully we can come back and fix it one way or the other as things go along and reform the reforms but to not do anything after everything that's happened in terms of the sub-prime crisis, in terms of people losing they are homes and forced into bankruptcy at record rates would be a travesty.
Ted Simons: Thanks for joining us.
Andrei Cherny: Thanks for having me.
Mayor of Scottsdale
- Scottsdale Mayor Jim Lane explains the city’s decision not to join Phoenix and Tempe in the “Discovery Triangle” regional planning and redevelopment effort.
- Jim Lane - Mayor of Scottsdale
| Keywords: scottsdale
, jim lane
Ted Simons: A couple of weeks ago, "Horizon" covered the regional planning effort known as the discovery triangle. It's a public-private partnership that includes the cities of Phoenix and Tempe. Scottsdale was supposed to be the third corner of the triangle, but its city council voted not to participate. We'll hear from Scottsdale mayor Jim lane in a memo, but first, here's what the chairman of the discovery triangle develop corporation had to stay about Scottsdale's decision.
Marty Shultz: Scottsdale, at this time, I have to emphasize, at this time, is somewhat divided politically in many different areas. And I think the mayor and a couple of his colleagues decided not to participate in a 3-3 vote.
Ted Simons: But he said “we would be recipient of a little and payer of a lot.” Talk to us about that quote and Phoenix and Tempe, what did they get and what did they pay?
Marty Shultz: The cities are paying several thousand dollars. It's a rather inexpensive effort just to keep our small staff going so we can keep our corporation going and doing the kinds of marketing analysis you've heard about. So in terms of the dollar investment, it's for the significant and mayor lane knows that. They also contribute their talent and vision as well. I just think this is one of those things -- and I've been involved before, as you know, Ted, in regional developments. When we started talking about a freeway system years ago, I had cities tell me, Marty, we don't want to participate and we had Indian tribes who said they didn't want to participate for various reasons. It's a change, but the regional cooperation is an imperative and frankly it is the key to this investment.
Ted Simons: Joining me with his side of the story is Scottsdale's mayor, Jim lane. Thanks for joining us.
Jim Lane: Nice to be here, thank you.
Ted Simons: Comment on what you just heard.
Jim Lane: Number one, I'd like to say Marty is a very good friend and we've had a lot of good discussions on these issues but Marty knows this isn't a matter of a membership fee to get into this. This is a matter of what the exchange of value that takes place beyond that. As a city of Scottsdale, this is not a renunciating effort on regional play because We're involved in a great number of regional efforts and public private partnerships and IGAs with a number of communities around us. But as elected for Scottsdale, elected by our Scottsdale voters, we have and it's incumbent on us to be the fiduciary protectors of their resources. And that means value, branding, that means reputation. It means a number of things that -- and controlling our environment. One of the things that we find, and we have found, and we have a tendency to at least be looking hard at this, as to what level of control we're transferring over to another body, a governance that would potentially be weighted against the decisions.
Ted Simons: I want to go back to what you said regarding branding because I know
that was important as far as the council is concerned. What is Scottsdale's brand and how would that be hurt by this particular development effort?
Jim Lane: I suppose -- and I don't want to be too braggart, but I think Scottsdale has a national and international brand as a tourist community, a resort level community. And that plays well with a number of companies that would like to consider us as a place to locate their businesses and frankly to have their meetings and conventions and otherwise. But it's a brand that we've spent a lot of money establishing and we want to enhance it and continue to grow it and it's unique and our reputation goes with that too. In combining, I suppose when we look at several different other communities and this is a -- no denigration or any dismissal of their particular brands and that, we're concerned about selling south Scottsdale as Scottsdale and we've had a fair degree of success in that. Merging in together, dilutes the branding and value, that we want to protect for our businesses and residents.
Ted Simons: I would have to ask because I think most folks who drive through south Scottsdale would say this is not necessarily a brand that needs to be reflected. How can I say this nicely? The area needs improvement and sounds like this particular effort might be a pretty good way to improve south Scottsdale. If there's a branding for Scottsdale, does south Scottsdale reflect that branding now?
