Failed Regulators Having "A Lot of Fun" Telling Consumers They Don't Deserve to Be Protected From Big Banks & Predatory Lending

BUZZFLASH NEWS ANALYSIS
by Meg White

It ain't easy to be in the business of green. And by that, I don't mean environmentally-friendly products.

Financial institutions are officially on the national, bipartisan shitlist. Even the corporate media is bashing them. The New York Times recently published a piece literally asking "Have banks no shame?"

Part of it is all that money we, as taxpayers, have invested in them. But the other portion of our collective hatred comes from their complete and utter lack of gratitude and humility. The Times article opened with a quote from a well-known economist asking, "How can [banks] be opposed to consumer protection as defined by [Tim Geithner,] a man who is the most favorable treasury secretary they have had in a generation? If he has decided that this is what they need, what moral right do they have to oppose it? It is unconscionable."

As Congress cobbles together financial reforms to prevent the nation from going through another financial crisis similar to the one that continues to hold the nation's commerce in a vice grip, the objections from banks, and their representatives at the U.S. Chamber of Commerce have surprised and angered many, including the president of the United States. On Friday, President Obama spoke on his proposed financial reforms, specifically addressing the industry's desire to sink the idea of creating a new consumer watchdog for financial products:

Predictably, a lot of the banks and big financial firms don't like the idea of a consumer agency very much. In fact, the U.S. Chamber of Commerce is spending millions on an ad campaign to kill it. You might have seen some of these ads -- the ones that claim that local butchers and other small businesses somehow will be harmed by this agency. This is, of course, completely false -- and we've made clear that only businesses that offer financial services would be affected by this agency. I don't know how many of your butchers are offering financial services.

Tuesday afternoon, I participated in a press call organized by Americans for Financial Reform, a coalition of nearly 200 national, state and local organizations demanding significant reform of the financial system. The intention was to expose what organizers call the death panel-style lies being circulated by banks and other financial services companies to defeat congressional attempts to create a Consumer Financial Protection Agency (CFPA).

The star-power was provided by Elizabeth Warren, the slightly sad but funny straight-talker you've seen addressing Americans' fear and anger over the financial bailout on The Daily Show and in Michael Moore's new movie, Capitalism: A Love Story. Warren said she was not speaking on the press call in her capacity as chair of the Congressional Oversight Panel created to oversee the U.S. banking bailout, but as "somebody who's been studying what's been happening to working families over the last generation."

The call also featured Director of the Consumer Program at U.S. PIRG Ed Mierzwinski, who spent some time outlining the ways the industry is trying to obstruct and obfuscate debate.

"They're trying to protect the system that failed. They're trying to protect the system that they're a part of," Mierzwinski said, adding that the chamber's latest ad comes from a "massive, unbelievably well-funded" effort to produce "the big lie."

He divided the deception into two parts: the myth of over-regulation and the banks' desire to preempt stronger state laws at the federal level.

The myth of over-regulation is easy to overcome, in that it's "simply not true." Mierzwinski said the proposed consumer protection agency would replace the many failed "agencies that aided and abetted, or slept through, the crisis."

As for preemption, the Americans for Financial Reform call targeted as their "single highest priority" an amendment offered by Rep. Melissa Bean (D-IL) to prevent states from having stronger regulations on the financial industry than those on the federal level. Interestingly, the attorney general in Bean's home state has indeed been more vigilant than the federal government and many other states in regard to consumer protection, especially in the payday loan industry. And the number one sector donating to Bean during her congressional career? Finance, insurance and real estate, according to Open Secrets.

"If you vote for the Melissa Bean amendment," said Heather Booth, executive director of Americans for Financial Reform, "you are choosing on the side of the big banks."

None of the advocates specifically targeted the other source of opposition to reform in their prepared comments: the regulatory agencies already in charge of consumer protection in the financial industry.

You see, before this whole financial meltdown thing went down, institutions offering financial products -- everything from start-up capital to mortgages to payday loans -- were pretty much allowed to pick from several different regulating agencies. At least four of the more than half a dozen agencies charged with upholding consumers' rights in the financial world -- the Office of Thrift Supervision, the Office of the Comptroller of the Currency, the FDIC and the Federal Reserve -- have publicly voiced opposition to the proposed CFPA.

These agencies are also responsible for ensuring that financial institutions remain solvent, that is that banks make enough money to keep giving it out in the form of loans. This would be as if the Consumer Protection Agency, in addition to their duty to make sure infant products don't include sharp edges and lead, were also tasked with selling as many baby toys as possible (much like the actual case in which the USDA has the responsibility of ensuring the safety of meat and marketing it at the same time).

And just as the banks and their lobbyists are gearing up for a fight, so are the all the failed regulators Mierzwinski briefly referenced. Sickeningly, they seem to be enjoying it. For example, Acting Director of the Office of Thrift Supervision John Bowman recently told the Boston Globe that he's having "a lot of fun" lobbying against the increased regulation of the financial industry.

Yeah, it's just a ball for the rest of us, too.

I asked Warren about the trouble of current regulators opposing the creation of a CFPA.

"I agree with you," Warren replied. "The two groups that oppose the new consumer agency are the banks and the regulators who have made the banks so profitable."

While Warren expressed thanks that the subject was addressed in the call, she didn't say much about how to counter such internal opposition. She said that, although there has been something of an effort to win over the old regulatory agencies, "there's just a different worldview of what is the appropriate role of a regulator." Warren specifically referenced Comptroller John C. Dugan, saying "he clearly does not think a consumer deserves" strong financial regulation.

"He thinks his agency has done a great job... not withstanding all the evidence to the contrary."

Americans are so mad at the big, bad banks that we can't see straight. Perhaps that is precisely why the president, Congress and groups like Americans for Financial Reform are concentrating on that popular anger and using it as fuel to get reform accomplished. Perhaps they fear that highlighting the regulatory failure of the past will make it impossible to create a new agency. But I suggest they do this at their own peril.

Research released by Americans for Financial Reform Tuesday backs up this idea. A new study by Lake Research Partners found that two-thirds of voters in both Blue Dog districts and in districts targeted by the Democratic Congressional Campaign Committee as vulnerable were in favor of creating a Consumer Financial Protection Agency. Additionally, 41 percent of these voters also said their representative's vote against a CFPA would make it more likely that they would not vote to reelect them.

Americans are not dumb. They know that the government let them down in this crisis too, by allowing financial institutions to have unprecedented leeway. Avoiding saying so not only makes people wonder why we would want a new agency in the first place, it also allows Dugan, Bowman et al. to continue to pretend they're doing their jobs while simultaneously lobbying against consumer rights and laughing all the way to the bank.

BUZZFLASH NEWS ANALYSIS

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