Consumer financial protection: Alive or dead?
- March 2, 2010
- 4 comments
- Posted in Banks & Banking, Consumer Rights, Government, Latest Posts
Maybe I mourned too soon.
I donned black crepe when Senator Chris Dodd (D) proposed killing Obama’s Consumer Financial Protection Agency—replacing it with a “bureau” that looked like a useless glob. Supposedly, Dodd was trying to compromise with the Party of No. But for them, even a glob proved an ooze too far. He got zero Republican support. Senator Richard Shelby (R) made two counterproposals, both of them just as bad. The financial industry’s owned-and-operated Senators appeared to have won again.
So I was surprised to find Ed Mierzwinsky feeling chipper. Ed is the consumer program director for the U.S. Public Interest Research Group, and a feisty supporter of financial reform. His take is that the Republican rejection actually helps the cause. “This fight is Wall Street against Main Street,” he told me. “The public is furious with Wall Street.”
If the R’s are really out of the picture, a stronger bill might come to the floor and win popular support. People blame the banks for wrecking the economy–throwing them out of work and drowning the value of their homes. They’re enraged that nothing has been done. In such a climate, R’s up for election might decide that backing predatory lenders doesn’t pay.
Maybe. I put away my black crepe but haven’t burned it yet.
The proposed Consumer Financial Protection Agency is the only—repeat, only—section of the financial reform bill that actually helps consumers. It would round up the scattered and ineffective consumer-protection offices, now housed in various federal departments, and combine them into a single agency. The agency would be independent so that Congress couldn’t clip its wing by clipping its budget. It would regulate potentially abusive financial products, such as the infamous exploding mortgages and theiving subprime credit cards, and require honest sales materials that customers could understand.
Banks and other financial institutions have spent nearly $400 million in lobbying fees to smother this idea. Why do you suppose that is? Could it have anything to do with their sacred right to exploit their customers? To deceive them with fine print? To mislead them about interest rates and loans? The economic collapse of 2008-09 started with one rotten mortgage at a time, pushed not just by marginal lenders but by the huge, arrogant banks that we-the-taxpayers bailed out. Now those same banks are demanding the freedom to sell you dangerous products again.
The House of Representatives weakened the president’s proposal (by, among other things, leaving out auto finance) but passed something acceptable. Now the CFPA sits in the Senate Banking Committee, subject to Shelby’s attack and Dodd’s retreat. In an up-and-down vote—the people against the big banks—the people would win. But it’s a nail-biter. If you want this bill to pass, you’ll have to stand up and shout.
Tags: banks, consumer financial protection agency, CPFA
Where is the proposed independent agency supposed to get it’s funding from, if not Congress?
The CFPA could be funded by fees, paid by the industries they regulate. That’s the way the FDIC is funded.
The SEC, by contrast, is funded by Congressional appropriation. On big issues the industry opposes (like requiring changes in accounting and transparency in accounting, post-Enron), the SEC comes under tremendous pressure from the industry’s favored Congressmen. Congress threatens to cut the budget, or prevent funds from being spent for specific SEC purposes–often hamstringing reform. For a consumer protection agency, independence is of key importance. Otherwise, it will be run over.
Speaking of banks, I’m confused about FDIC protection.
I know the new limit is $250,000.
But I would rather focus on the old limit for the sake of simplicity. Let’s say, hypothetically speaking, that the limit is still $100,000.
I am confused about that. Is the deposit insurance for $100,000 per account? OR is it for $100,000 per depositor?
If a person has $200,000 in cash, would that mean they would have to have 2 separate accounts within one bank?
Or would they have to put $100,000 in one bank and $100,000 in another bank?
Thanks,
Perkins
It by type of account, such as single account, joint account, retirement account, trust account. Details here http://www.fdic.gov/deposit/deposits/insured/faq.html