Today, the House Financial Services committee held the first in a series of hearings regarding financial regulatory reform and restructuring. Today’s topic was the new consumer protection agency that the Obama administration has proposed. During the hearing, House Republicans were adamant about their belief that the agency is intended to make us “yield our freedom” to “philosopher kings” who will dictate what consumers can and cannot buy, while forcing banks to lend to poor people. Some examples:
Rep. Jeb Hensarling (R-TX): An unelected bureaucrat will now decide for us what mortgages we can have. They will decide what bank accounts we can open. They may even decide whether or not we can be trusted with a credit card.
Rep. Scott Garrett (R-NJ): I don’t believe that creating more government agencies, perhaps those even with an Orwellian, heavy handed, government bureaucrat knows best mentality…is an appropriate solution.
Watch a compilation:
Incidentally, this is exactly how the mortgage and banking industries want the new agency to be characterized. When the administration’s plan was first released, the American Bankers Association (ABA) immediately claimed that it “needlessly rips apart all the existing regulatory agencies, eliminates charter choices and creates a new agency with powers to mandate loans and services that go well beyond consumer protection.” And today, ABA President and CEO Edward Yingling was on Capitol Hill, singing the same song:
[The agency] imposes government designed one-size-fits-all products – so-called plain vanilla products – over services that are designed for an increasingly diverse customer base…ABA believes the answer is not to have the government design products, mandate that they be offered, and give them an advantage over private sector products.
As it was put at Oxdown Gazette, “I hope all of you will provide examples of the way all that lovely financial innovation has helped you. Extra points for the people who were helped by credit default swaps.”
The new agency is actually meant to ensure that financial disclosure forms are clear and fair, that there are no gaps in the regulatory framework when it comes to existing consumer protections, and most importantly, to have an agency that is solely focused on consumer protection, instead of making it something that a bunch of agencies devote some of their time to. With their stance, House Republicans are endorsing the view of the banking and mortgage lobbyists, who want to maintain the same haphazard, almost non-existent regulation that led us down the subprime road the first time.
Ellen Harnick, a senior policy counsel for the Center for Responsible Lending, writes:
Some lenders have misused the banner phrase “free market” over the last 10 years to press for what in many ways has been a lawless market, with no commonsense effort to restrain excess, recklessness and in too many cases downright deception…This loosening of oversight did not promote competition but instead unleashed a race to the lowest standards possible, making it impossible for responsible lenders to compete.