Hugh,
It’s been a long time since I have written, but there has been so many more important issues – Afghanistan, Cap and trade, and Obamacare. Running a bank remains a real challenge in this economy. While the headlines have gone away the problem loans remain. Individuals, small businesses, and commercial real estate are all fighting hard to keep current on their loans. On top of that the regulators are being extremely tough. They dread the hindsight of the Inspector General and so requiring more and more capital and slapping formal agreements on banks, which make it difficult for the bank to raise capital and deposits.
The primary purpose for writing is to raise alarms about the administrations efforts to enact the Consumer Financial Protection Agency (CFPA) (H.R. 3126). This is another effort by Obama to take control of a significant portion of the economy. This bill not only covers banks but also tax preparers, credit card companies, title insurers, mortgage companies, financial advisors, data processors of financial information, credit bureaus, and any other activity that the agency defines as a financial activity to be covered by the act!
This effort to take control of financial companies is the brainchild of Elizabeth Warren, the Harvard Law professor. Currently, the professor is the head of the Congressional Oversight Committee. She is modeling the act after the Consumer Products Safety Commission because, “(t)his crisis started with the cheating of American families, and [solving it] has to begin there, too.” We all know how that commission had made products better! Professor Warren is being assisted in her effort by Heather Booth and Americans for Financial Reform, a coalition of groups including ACORN, SEIU, MoveOn.org, and many others invested in Community Investment Act activities.
If enacted, the CFPA would severely harm financial providers and consumers. The agency would be controlled by five appointees, one of whom is head of the national bank regulator. There is no real check or balance on the others (Warren is likely to be the Chairman). The agency would have sole authority to make and interpret regulations under existing consumer finance and fair lending laws. The agency would have broad examination and information gather authority. The CFPA would ban mandatory arbitration clauses.
The proposed agency would have the authority to define standard products and services (“plain vanilla”). The agency could require companies to offer these products and if they offer alternative products they could be subject to enhanced scrutiny. (The agency has very broad enforcement powers.) Further, the agency can dictate disclosure and marketing practices, in effect have broad authority over consumer advertising by the financial services industry.
It gets even worse. The law opens up financial services companies to litigation by every state attorney general and the tort bar.
This is an effort to do to financial service what they want to do to the healthcare. Through a panel of five people, they want to control financial services, determine what services are to be provided, how those services are to be delivered, and at a cost they determine. None of this has anything to do with the causes of the financial crisis of 2008, but rather it is the use of a crisis to take control of another large chunk of the economy.
Barney Frank’s committee begins hearings on the bill today. I’ll try to keep you posted.
You can contact me at BankerGuy2009@gmail.com