Jim Lane: I'd like to say that we're not going to sort of divide them off and somehow categorize them in some different kind of branding. I honestly don't believe and I'm not going to accept the fact that's in such a dire state and I think some of the things we're planning, we put together, as soon as I got into office a year and a half ago, we put together an economic summit for south Scottsdale and that went into a taskforce of stakeholders, business owners and folks that were going to be involved in the area. And we got them together and they came forth after about nine or 10 months with some great recommendations which we're working through right now and frankly, they're going to transform the area and we're working that hard but one of the elements we're selling is it's Scottsdale. Close to downtown and all of things relevant to it. If we were to combine this into a marketing program for the 16,000 acres which we include two or three hundred acres it's difficult to try to establish as our contribution versus the allocation of benefits coming back when you have weighted votes coming the other way. Even as you market it elsewhere. We're losing a little bit on that, in exchange -- I still believe, lending our name to it and our brand and reputation, which potentially could become diluted. I don't want south Scottsdale to be east Phoenix or north Tempe.
Ted Simons: I hear concern regarding power perhaps coming from Phoenix and perhaps Tempe as well. Losing the branding and that the identity but losing -- what seems to be a concern about losing power. Is that at play? You don't have enough chips at the table here?
Jim Lane: Well yeah, There's no doubt in any regional effort, you do dilute the voters' elected officials vote for your community. I mean you have now exchanged the governance into a larger body. Am I saying that is a bad thing? No. We're certainly intimately involved with MAG and other regional efforts because there's a common interest and common exchange of benefits and it makes sense. In this particular case, by definition or at least to this point in time, it doesn't seem like there is that sort of respectable -- well, we wouldn't expect that we -- the allocation of benefits would necessarily correspond to what our contribution would be on a number of levels.
Ted Simons: If the development sees success, if you see things happening in Phoenix and Tempe that could possibly benefit south Scottsdale and keeping whatever brand you want to keep intact, is this something that the city could look back into in the future?
Jim Lane: At any time. And any council could easily look back and see if there's something of value but the other side of it is we can continue to work with them in any case, but doing so independently. You mentioned something about control that I think is an important aspect. Scottsdale has a reputation, in land use and being -- having high standards. And it's something that we don't want to trade away. That control of that aspect of it.
Ted Simons: Last question. Critics will say, Scottsdale has a chance for regional cooperation here and they're not playing ball. How do you respond?
Jim Lane: It's incumbent on every elected incumbent to see how it best affects their community.
Ted Simons: We appreciate it.
Jim Lane: Thank you.
- Should companies that install solar panels on school grounds, and sell the power they produce to schools, be regulated as utilities? Chairman of the Arizona Corporation Commission Kris Mayes explains the Commission’s recent decision on the issue.
- Kristin Mayes - Chairman of the Arizona Corporation Commission
| Keywords: solar energy
Ted Simons: The Arizona corporation commission says companies that provide solar service agreements should not be regulated like electric utilities. We'll hear from the commission chairman in a moment. But first, David MAJURE and photographer SCOT OLSON take us to a west valley high school that's close to switching on its solar power.
David Majure: Verrado High, One of four schools in the west valley Agua Fria Union school district. It was built to be energy efficient. Earning a LEED silver rating from the U.S. Green Building Counsel. Their monthly utility bills are roughly $10,000 to $20,000 less than other comparable schools in the district and now it's ready to cut those costs more.
Dennis Runyan: As a district, we've been excited to work in the solar area.
David Majure: Over 1400 photovoltaic solar panels cover their rooftops
Freddie Bracamonte: These panels are going to provide 30% of the energy requirements for this particular location which is Verrado High School.
David Majure: but the solar panels don't belong to the school or the district.
Freddie Bracamonte: Sundial Arizona Our financing entity owns them and we'll be selling the energy generated to the district.
David Majure: It's called a solar service agreement. A private company, in this case, Clean Energy Constructers buys and installs , maintains, and then operates the panels and then the district pays a fixed cost per kilowatt hour produced. It's a way for cash-strapped schools to get into solar energy.
Freddie Bracamonte: The district can't capitalize, so that's why they lean on a company like us to make solar a viable solution to their dilemma.
David Majure: The company covers the cost of the $5 million solar project and gets back almost $4 million by taking advantage of incentives offered by APS and the federal government.
Freddie Bracamonte: With the tough economy It's very hard for a school district to issue a bond to purchase capital equipment. So a company like ours, we'll purchase it and claim the tax credits and utility incentives and provide the district with a fixed price per kilowatt for energy for 25 years. So it’s a long term hedge, It's a hedge against utility increases.
Dennis Runyan: As you know, costs can be volatile. Take some of that equation out of this and it allows us to maintain our budget over the next 25 years in a way we can manage.
David Majure: The agreement is expected to save the district about $2 million over the life of the contract.
