"The main job of the new Consumer Financial Protection Agency is to set up basic rules so no one gets tricked or trapped again." That's the essence of the CFPA, simply distilled back in July by Harvard Law professor Elizabeth Warren, chair of the Congressional Oversight Panel. In June, Warren described the fundamental shift (she called it a "sea change") in regulation that would take place under the proposed CFPA.
The CFPA is the portion of financial regulatory reform that Idaho Congressman Walt Minnick tried to gut last month in favor of a council of existing regulators, a proposal he's been floating since last fall. Listen as a finance lobbyist tried to explain how this marriage between consumer protection and safety and soundness regulation would work.
Sound like the "tough, new consumer regulation" Minnick claims his proposal delivers? Or does that sound a lot like more of the same kind of ineffective regulation the financial industry used to exploit taxpayers and consumers over the past decade. Sitting around talking about doing something to protect consumers is very different from actually protecting them.
Last week, Warren told MSNBC's Rachel Maddow that had the provision Minnick attempted to kill with his council been in place five years ago it "would have prevented a huge part of this crisis."
Minnick's proposal was narrowly defeated in the House of Representatives last month but in debate, to the glee of Republicans, an outraged Minnick railed against the CFPA as a "massive new federal bureaucracy." He touted the cost of his proposal as less than $50 million compared with the $4.6 billion he claimed the Congressional Budget Office estimated it would cost to create the CFPA.
That claim is disingenuous at best, though. The $4.5 billion estimate provided by the CBO was for the cost of enacting the entire legislation; the estimate for just the CFPA portion was $1.1 billion over ten years.
With the economy buried under financial industry collapse and having already spent billions of taxpayer money, including $700 billion in TARP funds, trying to dig out of this hole, $110 million a year seems like a wise investment for consumers. Much better than tossing a $50 million bone to the financial industry so existing regulators (who already had the power to protect consumers but failed to do so) can "sit around and talk" about best practices.
A marriage between consumer protection and prudential regulation would be very convenient for a "failed" industry already raking in billions. . . and Walt Minnick knows that.