While you were busy watching the melodramatic Jim Comey testimony on Trump and Russian hacking, the House of Representatives was busy voting to roll financial reforms passed in the wake of the 2008 economic collapse. The partly-line vote could is meant to end numerous consumer protections, including rules government payday loans — and the end of the Consumer Financial Protection Bureau. But the legislation now goes to the U.S. Senate where, like the health care bill, it faces a very uncertain future.
Consumer advocates were swift to denounce the vote. Lisa Donner, executive director, Americans for Financial Reform, called it a “license to defraud. ”
Ed Mierzwinski, Consumer Program Director at U.S. PIRG, warned the legislation would let “Wall Street banks and predatory payday lenders … run amok again.”
“The bill would leave the successful CFPB as an unrecognizable husk incapable of doing its job to protect consumers, homeowners, older Americans, students, servicemembers and veterans,” Mierzwinski said. “It would also repeal most Dodd-Frank protections enacted to prevent big Wall Street banks and other players from recklessly bringing on another financial collapse.”
I wrote this yesterday about the bill:
While folks are consumed by the testimony of former FBI Director Jim Comey — almost certain to be a letdown — take a moment to look around at the action that’s really happening in Washington D.C. Comey is going to say a bunch of things we already know. Your attention is better spent elsewhere. On this, perhaps:
Also on Thursday, Lawmakers in the House just voted to dismantle the reforms put in place after the economic meltdown of 2008. The legislation includes outright gifts to various industries, such as a provision that would prevent regulators from….regulating the payday and title loan industries. Naturally, the bill’s chief supporter is that that industry’s largest contribution recipient.
While you are distracted, the real news is happening.
Republicans are calling this legislation the Financial CHOICE Act, employing that fine Washington tradition of using forced acronyms to confuse casual observers. Don’t be one of them. Read up on what the bill does. But when you do, be careful, because you’re going to encounter all manner of word salad, like this:
“It’s no secret that the Dodd-Frank Act did for Americans’ access to financial services what Obamacare did for their access to health insurance. In both cases, many Americans were left paying far more for services that were available to them much more affordably before the passage of the thousand-page bill. Just as family after family found themselves with unaffordable health insurance deductibles, millions of Americans found themselves unable to afford fees imposed on Main Street banks that had nothing to do with the financial crisis. President Obama might as well have said, “If you like your bank account, you can keep it.” —
When I looked today for reading material on the bill, this was the first story hawked by Google, which is why I picked it.
Writing in National Review, Iain Murray puts a lot into that paragraph, but it’s hard to say what he means. Millions of families can’t afford fees imposed on banks? Well, I should think so. I would hate to have to pay a multi-million-dollar fee imposed on a bank.
Meanwhile, if you’ve lost your bank account because of the financial reform bill, please let me know. Recall that banks moaned financial reforms that impacted bank favorites like overdraft fees would kill free checking accounts back in 2010. They’re still easy enough to find, and in fact, 2016 saw an uptick in such offers. Banks collected $36 billion in overdrafts last year, the highest since 2009. In fact, Big banks just recorded their most profitable quarter ever. EVER. If Murray was somehow trying to say that banks can’t afford fees, that makes no sense, either.
Banks aren’t struggling. They just aren’t.
Republicans like to complain about the size of the legislation they are attacking — so many pages! — but undoing financial reform takes a good 600 pages. Many of them are reserved for turning the Consumer Financial Protection Bureau into a paper tiger. You might not know this, because it’s fairly unbelievable: prior to the CFPB, private student lenders and many other so-called “non-bank banks” had NO federal regulator. The CFPB was designed to fix such regulatory cracks, long abused by non-traditional lenders like payday loan outfits. Plenty of folks don’t like the CFPB; you can guess who.
The proposed financial reverse-the-reforms bill would stop the CFPB from setting rules for payday lenders, for example. But it it would do much more. It would kill the bureau’s source of funding. It would water-down its power structure and turn the agency into another politically-mired-and-thus-ineffective commission. It would stop the CFPB from ending the crazy legal structure we now know as forced arbitration, which kept even victims of the Wells Fargo scam from suing the bank. It takes away a lot of the “stick” power the CFPB has to make sure banks aren’t taking shortcuts. And it would kill the CFPB’s complaint database, which provides consumers with a rare source of raw data about precisely how misbehaving companies misbehave.
Sure, we can debate some of the finer points about the CFPB structure. Before we do, I’d hope you’d take a few moments to learn about effective-vs-ineffective bank oversight. Only an agency that operates outside political cycles, and has real enforcement powers, can be effective. Most folks don’t realize that the Federal Trade Commissions, God love it, can’t do much more than tell a bad actor to give back all their ill-gotten gains from a scam and promise not to do it again. Breaking those promises can bring steeper legal action, but most get one bite of the apple. The CFPB has stronger enforcement power. It can levy steep fines on bad actors. Any enforcement authority needs such power. Heaven knows, the financial industry has proven it needs a strong force on the other side, keeping it honest.
President Donald Trump has called the post-2008 financial reform legislation “a disaster.” How short our memories are. You know what was a disaster? The economic meltdown. You know what would be a bigger disaster? Removing provisions put in place to prevent another meltdown because everyone was so busy watching the former FBI director on TV telling us all things we already know.
Fortunately, the House vote expected Thursday week only gets those would dismantle financial reform about half-way there. Like the healthcare legislation, this House bill faces a very uncertain future in the Senate. Legislators there have so far expressed an appetite to provide relief for smaller banks that complain the new rules went too far, and are having an out-sized impact on their smaller legal departments. That’s certainly reasonable issue to examine.
But de-fanging the Consumer Financial Protection Bureau? Makes no sense. Claiming that financial reform is a disaster for banks? Makes no sense. Thinking people will see through that.
I just hope everyone isn’t too distracted.
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