Daily News Los Angeles
By Orson Aguilar
Few doubt that a main cause of our nation’s financial meltdown and the recession that still plagues us was an explosion of risky, poorly regulated banking practices on Wall Street. Amazingly, Congress is moving to gut the very agency that was put in place as a “cop on the beat” to make sure such dangerous actions don’t happen again, even before that agency is up and running.
That effort was on display May 24 at a surprisingly nasty house subcommittee hearing, and in legislation now moving forward.
It is well documented that predatory and deceptive lending practices fueled a real estate bubble based on mortgages that couldn’t help but blow up, taking the economy with them. In too many cases, trick loans were intentionally marketed in low income communities and to people with limited ability to read English. If such practices are allowed to continue, the whole economy remains vulnerable.
So, last July – after taxpayers had bailed out the banks – Congress passed new financial rules of the road. One of the most important and popular parts of this reform was creation of a new watchdog, the Consumer Financial Protection Bureau, which is currently in the process of setting up shop.
On May 13 (truly Friday the 13th for consumers), a House committee approved three proposals to gut the CFPB.
One of the bills gives the existing bank regulators – the same folks who failed to do their jobs last time – sweeping authority to veto CFPB’s actions. The second would eliminate the bureau’s director before one has even been nominated and would instead have CFPB run by a five-member committee, a near guarantee of weakness and indecision. The third would prevent the bureau from acting until a director is confirmed – that is, indefinitely.
And “indefinitely” could be a very long time. Recently, 44 senators – enough to block a nominee for as long as they want – wrote to President Obama to say they would not vote to confirm any director for the bureau unless the president gives in to a series of demands. Those demands include the main provisions of the House bills, as well as taking away CFPB’s independent funding – in other words, allowing politicians to hold it hostage.
Make no mistake: These demands are not reforms, and have nothing to do with accountability, as supporters would have us believe. They are designed to make sure that critical new protections for consumers never happen.
Ironically, this is occurring as the CFPB’s first actions, taken under the interim leadership of Professor Elizabeth Warren, are getting positive reviews from both consumer advocates and the banking industry.
Recently, the CFPB released a draft of a single mortgage disclosure form that financial institutions would use when signing people up for a new loan.
Both bankers and consumer advocates generally praised the draft, though some offered suggestions. Perhaps more importantly, there was near universal applause for the process by which CFPB is creating it, which includes lots of opportunities for feedback and ideas from both the banking industry and consumer groups.
The new consumer financial watchdog is off to a great start. Congress should get out of the way and let CFPB get rolling without trying to preemptively handcuff what could be the most important source of protection for all of us who use banks, credit cards, loans or other financial services.
President Obama should stand up to those who want to destroy the new bureau before it gets on its feet, and do whatever it takes to ensure that CFPB is what the public wants and needs: a tough, independent cop on the beat to make sure that consumers are treated fairly by the financial industry.