The word on Capitol Hill is that Senators Chris Dodd, D-Connecticut, and Bob Corker, R-Tennessee, are scheming to lose the proposed Consumer Financial Protection Agency (CFPA) — the office that President Obama and progressive reformers have proposed to protect Americans from the rapacious abuses of big banks and credit card companies — within the Federal Reserve bureaucracy.
That would be a little like placing chicken protective services under the aegis of Reynard the Fox — although, in fairness to carnivorous mammals, foxes pose far less of a threat to chickens than the banker-friendly Fed does to working Americans who might be trying to pay off a home loan or avoid a hidden credit-card fee.
According to The Hill newspaper, Dodd, the Senate Banking Committee chair, is seriously considering a plan to overcome partisan gridlock that has held up an overhaul of the financial-services industry by handing off consumer protection to the Fed.
Needless to say, Corker, the Republican Senate Campaign Committee chair who has made it his business to protect big banks and credit card companies, would find the idea attractive. So, too, will those Democratic Leadership Council Democrats who try to out-Republican the Republicans when it comes to currying the favor of industries that prey on consumers.
The White House is still "strongly committed," according to a spokesperson, "to an effective and independent consumer agency, with real accountability for setting and enforcing clear rules of the road in the financial services marketplace."
Consumer groups share that position.
But the banking industry and its allies in Congress are determined to take the teeth out of proposed consumer protections and their enforcement. And it is difficult to think of a better way to do that than by burying the new agency in the bowels of the Fed.
As Congressman Ron Paul, the Texas Republican who has for years led the fight to make the Fed more transparent and responsible, notes: "Since its inception, the Federal Reserve has always operated in the shadows, without sufficient scrutiny or oversight of its operations. While the conventional excuse is that this is intended to reduce the Fed’s susceptibility to political pressures, the reality is that the Fed acts as a foil for the government. Whenever you question the Fed about the strength of the dollar, they will refer you to the Treasury, and vice versa. The Federal Reserve has, on the one hand, many of the privileges of government agencies, while retaining benefits of private organizations, such as being insulated from Freedom of Information Act requests."
Paul’s ally in fighting for Fed accountability, Vermont Senator Bernie Sanders, properly portrays the central bank as defender of Wall Street’s interests — not a friend to Americans who are wrangling with lenders.
The American people overwhelmingly voted (in 2008) for a change in our national priorities to put the interests of ordinary people ahead of the greed of Wall Street and the wealthy few. What the American people did not bargain for was another four years for one of the key architects of the Bush economy. Fed Chairman Ben Bernanke, in charge of the central bank since 2006, could have demanded that Wall Street provide adequate credit to small and medium-sized businesses to create decent-paying jobs in a productive economy, but he did not. He could have insisted that large bailed-out banks end the usurious practice of charging interest rates of 30 percent or more on credit cards, but he did not. He could have broken up too-big-to-fail financial institutions that took Federal Reserve assistance, but he did not. He could have revealed which banks took more than $2 trillion in taxpayer-backed secret loans, but he did not.
Dodd is wrong, way, way wrong, to think that consumers could be protected by the Federal Reserve. It’s as crazy as thinking chickens could be protected by foxes.
Indeed, if the Banking Committee chair advances a plan to place the Consumer Financial Protection Agency within the Fed, then he has given up on reforming financial services in a way that would help Americans who write checks, use credit cards or seek loans.