Mike Konczal notes that if we’d had the Dodd Bill structure in place in 2005, and the Consumer Financial Protection Agency had tried to take action against mortgage abuses it would have found itself overruled by the Financial Stability Oversight Council.
But of course this isn’t just a problem for the CFPA, it goes to the heard of whether the FSOC will really work. I have my doubts. It seems to me that the common thread running between the more stable banking systems in history (Canada today, the US before the mid-eighties, etc.) is that they’re pretty cozy cartels. Regulated cartels, yes, but that’s how cartels work — strict rules and guaranteed profits. But I don’t see any real indication that any policymakers in the United States want to try to create a banking cartel.