Comptroller Of The Currency: Our Consumer Protection System ‘Works Fine’

There’s a bit of a turf war brewing between the various federal regulators regarding the Obama administration’s plan for reworking the nation’s regulatory structure. In particular, the administration’s proposal for creating a new Consumer Financial Protection Agency (CFPA) has drawn the ire of the existing regulators, including Federal Reserve Chairman Ben Bernanke. Yesterday, Bernanke joined Comptroller of the Currency John Dugan before the House Financial Services committee, where both made their opposition to the new agency known.

In his testimony before the committee, Dugan explained that doesn’t approve of the CFPA because it will not restrict states from providing additional consumer protection (on top of federal regulation), and because he wants enforcement mechanisms to remain with existing bank regulators. Shortly after the hearing, he appeared on CNBC, where he said that the current system of consumer protection “works fine”:

In terms of the agencies’ authority, we have a system that works fine in terms of examination and enforcement of consumer protection for banks.

Watch it:

In one sentence, Dugan managed to sum up the entire problem with our current regulatory regime and the attitude of the regulators who run it. Sure, maybe the system “works fine” for banks, since no regulator stops them from highly-profitable predatory lending. But the system surely does not work for consumers.


Right now, consumer protection responsibilities are scattered amongst the various regulators, and is the primary concern for none. The Fed, for instance, didn’t rein in predatory lending in the mortgage industry, even though it was granted such authority in 1994. Yesterday, the Fed proposed new consumer protection guidelines, but is there any reason to think it will be any more diligent in enforcing them?

The Obama administration has proposed taking all consumer protection responsibilities from the existing regulators and consolidating them in one new agency, so that consumers are not consistently an afterthought. But the existing regulators are not pleased with losing some authorities. As Treasury Secretary Tim Geithner said, the regulators are trying to “defend the traditional prerogatives of their agencies.” “I think, frankly, all arguments should be viewed through that prism,” he added.

As the New York Times pointed out, these squabbles between Geithner and the regulators “left some lawmakers baffled, and played into the hands of industry lobbyists who are attempting to defeat major provisions of the plan and are skilled in playing regulators and lawmakers against each other.” House Financial Services Chairman Barney Frank (D-MA) has already pushed back work on the CFPA until after Congress’ August recess, and these regulatory food fights are only going to slow the process further.