Do You Have Protection
The American Bankers Association and its lobbying brethren, including the Financial Services Roundtable, sent a letter last week around Capitol Hill pressing their case that the Federal Reserve should supervise the Consumer Protection Agency. If six of the major banking lobbying groups all agree, and the RINO [republican in name only] republicans agree as well, could there be trouble in paradise? It is like the rich kids showing up to a street ball game in their shiny new summer clothes and you still need 6 players. You hate to even ask them to join you, but what can you do.
Of course, how this is going to go down is the Republicans and Democrats are going put on this tap dance for the American public and pretend to be at odds with one another. Christopher J. Dodd, chairman of the Senate Committee on Banking, Housing and Urban Affairs, is expected to finally unveil the Senate’s version of a financial reform bill.
The Obama administration first proposed the idea of an independent watchdog for consumers to safeguard U.S. citizens from predatory lenders and having to read fine print. The agency’s efficacy is largely in question when the agency may not have any oversight of non-bank mortgage companies, which were largely responsible for some of the worst sub-prime loans to people who could not afford them.
Republicans have argued that the agency is unnecessary given that regulators already have the power over banks’ behavior. These are the same regulators that removed limits, disregarded laws, failed to implement laws on new financial products and were generally ineffectual.
Consumer advocates say they want consumer protection to be independent to ensure it won’t be mired in the same problems the Fed had during the financial crisis. So far, it appears that banks are winning the day against an independent regulator, including strong investor protections and transparency in the derivatives market, said Travis Plunkett of the Consumer Federation of America. “If reforms in these key areas continue to water down, we will move to opposition,” Plunkett said. “In our minds, it would be a mistake to enact legislation that has the appearance of reform without providing the reality. It would just be a giant effort to mislead the public.”
David Arkush, director of Public Citizen’s Congress Watch, said he believes it’s a nonstarter to give the Treasury or the Fed veto power over the consumer protection agency. “I don’t think this is the time for Democrats or for anyone to be compromising on weak reform,” Arkush said. “I think that the Democrats on the Banking Committee ought to push for a strong bill, and if that has to be a partisan bill, then that’s the case.”
Without massive amounts of cash infusions consumer advocates are not playing the legislation game properly. They can hope to have little to no impact on the discussion of reform. Also, if they cannot make good on promises of opposition, their threats ring hollow. It is unfortunate that the U.S. citizen is mired in olympics on t.v. and baseball games which have little to no impact on their lives, yet distract them from real issues. Consumer advocates are battling the likes of Avatar the movie for the public’s attention span. Meanwhile Dodd is selling the country down the river and will come out and say he made tremendous reform. The public will simply cheer and go back to watch the last inning of some baseball team that have absolutely nothing to do with them.