BREAKING NEWS

BREAKING NEWS

Adwatch: New TV ads launch in Pennsylvania’s Senate race

By MARC LEVY

Associated Press

New TV attack ads are launching in the final week of Pennsylvania’s neck-and-neck U.S. Senate race between Republican incumbent Pat Toomey and Democratic challenger Katie McGinty. The race is nationally important because it could help determine control of the U.S. Senate. In two new ads, McGinty allies are raising Toomey’s tie to banks and Wall Street and his battle against new banking regulations.

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AIRING: In undisclosed markets by the Washington, D.C.-based Democratic Senatorial Campaign Committee.

LENGTH: 30 seconds.

KEY CLAIM: “Pat Toomey started here (ad shows ‘Wall Street’ street sign), raking in millions. Then he founded a bank that used a predatory lending practice. Now, Toomey’s taking millions from Wall Street and using his position in the Senate, voting to gut protections that crack down on predatory lending. He even tried to rewrite the rules and help banks like his at our expense.”

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AIRING: In Pittsburgh, Wilkes-Barre/Scranton, Harrisburg and Johnstown by the Washington, D.C.-based Service Employees International Union.

LENGTH: 30 seconds.

KEY CLAIM: “2005. Millionaire Pat Toomey buys a bank. Three years later, the economy collapses. But Toomey’s bank takes advantage of the recession and engages in a predatory practice banned in most states — foreclosing on small business owners who put homes up for collateral. Toomey’s bank got richer and was sold for $122 million.”

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ANALYSIS

Just out of college in 1984, Toomey worked for six years at investment banks in New York City, selling interest-rate and currency derivatives used by large businesses to stabilize their costs.

In 2005, after serving six years in the U.S. House, Toomey helped start a retail bank, Team Capital Bank, according to a federal regulatory filing, and served as a co-chairman until he stepped down in 2009 to run for the Senate. He remained a shareholder after that — listing a stock value of between $500,000 and $1 million on financial disclosure statements with the Senate — until Provident Financial Services closed a deal in 2014 to buy Team Capital Bank for stock and cash it had valued at about $120 million. Team Capital reported its stockholders’ equity as $88 million just before the deal, meaning Toomey’s ownership stake was likely around 1 percent.

On the claim that Toomey is “taking millions from Wall Street,” the Democratic Senatorial Campaign Committee points to a tally by the Center for Responsive Politics that Toomey’s campaign has received more than $3 million in contributions from the securities and investment industry in this two-year election cycle.

In the Senate, Toomey has repeatedly said that he supports abolishing the Consumer Financial Protection Bureau, which was created by a 2010 law as part of a new post-recession regulatory scheme for banks.

Along with other Republicans, Toomey has pushed to overhaul the agency’s leadership structure, bring its funding under the authority of Congress and roll back some of its authority. Arguably, those measures do not “gut protections that crack down on predatory lending.” To the extent that Congress could de-fund the agency, Toomey has contended that other federal agencies already pursue and prosecute fraud.

The Consumer Financial Protection Bureau’s reach over a relatively small retail bank like Team Capital Bank — it listed assets of $949 million before Provident bought it — is relatively limited. It does write regulations for all lenders, but the Consumer Financial Protection Bureau is not the primary examiner for banks with assets of under $10 billion.

Meanwhile, the “predatory” practice mentioned by the ads refers to a practice known as confession of judgment. It is legal in Pennsylvania, if not most other states, and not banned by federal law.

In short, a confession of judgment clause is common in a commercial loan contracts to limit the lender’s risk of getting tangled up in lengthy lawsuits with borrowers who default. Under it, the borrower waives certain rights in court when the lender seeks a court order to seize the borrower’s money or property. Toomey’s campaign lawyer has cited 12 instances in 2009 through early 2014 in which Team Capital Bank began foreclosure proceedings using the method.

To back up its claim that the bank “got richer,” SEIU cites a Team Capital regulatory filing that it yielded shareholder income every year starting in 2009, at $1.6 million, and rising to $6.3 million in 2013.