The Fed is sick right now, CFPA is the next step

On March 3, 2010, in The Public, by Tiffiniy Cheng

Dodd is at the head of the financial reform effort in this country and is proposing new measures this week in the Senate, seemingly mostly written by Corker. The proposal is weak on almost all points and gets us back to where we started. Consumer Protection Agency given to the Fed, the Fed more regulatory powers, nothing real on derivatives, nothing really on too-big-to-fail. 

The Fed is sick, it’s a feeding trough for the big banks. It has no accountability and has not upheld its stated mission to maximize employment in the country. But, it’s what big banks and undiscerning people think about by default and assign responsibility to by default. We’re here to change that. CFPA is set up to be democratized and transparent and independent — that’s what is important.

If you missed it, this Funny or Die video is doing amazingly well. Thank you, thank you for this god’s send. Please pass it on to your friends who haven’t gotten into bank reform or who lost their jobs…

AFR gave a great, strong statement on the status of the plans from Dodd in the Senate. I expect more of this from them in the weeks ahead:

“AFR supports the creation of a strong and independent Consumer Financial Protection Agency. We haven’t seen a real proposal for this yet. When we see one, we’ll evaluate it based on our concern that the agency be effective and not a captive of the forces that either caused the financial meltdown or failed to exercise their regulatory responsibilities. We need real protection for consumers from a still out-of-control financial sector, that’s our bottom line.”

There are some great quotes about why this plan is a bad idea:

The Hill reports,”Sen. Charles Schumer (D-N.Y.) cast doubt on a new compromise proposal for consumer financial protections, threatening its future in the Senate before it has been unveiled. Schumer said he is ” very leery of any consumer regulator being placed inside the Fed.” Senate Banking Committee Chairman Chris Dodd (D-Conn.) and Sen. Bob Corker (R-Tenn.) are pitching a proposal to put a consumer protection office at the Federal Reserve. The proposal is significantly different than the administration’s original effort to set up a standalone entity.

Schumer’s comments are the strongest indication of how difficult it will be for the proposal to garner support in the Senate.”

“In my 20 years of trying to get the Federal Reserve to properly protect consumers, it has been an uphill, and very often unsuccessful, battle,” Schumer said.

If the banks are asking you to do something, it’s probably wise to do the opposite as they simply have their own profit to think about. Bank groups call for stronger Fed Reserve:

“Bank lobbying groups are calling on senators to support the Federal Reserve’s power to supervise small and large banks.”

This headline from HuffPo is notable:

Bipartisanship Is Not a Substitute For Real Reform

From the Big Picture:“What a splendid idea: A Consumer Finance Protection Agency whose sole purpose is to provide a set of standards for the finance industry when it comes to marketing their products to otherwise naive US consumers.

The original plan was to have a standard form for major finance purchases — mortgages, cars, revolving credit. This would allow consumers to 1) Understand the amount of money the  financing would cost them; 2) Determine if they could afford this product; 3) Allow them to shop competitively for the best rates.

Good idea, right?

Considering that we are a nation that made the Snuggie, the Sham-Ease, and Hair-in-a-Can all best sellers, a little impulse control is probably a good idea. More accurate cost disclosures of credit will also help. We are, after all, a country of math-phobic shopaholic shit junkies. Anything that can help us figure out whether we can afford our bigger purchases — like cars and houses — should be a no-brainer.

Unfortunately, the banking lobby, in conjunction with the auto dealers lobby, had other ideas. A simple mandate to have all mortgages shown compared to a plain vanilla 30 year fixed was thwarted. It was to be similar to the FDA nutrition disclosures on the side of your kid’s cereal box. Who, could possibly object to that?”

William Black, the famed regulator of the S&L crisis, is speaking on the issue of the possibility of losing the CFPA:

“The proposal to amend the Senate bill to place consumer protection in Treasury, rather than an independent regulatory agency with institutional incentives to protect borrowers, is a sick joke. This is not even a case of putting a fox in charge of the proverbial chicken coop — the foxes have already slaughtered the chickens. The only reason we were successful in reregulating the S&L industry during the Reagan administration was because the Federal Home Loan Bank Board was an independent regulatory agency. The administration hated our successful reregulation, which kept the debacle from developing into a Great Recession, and would have blocked it had we not been an independent regulatory agency.

Ryan Grim writes in
Senator Promises Floor Fight For Strong CFPA, “The Consumer Financial Protection Agency, a cornerstone of banking reform, won’t go down without a floor flight. Sen. Jack Reed of Rhode Island, the third-ranking Democrat on the Banking Committee, will introduce an amendment to financial regulatory reform on the Senate floor calling for a strong, independent CFPA if the bill that emerges from the committee does not include one, a Democratic committee aide told the Huffington Post Tuesday.”

And he quotes Frank:

“I was incredulous,” the Massachusetts Democrat said. “After all the Fed bashing we’ve heard? The Fed’s such a weak engine, so let’s give them consumer protection? It’s almost a bad joke. I was very disappointed.”

Also, you should probably note that, “Eleven CEOs from the largest property casualty insurance companies in the country have formed a new coalition to urge Senate Banking, Housing and Urban Affairs Chairman Chris Dodd (D-Conn.) to leave them out of the financial services overhaul legislation.

State Farm Insurance, Allstate Corp., Travelers Companies Inc., Chubb Corp. and Zurich Financial Services Group were among the insurers to take the unusual step of forming the Property; Casualty Leaders Coalition. The last time the insurers joined in a coalition effort was in 2005 over asbestos legislation.

“There is no public policy justification for taking funds from companies in our industry, especially on a pre-event basis, to bail out other financial institutions deemed to be overexposed to failing ‘systemic’ companies,” wrote CEOs from the coalition companies, including the ACE Group, Nationwide Insurance and Liberty Mutual. “Recoupment payments made to companies should come from the benefitting companies.”

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