Michael S. Barr, the Assistant Treasury Secretary for Financial Institutions on Tuesday laid out the case for the seperation of Consumer oversight from existing regulatory supervision of banks and credit unions:
"Our proposal will strengthen the banking system, not weaken it," he told the Credit Union National Association in a speech at the Washington Convention Center. "More transparent markets, markets where nonbanks are subject to oversight, markets with fewer unfair or deceptive practices — these are markets in which banks and credit unions will be stronger."
http://www.nytimes.com/...
He was quick to point out how the current system pays much more attention to protecting the banking institutions that it does towards protecting those who are most at risk and have been preyed on for years, the consumer:
He said the federal government spent at least 15 times more on consumer compliance and enforcement for banks and credit unions than for nonbank financial institutions, even though there are at least 5 times as many of the latter as of the former. A separate agency, he said, would help correct "misallocation of federal resources," make consumer protection a priority and create "a level playing field for all providers."
The bill’s greatest impact would be on the largest financial institutions. Under the House bill, Mr. Barr said, existing regulators would have the primary responsibility for consumer protection for 98 percent of banks and savings and loans and 99 percent of credit unions. (Those regulators include the Federal Reserve, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency and the Office of Thrift Supervision.)
Mr. Barr also said that a new agency would be required to share information with existing regulators and that the agencies would be required to coordinate their efforts. "The system we have proposed will be more likely to bring bank weaknesses to the attention of prudential regulators than a system in which consumer compliance supervision is subordinated to prudential supervision," he said.
But of course as always with any common sense measures thought of to protect consumers from the unethical business practices of the greediest and least patriotic among us, powerful voices have risen in opposition to the average working American having as many protections as the large banking institutions:
Industry groups — including the United States Chamber of Commerce, the American Bankers Association and the Financial Services Roundtable — have been fiercely lobbying against the consumer proposal.
The United States Chamber of Commerce, which started a Web site, StoptheCFPA.com, says it supports clear and concise disclosures to consumers about the risks of financial products, as well as crackdowns on fraudulent and predatory practices. But the chamber argues that creating a "big, new, expensive government bureaucracy" would choke off credit to small businesses, limit consumer choices and lead to higher prices.
Yes, because we all know just how effective not having this agency was in alleviating the greed and irresponsibility of these institutions from crashing our economy into a ditch in late 2008. However, unfortunately for all of us these folks were bailed out by taxpayer dollars and now have plenty of money to use in the fight to gain new protections for the American consumer. You know, you and me:
Supporters of the consumer agency have been outspent and are less organized than the opponents. Groups supporting the idea include the Consumer Federation of America and two fairly new coalitions, Americans for Financial Reform and Business for Shared Prosperity.
And while the protection of consumers is the main battle in passing the bill, several other unresolved issues remain in forging ahead with real regulations:
Another point of contention is the degree to which bank supervision should be consolidated, and whether the Federal Reserve should retain its power to oversee bank holding companies.
Other, less contentious elements under consideration include the creation of a council, led by the Treasury secretary, to detect systemic risk in the financial system; new regulations for the over-the-counter derivatives market and for credit rating agencies; reforms in corporate governance and executive pay; and a mechanism to dissolve any company deemed "too big to fail" before it can damage the economy and require another government bailout.
Of course we all know by now that anything that benefits the average American consumer over the big lenders will be bitterly opposed by the Chamber, Republicans and the banking industry. However, that does not alleviate the need for such an agency. Under the current system too much attention is paid to protecting large financial institutions as they prey on the American consumer and economy. Anyone who does not agree on the need for such an agency is simply not paying any attention whatsoever to recent history.
Also needed are serious reforms in regulating systmatic risk in the banking system and regulations on over-the-counter derivitives, and for the regulation of the huge salaries and bonuses paid to executives of companies that really take no risk whatsoever with their behavior and indeed crash our economy all while being bailed out as the average American suffers.
Anyone with an attention span over a few minutes realizes that these reforms are desperately needed. Of course the Chamber and big lending institutions are going to oppose this because that means an end to their free ride of greed, and the option of crashing our economy and being bailed out with money that our country does not have all because they engaged in risky behavior and refused to treat their costumers fairly. The time has come that this party is ended and all Americans should speak out for real reform and financial regulation that protects the consumer at least as much as the banking institutions. Anything less is a failure to learn from history and hence end up repeating it. Of all the things being discussed in Washington right now, this one is a no-brainer.
Here Professor Elizabeth Warren spells out the desperate need for a Consumer Protection Agency:
Comments are closed on this story.