WASHINGTON — If you doubt that U.S. banks long to return to the days of impotent regulation, you need only look at one of the financial sector’s top legislative priorities: killing a proposed new agency with generous help from Congressional Republicans that would be dedicated solely to protecting consumers’ financial interests.
The Obama administration is asking Congress to create a new Consumer Financial Protection Agency to regulate consumer financial products ranging from credit cards to auto loans to home mortgages, and to simplify full and fair disclosures about them. Though virtually every cause of the nation’s recent financial crisis was rooted in weak consumer protection [and anti-government U.S. Chamber of Commerce and their powerful lobby is leading the fight against the proposed agency on grounds that it would make credit less available and more costly. The American Bankers Association, the Independent Community Bankers of America, and the Financial Services Roundtable also oppose the measure.
“We have no argument that regulation failed. Consumer protection is just one of the many areas where it fell down,” said David Hirschmann, the president of the U.S. Chamber of Commerce’s Center for Capital Markets, which opposes the panel. “It just simply adds a new layer of regulation without fixing . . . our outdated, broken regulatory structure that was a contributing factor in our crisis.”
The Chamber said it’s spending about $2 million on ads, educational efforts and a grassroots campaign to kill the agency. It said that the grassroots effort has led to more than 23,000 letters sent to Congress to date. The Center for Responsive Politics said that for the 2010 election cycle, commercial banks have donated almost $3.7 million to lawmakers — 54 percent of it to Republicans. Companies that provide credit have given about $1.4 million, 59 percent to Democrats. Mortgage bankers and brokers have given $581,423. “Maybe instead of making government BIGGER, we should focus on making government BETTER,” reads one Chamber ad. The Chamber warns that the agency could morph into a monster regulator.
“If you look at this actual bill, the powers are so broad and so ill-defined that the scope of who is covered is incredible. They’ve managed to create a proposed new regulator for anyone who directly or indirectly provides credit to consumers,” Hirschmann said. “If you allow people to give gift cards for your store . . . you’ve got a new regulator. It’s amazingly broad in scope, scale and power.”
The administration scoffs at those charges as a disingenuous rouse by the powerful pro-business and finance lobby. “Contrary to some advertisements you may have seen, we have no desire to interfere with Main Street retailers’ ability to provide credit to their customers. That argument is to the financial regulation debate what the Death Panel argument is to the health insurance debate,” Lawrence Summers, the chief economic adviser to President Barack Obama, said in a recent speech. “We have become convinced that it is essential that consumer financial regulation be carried on by an independent body whose mandate is uniquely and exclusively consumer and investor protection.”
Until the current crisis, responsibility for these consumer protections fell to several separate regulators, who made consumer protection subservient to their core mission of regulating institutions for safety and soundness. Predatory lending and no-documentation loans helped spawn the housing crisis. Weak oversight by federal regulators allowed mortgage bonds to be sold to investors as the safest of investments when they were far from it. When economic times got tough last year, banks began padding their balance sheets by socking surprised consumers with new credit card fees that were hidden in contractual fine print. Read more here.
Source: McClatchy News Service; Cartoon: www.ablueview.com/economics/