Ted Simons: Both the Arizona corporation commission staff and an administrative law judge say companies that provide solar service agreements should be classified as public service corporations and regulated like utilities. But the commission decided against such regulation. Here to explain the decision is commission chairman, Kristin Mayes. Good to see you.
Kristin Mayes: It's great to be here.
Ted Simons: The idea that you sell electricity. You're a public service corporation, you need to be regulated. You say not so fast?
Kristin Mayes: We decided to overturn that recommended opinion and order recently because we decided that under the law, under the constitution, projects like the one that you just saw, just don't meet the definition of what a public service corporation is and the issue that we had, and it was kind of a close call, because the issue we have in Arizona, we have this wonderful constitution, that very specifically defines what a public service corporation is. And it says any entity that furnishes electricity or water or fuel to another entity is a public service corporation. And the question became are these SS As, these companies that provide SSAs as explained in the clip, furnishing power to another entity, the schools, under the constitution, and under the law, do they really look like big -- you know, utilities or utilities that ought to be regulated. And we decided no on both counts basically. We decided they shouldn't.
Ted Simons: Because -- what? -- this is a financial tool. Something along those lines.
Kristin Mayes: In terms of the first part of that test, we decided, look, the primary purpose of these SSAs is not to furnish the power; it's to provide a service to the schools. You heard only 30% of the power to the schools is provided by the solar panels. That's great, that's a beautiful thing we just saw there. But the primary purpose of the SSA is to act as a financing mechanism and get the solar panels on top of the schools, and schools, cities and non-profits are different, because unlike for-profit businesses, they can't take the tax credit now and that’s a big deal. Because they can’t take those tax credits now, they have to rely on these other companies to do it for them.
Ted Simons: So If, then, the case that got your attention, the commission's attention with the solar city, and if solar city or the company we saw in the clip there, if they were not involved in these SSAs, these solar service agreements, would they then be regulated?
Kristin Mayes: Probably not. The answer is no, because a lot of these same companies provide or sell solar systems to -- to for-profit entities, to residential customers and when you do that, you don't have the situation where you're potentially furnishing the power to another entity. You're just selling the system. Let's say, Ted, you decided you wanted solar panels on your rooftop or the school your kids go wanted to do it, and they purchase the system, they're just providing power to themselves and that's where the tricky legal issue came in. When you have somebody else doing it, for a school, does that fall under the constitutional definition of a utility? And we did leave the door open. You know, there were folks who said, you know, you should be regulating this, commission. We did leave the door open for down the road, potentially regulating these companies, like solar city, if they become like utilities. If they become so popular that everyone is doing it and take on the characteristics of utilities we're going to potentially leave the door open to regulate them down the road.
Ted Simons: So because a solar city or other companies that involve these SSAs, because they design, install, maintain and finance this solar equipment and also supply the solar power, as long as there's an "also" there, that kind of falls into the --
Kristin Mayes: As long as they are providing -- primarily providing a service to the schools and as long as they don't take on monopoly characteristics and don't declare themselves to be utilities and as long as they don't take on other characteristics of utility, they will likely not be public service corporations and that's important for a lot of reasons. I mean, a lot of states have declared these type of arrangements are not public service corporations and so in many ways we're competing with a lot of other states that are inviting these companies in to do business.
Ted Simons: I was going to ask how much that comes into play, the idea that if you went along with staff's recommendation and the administrative law judge, if you would lose a lot of these companies.
Kristin Mayes: I think we decided the case on the law and the merits of the case and we were careful to narrowly craft this decision, to schools, non-profits and governmental entities and we wanted to make sure we had really done this in an air-tight way, in a way based on the fact, but sure, I mean, there's concern on the part of commissioners – and a lot of other folks that we want schools to do this. That was a wonderful thing to see that school doing such an enormous solar system on their rooftop. And I hope this -- this decision will inspire, you know, entire generations of kids to believe in the power of renewable energy and we're hearing anecdotal evidence that schools are moving forward with these projects.
Ted Simons: Were you surprised by staff's recommendation and what the judge had to say?
Kristin Mayes: Not terribly. You have to understand that, you know, there's a strong view toward regulation. You know, and we -- we're good regulators at the commission we’re tough on the utilities that we do regulate, you know it was a close call and we have a special constitution in the state of Arizona and 100 years ago, I doubt they were thinking about solar panels on schools but 100 years ago they were specific about what a utility is.
Ted Simons: Thanks for joining us.
Kristin Mayes: Thanks, Ted.