If you think that the new Governor of New York, Kathy Hochul, will be a meaningful improvement over Andrew Cuomo, I would suggest that you look at who she is selecting as staff.
One of her first appointment was to name Adrienne Harris to head New York Department of Financial Services (DFS), and Harris is a poster child for the revolving door who wants to neuter the agency:
One of newly installed New York Gov. Kathy Hochul’s first key decisions was naming Adrienne Harris as the head of the state’s Department of Financial Services (DFS), which is responsible for regulating the activities of nearly 1,800 insurance companies with cumulative assets of $5.5 trillion and more than 1,400 banking and financial institutions with assets over $2.9 trillion.
If confirmed, Harris would be responsible for ensuring prudent financial conduct, robust consumer protection, and anti-fraud measures within New York. But given its role as the nation’s—and the world’s—financial center, her actions will have a significant impact on regulation and enforcement across the country and around the world.
The problem is Harris’s own philosophy of regulation. Apparently, Harris just doesn’t get why regulators have to be so skeptical of the industry all the time—which makes sense, coming from a fintech executive who’s advocated for the industry on both sides of the revolving door.
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Contrast Lawsky’s record with Harris’s own vision of what financial regulation should look like. “The way we tend to regulate financial services, and most industries in the United States, is—and I always took a little bit of an issue with this—it’s sort of like the list of no-no’s,” Harris said last year in an interview with the University of Michigan’s Ross School of Business. “It’s like ‘Go forth, free market, but here are the list of no-no’s,’ and then when somebody finds a new no-no you’re like ‘OK, we’ll add that to the list of no-no’s.’ Instead of what I always thought was a better approach, which is ‘What’s the outcome you’re looking to drive?’ Is it financial inclusion? Financial health? Consumer protection? Whatever it is. And how do you work toward the affirmative outcome that you want?”
This seems to especially irk Harris when it comes to fintech. “We’re so used to thinking about financial services in the predatory sense. Then they [regulators] come to fintech and then they’re like ‘Okay, where’s the hidden fee? Where’s the icky thing?’ Instead of approaching it, again, with this affirmative mindset,” Harris said.
Yes, an affirmative mindset. I'm sure that John Dillinger wished that the FBI had an affirmative mindset.
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Case in point: fintech firms, including some that Harris herself cited. She told the Ross School that “frankly, I’m not sure I understand why” so-called payday advance apps like Brigit and Earnin are controversial, since they “are helping people get access to their earned, but not yet paid, wages,” as an alternative to payday loans. Except Earnin was subpoenaed by DFS—the same agency Harris may soon lead—for its “tipping” policy, in which users who don’t leave a tip for the company have their Earnin withdrawals capped at $100. This may not be a payday loan interest rate, but to a low-wage worker who can’t get more than $100 unless they ante up, it’s a distinction without a difference. For its part, Brigit makes money through a $9.99-per-month subscription fee and caps loans at $250. Unless a user is very regularly in danger of overdrafting, it may not be worth the $120-per-year cost.
Notably, Harris was an adviser to Brigit at the time she made those remarks, and was a limited-partner adviser to one of its venture capital backers, NYCA Partners. During the Trump years, Harris also partnered up with Homie, a firm that buys and sells houses in lightly regulated Utah; States Title, a machine-learning product for real estate agents; Carver Edison, which makes products for buying and selling stocks; and BOND.AI, which claims to have created an “empathy engine” for marketing financial products to consumers. She also joined the Brunswick Group, a D.C.-based lobbying and public relations firm, this March. Companies looking for her advice to help “future-proof” their operations through her “regulatory intelligence” and “political expertise” can also request a direct consultation on her website.
(emphasis mine)
Harris likely got most of those jobs thanks to her role as the Obama administration’s policy head on fintech. Her work culminated in a white paper titled “A Framework for Fintech,” which is less of a framework and more of an ode to public-private collaboration. The word “innovation” appears 51 times.
Yes, that sounds like a former Obama administration official. "Regulatory capture" was their middle name.
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All of this matters, since Harris is now inheriting several regulatory regimes that run counter to her own stated beliefs about the purpose of regulation.
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As Harris potentially enters office after extensive work with fintech startups, the key question is how her enthusiasm for the space may influence her development and enforcement of regulations.
Early reactions to her appointment show that industry players are excited to see a like-minded person take up the regulatory mantle. “No one knows the future of financial services better than Adrienne and her hiring is a real competitive advantage for NY,” wrote Matt Homer, Harris’s former colleague at NYCA Partners who runs their crypto strategy. Trump-era fintech regulator Daniel Gorfine called Harris “an excellent choice,” and Obama-era Treasury appointee Alex Zerden agreed it was a “smart choice.” Both Gorfine and Zerden now run “consultancies” (read: shadow lobbying shops) for fintech and crypto firms. It seems Harris is truly a bipartisan nominee; revolving-door profiteers on both the Democratic and Republican teams endorse her.
So it looks like more corrupt cronyism and more corrupt sucking up to the banksters, though her decision to nominate Brian Benjamin as her replacement as Lt. Governor is perhaps even more troubling, given that he has financial interests in semi-legal loan sharks and a trail of campaign finance irregularities:
Newly appointed Lt. Governor Brian Benjamin stands to make a hefty profit from insider stock he holds in a company that arranges loans with interest rates up to 500% and has been sued repeatedly, THE CITY has learned.
Gov. Kathy Hochul recently tapped Benjamin for her old job after she succeeded Andrew Cuomo, who resigned amid sexual harassment allegations and other scandals.
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The Harvard Business School grad got the inside edge via his role as a founding board member of Next Point Acquisition Corp., an investment firm that earlier this year bought the oft-sued California firm LoanMe, records show.
Benjamin resigned from NextPoint’s board in March, but kept his stock. THE CITY estimates that Benjamin could net a hefty $80,000 profit off what appears to be his initial $4,100 investment if he sold the stock tomorrow on the Toronto Stock Exchange where it’s traded.………
LoanMe has been sued 33 times in seven states in the last five years, records show. The firm has settled all but two of those lawsuits under terms that remain sealed, records show.
In some suits, consumers charged that LoanMe bombarded them with texts and robo calls pushing them to take out loans. In others, borrowers alleged LoanMe employed similar harassment if they were late with payments.
Some borrowers have also alleged LoanMe reported to credit rating agencies that they still owed money even after they’d paid their debts — an erroneous claim they said destroyed their credit.………
Earlier this year, Benjamin launched an unsuccessful bid for city comptroller. In January, THE CITY revealed contributions to his campaign that some named donors said they never made. The city Campaign Finance Board is now looking into those contributions, which Benjamin promised to return after THE CITY’s report.
I'm not sure how to get meaningful reform in New York, but it is desperately needed, and it is not limited to the Democratic Party, as the case of Dean Skelos makes clear.
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