Dodd Proposal to Give the Federal Reserve Consumer Protection Authority Would Create an Industry Lapdog, Not a Public Watchdog
House Financial Services Committee Chairman Barney Frank on Tuesday blasted a proposal floated by Senate negotiators to place a proposed consumer protection agency inside the Federal Reserve.
“I was incredulous,” the Massachusetts Democrat said. “After all the Fed bashing we’ve heard? The Fed’s such a weak engine, so let’s give them consumer protection? It’s almost a bad joke. I was very disappointed.”
A leaked proposal by Senate Banking Committee Chairman Chris Dodd to give consumer protection authority to the Federal Reserve Board in financial reform legislation would be a total capitulation to Wall Street lobbying, said Consumer Watchdog, and urged Senate committee members to insist on a strong independent consumer protection regulator or refuse to move a bill forward.
“Granting the Fed consumer protection authority would create a lapdog for Wall Street, not the watchdog consumers need. We can’t cross our fingers and hope the regulators whose failures caused the crisis in consumer lending will do a better job for the public next time around. That just isn’t believable to the millions of Americans who lost their homes and savings due to unscrupulous lending practices while regulators turned a blind eye because they were money-makers for the industry,” said Carmen Balber, Washington Director for Consumer Watchdog. “Americans would be worse off with the Fed in charge of consumer protection than they are today with no reform.”
The financial industry spent $437 million lobbying Congress in 2009, and gave $41 million to members of the Senate Banking committee over the last five years, according to a Consumer Watchdog analysis of data compiled by the Center for Responsive Politics. An independent Consumer Financial Protection Agency as proposed by President Obama has been a primary target of financial industry opposition.
“It’s time for Senator Dodd to stop negotiating with Senators who have dug into battle trenches with the big banks in their attempt to block any meaningful consumer protections, and move a bill that will give the rest of the Senate a chance to vote for Main Street and support real reform,” said Balber. “Those who stand in the way of Wall Street reform will answer to the millions back home who are struggling to hold onto their homes, jobs and savings because of the consumer lending abuses that caused the crash.”
An effective consumer financial regulator must have full authority to write and enforce new rules of the road for banks, and those rules cannot be subject to veto by existing banking regulators. These criteria must be met in order to protect Americans from ongoing lending abuses and the next financial meltdown, said Consumer Watchdog. At least three other “compromise” proposals were leaked from Senate Banking Committee negotiations in the last week that also failed to meet these standards.