As I pointed out earlier, Republicans are planning to offer an amendment to Sen. Chris Dodd’s (D-CT) financial regulatory reform bill that would forbid a new consumer protection regulator from enforcing its rules for any institution that is not a “large non-bank mortgage originator,” leaving most of the financial system outside of the regulator’s reach. This fits with the broader GOP theme on consumer protection, which is to say that, if it gets boosted at all as a result of regulatory reform, it should remain a second-order issue, after the profitability of banks.
But that doesn’t stop Republicans from complaining about consumer protection measures that they claim are missing from Dodd’s bill. For instance, Sen. Saxby Chambliss (R-GA) took to the Senate floor today to criticize Dodd for not including standards for mortgages in his bill, but still taking a swipe at the consumer protection portion of Dodd’s legislation in the process:
There are no mortgage standards that are specifically set forth in the underlying bill…Certainly, we need standards in place, to ensure that people who are buying houses can afford to make the mortgage payments that they are making application for. And with respect to the consumer financial protection act, it appears that in the underlying bill there is an umbrella that is cast out there that is going to require the inclusion of more non-problem areas of the consumer finance industry.
Watch it:
For months, Republicans derided the Democrat’s attempt to create a new consumer protection regulator, saying that it would decree what financial products (including mortgages) people could have. The cacophony was so loud that a provision in the House of Representative’s financial reform bill mandating that banks offer consumers a plain “vanilla” product — a standardized version of whatever the consumer is looking for — before moving onto more complicated products was dropped.
But now Chambliss is advocating that Congress come up with a plain vanilla mortgage. This could be a good idea! But why is the GOP so intent on focusing solely on mortgages, when there were consumer abuses across the financial sector? Banks and non-banks alike are able to rip off consumers with a host of financial products, making a regulator with the ability to write and enforce regulations against all of them a critical addition to the regulatory system.
The GOP is flailing on consumer protection because it doesn’t want to do anything that will cut into the ability of banks to make a profit on confusing, obfuscatory financial products. But it also can’t deny that many people were hurt by the bank’s use of products that should have never been sold. So they’re left trying to call for prudential standards in one slice of the system, while leaving the rest of the system in the dark and unregulated, allowing the banks to run rampant.