Monday, March 15, 2010

the travails of the CFPA

if you're having trouble following what has been happening with consumer protection, or more specifically, what was to be the Consumer Financial Protection Agency, i wouldnt be surprised, because even though ive read & linked to dozens of posts and articles on its progression, sorting it out has been difficult even for me…the CFPA was originally proposed by elizabeth warren in 2007 and advanced by obama as part of his financial reform package…the idea was to get all consumer protection into one agency with muscle, and prevent agency shopping among those being regulated…

this is a clickable picture of the present regulatory infrastructure for consumer protection.


since the beginning of this month, the planned agency has been in play in the Senate Banking Committee under Chris Dodd…it didnt take long for the original plan to be compromised, first with a proposal to put a watered down version under control of the Treasury, then to put it into a back office at the Fed: as Yves Smith put it: “Banksters Win Yet Again: Dodd Proposes Putting Consumer Protection Agency at the Fed - I felt certain when I read the Financial Times headline, “Proposal sees consumer watchdog role for Fed,” that I must have woken up in a bizarre parallel universe (but that is probably unfair to pretty much all universes parallel to ours: I imagine it would be very difficult to have one more perverse than ours). But no, sadly, this headline is for real; the only possible good news in this account is that this dreadful idea is far from a done deal. Putting the proposed consumer financial services watchdog in any existing agency, save perhaps the FDIC, no matter what the professed logic is, is really a plan to neuter it. The Treasury, Fed, and Office of the Comptroller of the Currency are notoriously bank friendly. Think they are gonna do anything to seriously inconvenience their charges? Not on your life.”

it was about this time that former presidents got together and paid a nighttime visit to president obama, to lobby him to step in and push for the original proposal:


but even with all this presidential firepower behind it, the plan continued to deteriorate last week; first, the senator from the loan shark state got a provision inserted to allow payday lenders to continue charging 400% interest, then a congressman from California who owned a bunch of car dealers got a provision in the house version exempting car loans from scrutiny, and by the end of the week both of those,  as well as other non-bank lenders & pawnbrokers were exempt from scrutiny in Dodd’s version as well…

its not exactly clear what caused Dodd’s epiphany over the weekend, maybe he had enough compromise, or maybe he was feeling the heat from other Democrats, or from columnists & bloggers, but he’s now pledged to start financial reform over, without the exemptions for those special interests:

Senator Dodd's Financial Overhaul Bill to be introduced Monday From the NY Times: Dodd to Unveil a Broad Financial Overhaul Bill Here are the key points:

  • The consumer financial protection agency would be part of the Federal Reserve.
  • Creates a systemic risk council that would be headed by the Treasury Secretary and would include "representatives of the Fed, the new consumer agency, the F.D.I.C., the Securities and Exchange Commission, the Commodity Futures Trading Commission and the Federal Housing Finance Agency — along with an official appointed to monitor the insurance industry, which is largely regulated by the states."
  • Regulate over-the-counter derivatives: "Standardized swaps and derivatives would have to be traded on exchanges or clearinghouses."
  • The Federal Reserve would regulate bank holding companies with $50 billion or more in assets, and "systemically important nonbank financial institutions".
  • & here’s today's update at this posting time from AP:  Key provisions of Wall Street regulation bill

    btw, lest you get your hopes up for any real reform, this was the same senator Dodd, 4 months ago, in the WSJ: “Over the last number of years when [the Fed] took on consumer-protection responsibility and regulation of bank holding companies, it was an abysmal failure," Mr. Dodd, a Connecticut Democrat, said at a press conference flanked by eight other Democrats on his panel.

    stay tuned…

    1 comment:

    1. It is pretty much what I expected and I reached several of the same conclusions in my analysis of Dodd's bill today. I call it DARE (Derivatives Arent Regulated Either).