After healthcare–if you can imagine an “after healthcare”–the next big fight in Congress will likely be over financial reform, particularly the proposed creation of a Consumer Financial Protection Agency (CFPA). The CFPA would focus solely on protecting consumers’ financial interests–a task currently shared (with disastrous results) by several agencies whose primary focus is on monitoring the safety and soundness of financial institutions.
No longer would financial institutions be able to choose their federal regulator–if they have one at all–by shopping for the one that is most accommodating to their interests.
No longer would the regulators depend on the very firms they are supposedly monitoring as a major source of funding.
And no longer would consumer protection be an afterthought–understaffed, under-funded and absolutely underwhelming.
In contrast, the CFPA would, for example, focus on enforcement of fair lending laws through its Office of Fair Lending and Equal Opportunity. It would expand oversight to include non-bank firms, such as those in the mortgage market that issued many exotic loans people couldn’t afford. It would ensure that products are more readily understandable, rather than thirty pages of legalese along with very fine print. And it would promote financial literacy efforts.
The House Financial Services Committee hopes to approve the CFPA the week after next. On Wednesday, the committee held a hearing to discuss Chairman Barney Frank’s draft proposal. The best case for a CFPA was made by those offering their reasons for opposing it.
Those arguments ranged from the bizarre: “If [this] had been in effect a number of years ago we probably wouldn’t have ATM machines, frequent flyer miles, and the list goes on,” said Texas Congressman Jeb Hensarling. Ranking Member Spencer Bachus of Alabama claimed that the CFPA would lead to “less consumer protection.”
To the inane: “Could you clarify to me the extent of [SEIU’s] financial and programmatic ties to ACORN?” Congressman Patrick McHenry of North Carolina demanded of witness Anna Burger, secretary-treasurer of the Service Employees International Union. David John, senior research fellow, at the Heritage Foundation, said, “When you establish a new agency of this type…you’re going to find yourself with people who are supposedly regulating but in reality they’re far more concerned about finding things like where their desk is, and who their new reporting relationship is, etc. etc.”
Finally, there was the You Must Truly Take the American People for Shmucks approach: Edward Yingling, president and CEO of the American Bankers Association (ABA), stated, “No real case has been made for…requiring additional enforcement on banks and credit unions; [or] a large increase in consumer regulatory powers.” Yingling then took his handy shovel and proceeded to keep digging: “I think that our industry made a big mistake…. We looked at what does it mean for our regulatory burden on banks and…it’s because we have such a heavy burden, that we get paranoid about it. Sometimes for good reason. One of the lessons for the future is we can’t just look at what’s going on in our narrow interest, we have to look at what’s going on in the economy and in neighborhoods…. You have our pledge we’re going to work with you to help solve this.”