Today, Senate Banking Committee Chairman Chris Dodd (D-CT) and ranking member Richard Shelby (R-AL) said that, while they still have “a number of issues to resolve,” negotiations regarding financial regulatory reform are “going great.” “My hope is when we get back in January, that we’ll — depending on how the progress is moving — schedule a markup in the committee,” Dodd said.
Shelby added, “I think we have an opportunity between now and January, over the holidays, to come closer together. I hope we will in a bipartisan way.” But one of the sticking points in the regulatory reform effort continues to be the Consumer Financial Protection Agency (CFPA) which Republicans and many conservative Democrats are standing against. Shelby has previously called the CFPA “folly and dangerous,” and today he provided some insight into his reasoning:
‘’From the beginning I’ve always thought that we should not create a stand-alone consumer financial authority,’’ Shelby said this week. ‘’Safety and soundness (of banks) should be number one.’’
So like Rep. Jeb Hensarling (R-TX), Shelby seems to believe that banks ought to trump consumers. But his alternative — leaving responsibilities for consumer protection with the existing bank regulators — essentially condones the status quo.
Shelby’s stance is especially interesting considering his vote today against confirming Federal Reserve Chairman Ben Bernanke for a second term. Under the GOP’s regulatory reform plan — which simply tells the regulators to get their act together and protect consumers — the Federal Reserve, of which Shelby seems to think so little, will not have any of its consumer protection powers removed.
As I’ve pointed out before, there’s a tension between the safety and soundness of a financial institution and consumer protection, because the same actions that are best for a banks bottom line are often the worst for consumers. Would predatory lending be a problem if it weren’t profitable? A new agency that is focused on consumers and can stand on equal footing with the bank regulators is a vital part of the regulatory reform effort.
On a grander scale, though, Shelby’s statement is emblematic of the GOP’s attitude toward regulatory reform. The financial crisis occurred barely more than a year ago, and yet no Republican voted for the House’s reform bill, and Dodd’s ambitious initial legislation is being pared back. And all because banks “should always be number one.”