Americans for Financial Reform and Americans for Fairness in Lending have a new video out supporting a strong, independent Consumer Financial Protection Agency as part of financial regulatory reform. It features the voices of President Obama and CFPA advocate Elizabeth Warren.
In the wake of Wall Street playing Russian Roulette with middle-class America's livelihoods, it's pretty astounding that anyone would stand with the banksters to fight an independent Consumer Finance Protection Agency. It's a fight Obama and Senate Democrats should be willing to take on in an election: put the Republicans on the spot to be with the banksters, or with ordinary Americans.
In a conference call for Americans for Financial Reform this week, Elizabeth Warren explained why an independent CFPA--either it's own agency or with independence within an agency--is critical to reform. One of the reasons why consumer protections have failed at the federal level is because of a structural problem--the issuers of consumer products have always been regulated, rather than the products themselves. There are seven different agencies that have some responsibility for consumer protections, but none of them have consumer protection as their primary regulatory job, and thus there's no real accountability in the existing system for any of these agencies to protect us. What's worse, about 75% of the operating budget for many of these agencies comes from those they regulate--the regulators have ended up competing for business from the financial industry, leading to a light regulatory touch.
The CFPA fixes this by regulating straight across on products, all mortgages, loans, car loans, credit cards--every consumer product--would be subject to the same regulatory regime regardless of who is offering them, and a single agency, headed by a single, identifiable person who would have to answer to Congress and the American people, would be accountable for consumer protection.
How would that prevent another financial meltdown? Warren answered this as well, emphasizing that the crisis "started one lousy mortgage at a time." The issuers of these mortgages knew that they were unpayable when they made them, putting the risk at the household level. Home mortgages for decades had been a stable part of our financial system, but the industry saw a product where it could make enormous profits, and spread the risk up the system. A functioning CFPA, with the most basic consumer protections in place, would have prevented most of the mortgages that blew up in the first part of this crisis from being issued. The risk would have never been pumped into the system.
With the amount of money the banking industry is pumping into the Senate Banking Committee, Sen. Dick Durbin's assessment that the banks "own the place" is hard to argue. It's going to take concerted push back from a justifiably angry populace (and not of the teabagger, bomb-making, death-threatening kind) to keep any hope of a strong consumer protection agency alive. Americans for Financial Reform and Americans for Fairness in Lending created a Web site, Protect the Consumer, to make finding information, eductating yourself, and taking action easier.