Money Rehab with Nicole Lapin - The Supreme Court Case That Could Turn Wall Street Into the Wild West

Episode Date: September 27, 2023

On this week's roundup of the headlines that affect you and your finances, Nicole covers the biggest Supreme Court case you haven't heard of (yet), the looming government shutdown and tips for negotiating your paycheck. Want to start investing, but don't know where to begin? Go to moneyassistant.com and meet Magnifi, your AI money assistant, designed to help you make a plan for your financial goals. Want one-on-one money coaching from Nicole? Book a meeting with her here: intro.co/moneynewsnetwork 

Money rehabbers, you get it. When you're trying to have it all, you end up doing a lot of juggling. You have to balance your work, your friends, and everything in between. So when it comes to your finances, the last thing you need is more juggling. That's where Bank of America steps in. With Bank of America, you can manage your banking, borrowing, and even investing all in one place. Their digital tools bring everything together under one roof, giving you a clear view of your finances whenever you need it. Plus, with Bank of America's wealth of expert guidance available at any time, you can feel confident that your

money is working as hard as you do. So why overcomplicate your money? Keep it simple with Bank of America, your one-stop shop for everything you need today and the goals you're working toward tomorrow. To get started, visit bofa.com slash newprosmedia. That's b-o-f-a dot com slash n-e-w pros p-r-o-s media. bfa.com slash newprosmedia. I'm Nicole Lappin, the only financial expert you don't need a dictionary to understand. It's time for some money rehab. All right, here's your weekly roundup of the biggest headlines on Wall Street and how they affect your finances. Our first story has gone mostly unnoticed, but has potentially massive implications for the entire financial industry. To ease us into the story, let's kick off with one basic fact. The government moves pretty dang slow. Anyone who's ever waited for a passport already knows this.

And it's not always a bad thing. Sometimes it's simply a function of checks and balances, and other times it stems from controversies and struggles that have frozen our democratic process over the last decade and a half. In some cases, the government moves slowly because it has always moved slowly. And when it was designed, we had different expectations for what timeliness meant. And that's the situation with the Supreme Court right now. The annual Supreme Court term kicks off the first Monday in October. The court decides to hear a case, puts it on the schedule, usually for a date a few months in the future, and then releases most of their decisions in June and then takes the summer off. When a case makes it in the news, it usually lines up with when the court decides to hear it and put it on the schedule, when oral arguments happen, or when the decision is released in June.

In a world where we are all used to everything happening as fast as possible, the rate at which the Supreme Court moves is straight out of 1789. I'm just giving you context here so you understand that when we talk about this story, we won't know how the Supreme Court rules until next June. But I want to put this story on your radar now because it is a huge deal. As I mentioned, the new Supreme Court term starts on the first Monday of October. So that's next week, the second. The court will hear a case on the third called Consumer Financial Protection Bureau versus Community Financial Services Association. The two fighters here are the Consumer Financial Protection Bureau or the CFPB and a trade group of payday lenders.

The CFPB is the Department of the Government tasked with protecting the public from unfair and criminal lending practices. They were formed after the 2008 crash for obvious reasons. One of the unique things about the Bureau is that they aren't funded by money that Congress sets aside for them each year. Rather, they are automatically funded with money from the Federal Reserve Bank. This case argues that the way the Bureau is funded is a violation of the Constitution, and therefore the Bureau shouldn't exist. This argument was actually upheld by a panel of three judges from the Fifth Circuit Court, which is the conspiracy theory-prone conservative uncle of the judicial system. The Supreme Court will decide if the ruling should stand

or if the Bureau is indeed constitutional. If it is unconstitutional because of the way it is funded, then it would call into question the legality of all other departments of the government that aren't funded by appropriations, departments like Medicare and Social Security. Declaring it unconstitutional would seriously limit the federal government's ability to protect consumers from financial scams and predatory practices. It would also call into question every legal action taken by the Bureau. Now, the CFPB governs the rules by which financial entities function. In a brief filed by the banking industry, the industry registered their concern that if the bureau was abruptly dismantled, they would no longer know what the

