In the last several years we have all been fleeced, looted, robbed, swindled, thieved, tricked, cheated, scammed, exploited, ponzied, stung, conned, extorted, ripped off and bankrupted by the banks and other big financial companies. Finally the Congress is working on reining them in. This week the Congress takes up whether to create a new Consumer Financial Protection Agency (CFPA). This is a very important bill, creating an analog to the Food and Drug Administration (FDA) and the Consumer Product Safety Commission (CPSC), designed to protect consumers from financial scams and general fleecing.
I was on a blogger call today with Elizabeth Warren to discuss this bill. This call was hosted by Heather Booth, Americans for Financial Reform, a coalition of 200 organizations fighting for this other reforms of our banking and financial system. Warren is Chair of the Congressional Oversight Panel – COP – but was not on the call in that capacity. She was on the call to explain why we need the CFPA. Warren originally proposed the idea of a CFPA, and you might know her from Michael Moore’s movie, Capitalism: A Love Story.
Here is what Warren had to say: (from notes)
She has been studying what has been happening to people around the country. The status quo is bad. It created financial crisis and subprime mortgage meltdown with all of its implications, including millions losing homes, 10-12 million could lose to foreclosure before this is over.
Dangerous products were fed into the system. These products destabilized families and destabilizing families destabilized the economy. It’s not just mortgages. Look at payday loans, and the traps involved… And credit cards.
What it comes down to is that people who never thought they were at risk, but then when interest goes from 9.9% to 29% it is just unmanageable. People are thrown to ground. When families get cheated we are all at risk. This destabilization at a family level echoes throughout the economy.
Safety works. People getting cheated. Agencies work.
Look at how credit card business models have shifted. The old model was a you getting a card based on your good credit, if you qualified. But now they hold up low interest or a free gift or say it is a cool card to have, and you get the card, and then they make their money from the traps and tricks in the fine print that people just do not know about. Lenders hide costs and prey on customers. So no one can compare the cards. It is a market driven by the tricks and traps they can hide.
We have the FDA. In the 1920s anyone with a box of chemicals and a bathtub could start a pharmaceutical company. How many people are alive today because now we have basic safety protections on drugs. And this makes it safe to invest in good products and good companies.
Look at the Consumer Product Safety Commission – the agency sets standards, and child car seats are safer etc.
The David and Gioliath nature of this story shows up in multiple ways. Lawyers that create these deceptive and dangerous products – come in well-funded teams. These companies use these teams of lawyers and sociologists and psychologists, and find as many ways as they can to trick people.
In contract law an equal contract is both sides have good knowledge and that is basis of legal binding in contracts. Both sides have an understanding of what they are agreeing to. But here we have had large financial institutions writing contracts no one understands and writing the regulatory rules over the last 15 years, and that is what got us into this mess. Then they turned to the taxpayer and said, “Bail us out.”
They have survived because of that taxpayer bailout and their response is to turn around and fight to continue to be the ones who write the rules so they can do it all again.
This is about survival of families but also fundamentally a question of where our country and economy goes.
Then Ed Mierzwinski of U.S. PIRG talked:
We are up against a massive well funded lobby trying to protect the status quo. They are using the big lie.
This will create 1 agency instead of 7. It is replacing, not creating a new layer. The analog agency is the FDA.
The big issue now is preemption, where they are trying to override stale rules that might be stronger. We must allow states to have stronger regulations. Let the federal agency and regulations be a floor not a ceiling.
Mierzwinski then listed members of Congress who should be contacted to let them know that there is support for creating this CFPA:
Top of the list: Melissa Bean, D-Ill., because of her opposition to state preemption.
Also on the list:
Paul Kanjorski, D-Pa.
Dennis Moore, D-Kan.
Gregory W. Meeks, D-N.Y.
Carolyn McCarthy, D-N.Y.
Charley Wilson, D-Ohio
Ed Perlmutter, D-Colo.
Joe Donnelly, D-Ind.
Bill Foster, D-Ill.
Walt Minnick, D-Idaho
Mary Jo Kilroy, D-Ohio
Ron Klein, D-Fla.
Travis W. Childers, D-Miss.
Steve L. Driehaus, D-Ohio
Jim Himes, D-Conn.
Gary Peters, D-Mich.
Dan Maffei, D-N.Y.
John Adler, D-N.J.
Joseph Crowley, D-N.Y. (not a member of the committee, but is chief deputy whip and is the chairman of the New Democrat Coalition.)
Here is Elizabeth Warren talking about this agency, in July:
Also working on this: The Center for Media and Democracy is launching the Real Economy Project this week to “to simplify these complex issues and give you a voice in the debate surrounding proposed public policy fixes.” They will also be launching a Bankster site to “to be your go-to site for updates on the financial services re-regulation fight in Congress and for progressive net-roots campaigning against the big boys on Wall Street.” It will be at www.banksterusa.org and will be about accountability. (I’m also working with them on these.)
Finally, see this post from Sunlight Foundation: Top Financial Services Committee Members Rely Heavily On Finance Campaign Contributions,
One year after the biggest economic collapse since the Great Depression, Congress is still debating new financial regulations to protect consumers and prevent risk-taking in the financial sector. The House Committee on Financial Services is currently undertaking the important first step of writing, amending and voting on some of the pieces of the long-proposed financial regulatory reform. While debating these issues top committee members have been the recipients of disproportionate campaign contributions from the very industry that they are tasked with regulating.
Go read — it’s enlightening.