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June 18, 2009
Banker opposition to consumer agency weak, desperate
One day after the President announced his support for a new Consumer Financial Protection Agency it is clear that the bankers are going to attack it on all fronts:
They say regulators already have the power: Banks “are really dumbfounded (NY Times) by the scope of this agency,” Edward L. Yingling, the president of the American Bankers Association, told The Times. “It’s not like the current regulators don’t have all the authority they need. You don’t have to blow up the system.” Bad answer. Actually, Ed, the whole economy already blew up. You missed that? Why? Because the Fed didn't use the power to regulate predatory mortgage loans Congress gave it way back in 1994 until 2006, after the predatory mortgage crisis had already peaked.
They say it's a new redundant layer of government: "We intend to take our case to Congress to explain why we believe adding new layers (Jim Puzzanghera and Walter Hamilton in the Baltimore Sun) to a broken regulatory system is not the answer," said David Hirschmann, president of the Center for Capital Markets at the U.S. Chamber of Commerce. Wrong answer, David. The CFPA replaces a layer of failed regulators with one that will work.
States will create a patchwork: Robert Litan, a senior fellow with the Brookings Institution, calls expanding state authority " a recipe for disaster. That could lead to 51 different laws" (Kathleen Pender in the SF Chronicle) and the need for banks to create 51 different products and disclosure statements, he says. As a former Treasury official, Bob Litan should know better than to repeat this hackneyed claim. States will only act when the federal floor turns out to be too low, and their proposals will converge on one, best proposal, which will then be adopted by Congress as protections ratchet up. But if you take away state authority to act, Congress will never act again until we have another crisis. And the federal regulators won't act to protect consumers without pressure from state regulators. Worse, they will act in the wrong way-- as the current Office of the Comptroller of the Currency (OCC) arrogantly has done by preempting all stronger state laws.
More stories discussing the Consumer Financial Product Agency: John Waggoner on Page One of USA Today, Jane Kim in the Wall Street Journal, Katherine Rampell in the New York Times blogs, Kimberly Palmer's U.S. News Alpha Consumer, Julie Satow in HuffPost, Connie Prater in Creditcards.com.
Posted by Ed Mierzwinski at June 18, 2009 09:03 AM
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