Shielding Americans from banksters and likeminded rip-off artists is only one small piece of needed financial reform. Out-of-control executive compensation, overly large financial institutions, insane derivatives trading, a Federal Reserve System apparently incapable of basic regulatory enforcement, and levying of a securities transaction tax all require attention. Political obstacles make all these difficult changes to make, but an independent Consumer Financial Protection Agency seemed likely, once upon a time, to be a provision of the Restoring American Financial Stability Act that all but the most bank-beholden Congresspersons could get behind. As it turns out, the eagerness to gut the CFPA has enough Senate knife-wielders to make the agency, in the word of Barney Frank, a joke.
No surprise. By November, more than 1500 lobbyists had registered on Capitol Hill to have their say on this legislation, from credit-card companies to car dealers, from hedge-fund operators to payday lenders, everybody who might have a consumer-scamming shell-and-pea game at risk got into the act.
That didn't stop the House from including a watered-down but still independent consumer protection agency in its legislation. But Sen. Richard Shelby soon made it clear that a standalone agency like the House bill's was out of the question. So lame-duck Sen. Christopher Dodd, chair of the Senate Banking Committee, has sought to find a compromise by putting some version of the CFPA under the Fed, the very entity that failed so miserably in its regulatory, disclosure and consumer-education efforts in the run-up to the financial crisis that gave birth to the Great Recession.
Quite a number of Senators, Sherrod Brown, Chuck Schumer, Jeff Merkley and Jack Reed, among others, rightly think a Fed-based consumer agency is ludicrous. Which leaves the nation where it is on a number of other important pieces of legislation, up the creek without enough paddles. That is, unless it gets some focused grassroots attention. Up until now, however, most of the attention has been directed at health insurance reform
On MSNBC Tuesday night, Chris Hayes of The Nation took a look at the issue through the eyes of Heather McGhee, Washington director of the public research and advocacy organization Demos.
An excerpt:
McGhee: We have to realize that Republicans and all people in Congress have more than one set of constituents. They have the voters who are paying attention sometimes, and the donors and the lobbyists who are paying attention all the time. And they've been swarming Congress for the past year, ever since the financial crisis trying to weaken and ultimately kill the Consumer Financial Protection Agency.
Hayes: So those banks that have been trying to kill this thing, and they've been going at it with hatchets from the very begiininng, what is it they're so afraid of? Why are they fighting so hard against it?
McGhee: What we've seen is over the past 30 years there's really been a really radical experiment in financial deregulation across the board. But at the consumer level there's just a new Wild West situation out there where the banks, the payday lenders, the rent-to-own stores, the used auto dealers have just basically had very little oversight. And they've profited from that regime.
Hayes: Right ...
McGhee: The financial crisis has absolutely shown that that was not only bad for consumers, it was bad for Wall Street, it was bad for the entire country. And they know that the jig is up unless they can beat down a consumer protection agency. ...
And so we've got backroom deals right now. We've really got ... Senator Dodd really wants to make a deal and he's going to give away, I think, a real opportunity to make a very clear contrast and say "Hey! This is what the Democratic Party stands for, and it's you and your family, your retirement savings and your home." Republicans are trying to gut investor protections, consumer protections. they're trying to stand up for the subprime lenders and the payday lenders. I mean, this should be a very easy political fight. So, I think if we can make that political fight more visible to the American people, and it's really just starting to heat up, then I think we're going to have a stronger hand to get this consumer agency passed.
Three years ago, Elizabeth Warren wrote:
To be sure, creating safer marketplaces is not about protecting consumers from all possible bad decisions. Instead, it is about making certain that the products themselves don’t become the source of the trouble. This means that terms hidden in the fine print or obscured with incomprehensible language, unexpected terms, reservation of all power to the seller with nothing left for the buyer, and similar tricks and traps have no place in a well-functioning market.
How did financial products get so dangerous? Part of the problem is that disclosure has become a way to obfuscate rather than to inform. ...
In a recent memo aimed at bank executives, the vice president of the business consulting firm Booz Allen Hamilton observed that most bank products are "too complex for the average consumer to understand."
Rahm Emanuel famously said that crises shouldn't be wasted. Indeed, they are and should be the cradle for making big and long-needed changes in the way our political and economic system operates because nothing gets reformed in less anxious times. However, wasting the financial crisis seems to be exactly the outcome of efforts to give hoi polloi a smidgen of leverage against hoi oligoi in the next decade or so of the 21st Century.
None of what's been proposed is radical or anything like the supposed "socialism" that Republicans and their media mannequins keep caterwauling about. Too bad it's not. But just getting our leaders to enact even an ultra-modest reform ending the most egregious financial deceptions and rip-offs would appear to be a tough enough task.
Are your Senators on board? You might give them a call to find out.