Are We Trading Away Real Bank Regulations for a Consumer Protection Agency ?
Noam Scheiber puts forth an interesting discussion yesterday about the DC horse trading in Street Fight. Scheiber argues that the right is going to give in on the idea of a Consumer Protection Agency in exchange for toothless financial regulation:
“Last week, Alabama Republican Richard Shelby, the ranking member of the Senate Banking Committee, floated a compromise on the consumer financial protection agency that’s currently stalled in the Senate. Under the bill Chairman Chris Dodd moved through the committee in March, the consumer agency would effectively have its own budget and an independent, White House-appointed director. It would also have significant (but not unchecked) authority to write and enforce rules protecting consumers from abusive bank practices, like deceptive mortgages. Until now, the banks and the GOP have largely tried to eviscerate these provisions. But, according to one person familiar with the discussions, Shelby’s proposal took a big step in the direction of the Dodd approach. (Spokesmen for both senators declined to comment beyond saying that “we continue to discuss a number of options,” as Shelby’s communications aide, Jonathan Graffeo, told me.)
Shelby’s recent outreach seems to reflect the new reality in the battle to tame the banks: Both sides recognize that the reformers have the momentum, given the way last month’s health care victory has unified Senate Democrats, and given the political peril for Republicans in appearing to do Wall Street’s bidding. But both sides also recognize that, p.r.-wise, the consumer agency tends to overwhelm other elements of the reform effort.
In light of this, Republicans seem to be settling on a strategy: Give the Democrats much of what they want on the consumer agency and bet that Democrats won’t be too picky about the rest. If the bet pans out, the industry and its GOP allies would, in effect, be trading a robust consumer agency for a chance to scale back a number of highly consequential but below-the-radar reforms. But will it?
I hope that Congress doesn’t make this compromise. The Consumer Protection Agency might be a nice way to provide some education about finance to the average American, and help to reduce fraud, and increase transparency in consumer contracts,. However it had less to do with the cause fo the crisis than many other factors. Reducing leverage, re-regulating derivatives, maintaining adequate capital, separating insured deposits from more speculative activities are much more importnant.
What are the odds that genuine financial reform will pass Congress? Will we get something significant, or will FIn/Reform be yet another giveaway to the banks?
The people who think reform has a chance — are they wishing on a star, or wasting their time?
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Source:
Street Fight
Noam Scheiber
TNR, April 4, 2010
http://www.tnr.com/article/politics/street-fight
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April 6th, 2010 at 9:59 pm
In our esteemed elected officials’ eyes there are two key issue: election talking points and campaign funding. Well, OK they also like being treated very nicely by the WS fat cats. And oh yeah, they love to create toothless patronage bureaucracies Chicago style, like the SEC.
Perfect non-solution. Duh.
So I’m guessing you already know the answer, but would like to stir the pot. Whatever they come up with will be a bottomless tax pit. Totally irrelevant.
Why not just write the rules and leave it to the bankers to comply. Like they’ve already done several times. And I guess we’ve seen how that works out.
IMHO, this crisis was wasted.
People are still mad as hell, but they’re frustrated, and consider Congress less than useful.
When commodity prices start exploding into the painful zone then we can revisit the old issues just to be told “it’s not speculators screwing everyone. It’s these critically important WS billionaires setting ‘market price’.” Where’s Nero when you need him?
April 6th, 2010 at 10:27 pm
Barry,
Is your title a rhetorical question?
The Politicos need something they can sell to the public and still pat their buddies on Wall Street on the back with.
What accomplishes that easier than another agency that just mandates “oh mortgage stuff should be easy for Average Joe to follow, like the Nutrition Tables on food that everyone ignores!!!”
I know you love Elizabeth Warren (I think she is noble and all too) but the fact is she doesn’t know how to regulate banks. I’ve watched enough videos of her to understand that. She’s a Politico too. Her cause is “protect the middle class,” whatever that means these days. She a contract law professor. She’s not an insider.
To properly regulate banks we need someone that understands all the little details of what they do and how to bust them in the chops for that.
After the Great Crash, who did FDR appoint as SEC Chairman? Joseph Kennedy, Sr. He was an insider. He laid down the law because he knew what the b@stards were doing and how they were doing it.
We’re never gonna get true reform unless with get an insider to bring it out. Like Volcker, Soros, or any of the other insiders you have mentioned in the past.
Again, not to attack Elizabeth Warren, but she ain’t exactly Spitzer.
April 6th, 2010 at 10:27 pm
“What are the odds that genuine financial reform will pass Congress?”