rules were governing basic banking functions like mortgage lending, which would basically force banks to freeze that activity until the situation was clarified. The brief explains that the mortgage lending industry is the foundation of a bunch of other industries like home building and sales. It makes up 17% of the US economy. The brief goes on to express concern that freezing 17% of the US economy would seriously trigger an economic depression, not recession, but depression. Now that's just one brief, and most court watchers do think that it's extremely unlikely that the court will uphold the fifth court's ruling and invalidate the Consumer Financial Protection Bureau. But the chance there isn't zero, and similar cases are

working their way through lower courts. Again, the court is hearing arguments early next week, and we won't have their ruling until next June, which is a hell of a long time to wait for a ruling that could potentially end social security and freeze the entire mortgage industry. And this is all because the Bureau doesn't go through the appropriations process, which good for them because once again, we are facing another potential government shutdown over how and how much to fund the federal government. Just to clarify, the government is not running out of money here, nor is it facing any surprise bills. The way the US government works is that it passes various laws and approves projects or creates programs, and then separately it passes funding appropriation bills to pay for everything

it decided to do. Basically, Congress is the equivalent of a drunk dude at a bar yelling, next round's on me to the entire bar. And then when the check comes, wants to fight about it. I mean, sir, that was all your, Jameson, please pay for it so we can all go home. Here's the thing though, if the fight does go into a government shutdown, Congress will still be getting paid. But the food safety inspectors at the FDA, no. In the case of a government shutdown, they will not get paid and therefore will not be working. But Congress will still be cashing checks while doing their job so poorly that the TSA will be working without pay. We don't know yet how likely a shutdown is,

hopefully we'll manage to avoid it, but if we don't, the credit rating for Moody's is warning that a shutdown would ding our national credit score again. Which, fair, if some dude comes into your bar and orders a round for the entire bar and is slow to pay, you'd be reluctant to serve him in the future as well, even if he eventually pays. And that's the basic principle of what the credit rating reflects. This is especially significant because Moody's is the only credit firm of the big three to give the US a triple A credit score. In terms of investment and financial ramifications, slipping from a triple A credit score to a double A credit score isn't hugely significant, but it's kind of embarrassing, and we can and should do better. Hopefully, Congress can work things out the way the

Writers Guild has with major studios. At the time I'm recording this, a tentative deal has been reached and just needs to be ratified by members. While the Actors Guild remains on strike, the Writers Guild is returning to work. This means that talk shows and late night TV can resume. The strikes have already cost the entertainment industry billions of dollars and perhaps even inspired other labor action in other industries. With the strike lasting more than 100 days, the Writers Guild showed that they could take hot labor summer all the way into the fall. For today's tip, you can take straight to the bank. If all this labor action has you feeling inspired, here are two steps for negotiating a better salary. Number one, do your research. What are others in the field making? And then number two,

start by asking for the upper end of that range first. Remember, this is a negotiation, so there's probably going to be some back and forth. If you ask for the upper end of the range first, if you throw out a really big number, you probably have a better chance of getting that than if you start with the lower end of the range and just accepting the first offer. This is a little bit of unconventional financial and career advice, but you probably won't get to that really big number or anywhere near it if you don't throw it out first. Money Rehab is a production of Money News Network. I'm your host, Nicole Lappin.

Money Rehab's executive producer is Morgan Levoy. Our researcher is Emily Holmes. Do you need some money rehab? And let's be honest, we all do. So email us your money questions, moneyrehab at moneynewsnetwork.com to potentially have your questions answered on the show or even have a one-on-one intervention with me. And follow us on Instagram at Money News and TikTok at Money News Network for exclusive

video content. And lastly, thank you. No, seriously, thank you. Thank you for listening and for investing in yourself, which is the most important investment you can make.