“My view is that Washington and the regulators are there to serve the banks” — Republican Rep. Spencer Bachus, chairman of the House Financial Services Committee.
You might expect the above statement from the CEO of a Wall Street bank or chairman of a Fortune 500 investment firm. The fact that it came from the chairman of the congressional committee charged with protecting the public interest by regulating the financial services industry is troubling.
My guess is that Mr. Bachus, R-Ala., is not the only Republican in Congress who thinks consumers and regulators should be subservient to banks, but rarely has a lawmaker allowed such an intimate peek behind the curtain to see just whose interests they believe Washington should protect.
That same upside-down reasoning is playing out over the fight to empower the new Consumer Financial Protection Bureau, or CFPB. Passed as part of the Wall Street reform law in 2010, the CFPB was created to protect consumers from the worst abuses and excesses of the banking, mortgage, hedge fund and pay-day lending industries.
As President Barack Obama said: “If your toaster explodes, there are laws saying toasters must be safe. But when you get a credit card, or a mortgage, there’s no law that says if those explode in your face financially, somehow you’re going to be protected.”
Although the Wall Street reform law has substantially improved transparency and cut abuse in the industry, many of its consumer protection provisions cannot be enforced until the CFPB has a director.
This means that many of the businesses that put our economy into the ditch — mortgage originators and trading desks at investment banks, for example — remain unregulated.
Having failed in their effort to block creation of the CFPB, Republicans are now blocking the president’s nominee to run it — Richard Cordray — in hopes of neutering the bureau altogether. Last week, 45 Republican senators blocked his confirmation as CFPB chief. Republicans cloak this cynical tactic in rhetoric about helping the economy, even though the lack of effective regulation was a key cause of the financial meltdown in 2008.
As Martin Baily, a senior fellow at the Brookings Institution, said, “Some credit card companies and pay-day lenders used deceptive practices, charging high rates or unfair fees to customers. An independent agency focused on consumers should reduce deceptive practices and the chances of another crisis.”
It’s astounding that the party that brought us to the brink of default and three shutdowns this year is now focused on preventing effective regulation of the financial industry.
Many Americans are struggling to make ends meet. The CFPB protects consumers by helping them make sound financial decisions. It’s good for students and parents to help them better understand loan options. It’s good for our soldiers — who are too often targets of unscrupulous lenders — and it’s good for homeowners who are trying to prevent banks from signing them into foreclosure.
During these difficult economic times, the stakes are too high. The CFPB and its director will help level the playing field. Mr. Bachus, Congress should be about protecting ordinary Americans, not its powerful industry patrons. The CFPB needs to be up, running and fully empowered.
U.S. Rep. Hank Johnson, D-Ga., represents District 4.
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