Last month, the House held a hearing on the Obama administration’s proposal to create a Consumer Financial Protection Agency (CFPA). House Republicans, taking their lead from banking industry lobbyists, extensively criticized the proposal, claiming that the new agency would literally decide which mortgages and credit cards individual families could and could not have, thus making us all “yield our freedom.”
Today, the Senate had its turn, and the result was not any better. Led by Sen. Richard Shelby (R-AL) — and wholeheartedly joined by panelists Edward Yingling, President and CEO of the American Bankers Association, and Peter Wallison of the American Enterprise Institute — the GOP derided the agency as “a paternalistic departure from the notions of liberty and personal responsibility.” “In other words, yes, we can has become no, you can’t,” Shelby said. Watch it:
Leaving aside the fact that the agency simply will not mandate appropriate products for individual families, it’s really quite remarkable to watch Republicans go to great lengths to protect the worst predatory and deceptive practices that banks undertook in recent years. They never acknowledge that, yes, there were abuses, including banks pushing minorities who qualified for prime loans into subprime or signing immigrants up for a potpourri of unnecessary and expensive financial products. They make it sound as if as if exotic mortgages occupy a natural niche in the marketplace, and that there are lots of homebuyers who actively want to owe more on their house five years down the road, despite making monthly payments.
As Connecticut Attorney General Richard Blumenthal said, “the new agency is a necessary and appropriate response to exploding complexity, scope and scale of new financial instruments and markets — and exponentially increasing impact on ordinary citizens“:
Ever more slick and sophisticated marketing — often misleading and deceptive — cannot be battled successfully by states alone, or the existing federal agencies…The point is to assure that consumers fully understand the financial realities and consequences of financial obligations, credit cards or loans, they are considering before they make commitments…Once they use that information and make decisions, they will have to live with the consequences.
On a separate note, it’s interesting to watch Shelby’s utter dismay that creating a new agency might signal a new regulatory approach, as if the approach that utterly failed to prevent the subprime boom was somehow worth preserving.