Money Money Money

Senators Dodd (D-Countrywide) and Corker (R-Tenn) have gone mano a mano for lo, these many months.  They will soon unveil the masterful plan to protect the hapless consumers of America.  Gee whiz.  I just can’t wait to see it.  While I am hardly privy to the fine details of the agreement, I don’t think that much could come out of anything ginned up  by these two gentlemen.  Much that I have been reading of late adds to my skepticism.

John Schoen of MSNBC states:

WASHINGTON – As Congress this week inches toward a new set of rules to avert another global financial collapse, it is focused on two conflicting goals: reforming the banking system to protect consumers while still giving lenders the freedom to take risks.

So far the score looks like: Bankers 1, Consumers 0.

More than a year after a wave of risky mortgage bets brought Wall Street to its knees, banks and other financial institutions are still playing by the same rules that got them into the mess.

Great score!  I’m pumped.  Just look how much we gained from credit card regulations.  The year’s worth of warning gave every credit card company in America ample time to lower limits and raise rates.  Things are just marvelous.

Further, after months of loudly insisting that any regulatory agency must be self-standing, Sen. Dodd is now laboring to put said agency under the Federal Reserve.  The Fed???  Oh, yeah.  That’ll work.  What could go wrong?  This is the same group that failed to apply existing regulations to home mortgages.  Now it will represent both bankers and consumers.  Hmmmmmmmmm……..

The Federal Reserve was founded to ensure that the banking system remained sound, and that is the only stated purpose of any consumer protection.  Some consumer advocacy groups argue that the place of the agency is less important than its power, and that an independent appointed administrator with a separate budget (funded by bank fees rather than Congress) coupled with broad authority exercised over financial instruments should suffice.  Sounds good, but I am compelled to ask why the banking lobby spent so much time and money to house the agency within the existing structure if that were not to its benefit.  Barney Frank’s response was “It’s got to be a joke.” You’re right, Barney.  The joke is most likely on us.

Rep. Brad Miller (D-NC) agrees.  In a post for POLITICO, Miller writes:

There is no doubt that there will be new abuses. Many of the practices the financial industry celebrates as “innovation” are just contracts rewritten by industry lawyers to evade existing regulation. The financial industry has the skill to “innovate around” any regulation passed by Congress or regulators. Effective reform requires a motivated, agile agency with the powers necessary to address new abuses promptly.

So can we have a consensus bill on financial reform, including consumer-protection issues? Compromise is possible, but consensus may not be.

The financial industry dresses up its opposition to an independent consumer financial protection agency with philosophical talk of the size and scope of government. It is against Big Government, except when it needs to be bailed out.

That’s not what the issue is really about. The issue is all about who wins and who loses.

Removing the traps in consumer financial contracts would activate dormant market forces in consumer lending and result in dramatically lower costs for families and dramatically lower profits and compensation for the financial industry.

The interests of the financial industry and those of working- and middle-class families appear irreconcilable. That doesn’t leave much room for consensus.

Congress may just need to pick a side: the financial industry or working and middle class families.

I’m with you, Representative Miller.  Business is always against Big Government, except when it wants or needs a handout.  Please write, call, fax or whatever your Congressional representatives and share your concerns.

This is an open thread.