Apr 21, 2019

The corruption of laissez-faire capitalism

Illustration: Sarah Grillo/Axios

Laissez-faire capitalism works very well in theory. The government sets clearly-defined rules, within which corporations compete for profits. Companies win by providing the best products at the lowest price; investors win by allocating scarce capital where it can be put to best use; the country as a whole reaps the benefit.

In an age of corruption anxiety, however, laissez-faire often means that companies themselves get to set the rules.

  • The Consumer Financial Protection Bureau has lost all its teeth, as Nicholas Confessore reports in today's NYT Magazine. The agency was created to work for and be answerable to consumers, but then Mick Mulvaney took over, and now it seems to answer mostly to payday lenders.
  • The CFPB's new head, hand-picked by Mulvaney, is Kathleen Kraninger. (Mulvaney himself has moved up to become the White House chief of staff.) Kraninger's first big speech this week was described as "the latest nail in the coffin of the CFPB" by LA Times consumer advocate David Lazarus.
  • Kraninger referred 11 times to "stakeholders", including "a continued commitment to engagement with all of our stakeholders". Those stakeholders emphatically include financial institutions, who don't need to worry about being sued: the CFPB's rules "are not best articulated on a case-by-case basis through enforcement actions," says the agency's new head.
  • A group of payday lenders called NDG Enterprise illegally threatened borrowers with arrest and imprisonment, per Confessore. The CFPB recently settled its three-year prosecution of NDG; the fine was exactly $0.

The big picture: When corporations capture their regulators, laissez-faire fails.

Driving the news: Corporations must not be allowed to influence bankruptcy proceedings without fully revealing their conflicts. But that's exactly what McKinsey is being accused of. Now, McKinsey itself has been given the job of drawing up new conflict-of-interest guidelines — guidelines that "could serve as a model for all bankruptcy practitioners". A spokeswoman for McKinsey told the WSJ that the firm is looking to address "ambiguities" in the existing rules.

  • Corporations literally write laws now. An investigation by USA Today, The Arizona Republic, and the Center for Public Integrity found at least 10,000 bills drafted by corporate interests being introduced in the past 8 years, of which more than 2,100 were signed into law. 

Why it matters: Regulatory stakes are high, sometimes life-and-death. Ali Bahrami, for example, the top safety regulator at the FAA, got that job after previously urging the agency to allow Boeing to self-certify the safety of it jets. (Boeing is back in the news this weekend, with a report of safety lapses at its North Carolina Dreamliner factory.) More insidiously, corporate capture of the government apparatus reduces faith in all institutions.

Go deeper: Michael Lewis's new podcast, Against The Rules, is all about the ways in which referees are no longer trusted. Episode 2 dives into the CFPB.

Go deeper

Trump's new purge

Michael Atkinson, arrives in October for closed-door questioning about the whistleblower complaint. Photo: J. Scott Applewhite/AP

Sources close to President Trump expect him to fire more inspectors general across his government, after his Friday night removal of Michael Atkinson, the intelligence community I.G. who alerted Congress to the complaint that triggered impeachment.

What they're saying: Conservative allies of the president have told him that these I.G.s are members of the “deep state” trying to undermine him. Trump appears to have embraced that view.

Go deeperArrowUpdated 4 mins ago - Politics & Policy

Coronavirus dashboard

Illustration: Axios Visuals

  1. Global: Total confirmed cases as of 11:30 a.m. ET: 1,140,327 — Total deaths: 60,887 — Total recoveries: 233,930Map.
  2. U.S.: Total confirmed cases as of 11:30 a.m. ET: 278,568 — Total deaths: 7,163 — Total recoveries: 9,920Map.
  3. Public health latest: The CDC is recommending Americans wear face coverings in public to help stop the spread of the coronavirus. The federal government will cover the costs of COVID-19 treatment for the uninsured.
  4. 2020 latest: "I think a lot of people cheat with mail-in voting," President Trump said of the 2020 election, as more states hold primaries by mail. Montana Gov. Steve Bullock said Friday that every county in the state has opted to expand mail-in voting for the state's June 2 primary.
  5. Business updates: America's small business bailout is off to a bad start. The DOT is urging airlines to refund passengers due to canceled or rescheduled flights, but won't take action against airlines that provide vouchers or credits.
  6. Oil latest: A pivotal Monday meeting among oil-producing countries to discuss supply curbs is reportedly being delayed amid tensions between Saudi Arabia and Russia.
  7. Military updates: Senators call for independent investigation into the firing of Navy captain of the U.S.S. Theodore Roosevelt. The U.S. military is struggling to find new recruits as enlistment stations are shut down.
  8. What should I do? Answers about the virus from Axios expertsWhat to know about social distancingQ&A: Minimizing your coronavirus risk.
  9. Other resources: CDC on how to avoid the virus, what to do if you get it.

Subscribe to Mike Allen's Axios AM to follow our coronavirus coverage each morning from your inbox.

U.S. coronavirus updates: New York reports record 630 deaths in 24 hours

Data: The Center for Systems Science and Engineering at Johns Hopkins; Map: Andrew Witherspoon/Axios

New York reported 630 new deaths in 24 hours, Gov. Andrew Cuomo said Saturday — an "all-time increase" that beat the previous day's record of 562 deaths in one day.

The big picture: As expected, COVID-19 death tolls are rising in the U.S., killing more than 7,100 people in total, and over 1,000 in 24 hours alone. The CDC is recommending Americans wear face coverings in public to help stop the spread, marking a significant change in messaging from the Trump administration.

Go deeperArrowUpdated 57 mins ago - Health