Answer: Little to None — not with any Real Teeth to it — and not when the Clowns drafting the legislation are receiving large sums of campaign contributions from the very same actors that caused this disaster. This question has been answered here before. And like someone else said here in a related post you can only wonder what angles their playing with this proposed legislation as they look past their careers as congressmen/women and take up other jobs connected in some way to the Wall Street Banks/Financial Industry.
Lets look to Christopher Dodd as an example:
“…Dodd initially denied having anything to do with American International Group paying out millions in bonuses, then later acknowledged his role in adding language to the stimulus bill to ensure that existing contracts for bonuses at bailout recipients, such as AIG, were honored.
Dodd also faced controversy when news surfaced that he had received favorable mortgage terms from now-defunct sub-prime mortgage lender Countrywide Financial. Dodd later severed his relationship with Countrywide to avoid any appearance of impropriety.
In another blow to his credibility, Dodd took heat for insisting that the government-sponsored mortgage lenders Fannie Mae and Freddie Mac were sound and failing to rein them in. The Senate Finance Committee he chairs oversees the lenders. Dodd had also received more campaign contributions from Fannie Mae and Freddie Mac than any other lawmaker, according to the Center for Responsive Politics..”. http://www.cnn.com/2010/POLITICS/01/06/chris.dodd.bio/index.html
(I can’t imagine who some of Dodds’ Top campaign contributors might have been…)
April 6th, 2010 at 10:31 pm
We need both, and we need them to be comprehensive, and structured to help and protect the average citizen.
How disgusting that the best deal we might get is that the bankers will only be able to financially rape us half as much.
April 7th, 2010 at 12:11 am
No reform — in any area — will be achieved only after a substantial percentage of the incumbents have been removed from office, with candidates other than Republicrats assuming those seats in the Senate and House.
Then, and ONLY then, will our elected “representatives” begin listening to the people they are supposed to represent. The incumbents have come to believe that elections are a periodic nuisance that they must endure as part of the “elected-for-life” status as sainted servants of the lobbyists.
So if we see a large number of Republicrats being tossed out of office this fall, adn another wave of them exiting their fat careers as “public servants” in 2012, then maybe, just MAYBE, the greedy bastards will get the message.
April 7th, 2010 at 12:16 am
oops. That’s supposed to be “Reform — in any area — will be achieved only after a substantial percentage …”
Mind shifted gears during composition, and the fingers missed the memo on the content change.
April 7th, 2010 at 12:36 am
@john clarke: Guess I forgot to hit the submit button first time.
Your points are dead on.
Dodd is the perfect example of the fraud. BSO’s bud. The one he chose to lead the fight.
Thanks for the thoughtful and insightful points. It takes info and work to detail the positions and actions. As you did. But how smart do you have to be to sense we’re being screwed again, repeatedly.
April 7th, 2010 at 9:12 am
Sadly enough this is realistically the best we can do as long as the GOPsters have enough senators to filibuster. They will never allow legislation that is going to rein in their corporate masters, and with those master now being allowed to spend without limits in political campaigns even a lot of the blue dog “democrats” will fear the consequences of supporting real reform. The american people need to wake up and stop electing corporate slaves to “represent” them.
April 7th, 2010 at 10:10 am
NO, we are doing neither. It is all a shell game to fool the public.
April 7th, 2010 at 10:20 am
To me, the effort to protect and educate US consumers is the toughest battle of all. First, you have to have a willing student, which Americans are not. In fact, most of the country is not excited to learn anything, and especially about money. Hell, here in the South, where Sen. Shelby is from, people are more comfortable talking about their hemorrhoids than they are talking about money. NO JOKE on that one.
back to politics as usual. Nothing to see here.
April 7th, 2010 at 10:40 am
It will take social chaos for things to really change, right after DJIA <3600.
April 7th, 2010 at 11:32 am
[...] the give and take on Christopher Dodd’s financial reform plans doesn’t end up with the root causes of the financial crisis being left untreated. The Consumer Protection Agency might be a nice way to provide some education [...]
April 7th, 2010 at 12:54 pm
Based on the graph in your later post, the top 5 IBs spent $22+millions lobbying last year. Just a guess, but I’d say that about $22 millions more than was spent lobbbying in favor of regulatory reform.
(Insert image of scales of justice here.)
April 7th, 2010 at 2:58 pm
The people who think reform has a chance — are they wishing on a star, or wasting their time?
Aren’t they wasting their time by wishing on a star? I have lower-than-dirt expectations for Congress since it amended FISA. So far it hasn’t disappointed me.
April 7th, 2010 at 3:07 pm
BTW,
http://www.prospect.org/csnc/blogs/beat_the_press_archive?month=04&year=2010&base_name=did_the_media_miss_the_bubble