[Speaking of bald-faced hypocrisy]
[Boy she's great. Boy it would be unbelievably great if she could run this agency.]
http://dyn.politico.com/printstory.cfm?uuid=ACA33BE0-18FE-70B2-A8778278A4F4B4EF
March 30, 2010
Politico.com
Banking on hypocrisy
By Elizabeth Warren
Banks or families?
For almost a year, the big banks and the American Bankers
Association have presented that choice to Congress. Lobbyists argue
that meaningful consumer protection will jeopardize the safety and
soundness of banks, telling lawmakers that they must decide between
the two.
While American families have made clear that they overwhelmingly
support the reforms that a new consumer financial protection agency
will produce -- like clear, understandable terms and conditions for
consumer credit products and accountability for the big banks -- the
lobbyists have made equally clear their plan to kill the agency.
ABA lobbyists now aggressively insist that separating consumer
protection and safety and soundness functions would unravel bank
stability. Yet just a few years ago, they heatedly argued the
opposite -- that the functions should be distinct.
In 2006, the ABA claimed to act on principle as it railed against an
interagency guidance designed to exercise some modest control over
subprime mortgages. It criticized the proposal for "combin[ing]
safety and soundness guidance with consumer protection guidance,
creating confusion that is best addressed by separating them."
The ABA went on to argue that the "marriage of inconvenience between
supervision and consumer protection appears to blur long-established
jurisdictional lines." And then: "ABA recommends that the safety and
soundness provisions relating to underwriting and portfolio
management be separated from the consumer protection provisions."
Read that again: The ABA in 2006 said that policymakers should
separate safety-and-soundness and consumer protection -- exactly the
opposite of its position today.
This 2006 memo illustrates the ABA's real consistency -- consistent
opposition to meaningful reform.
If there is a smoking gun in the battle over financial regulatory
reform, the 2006 ABA memo is it.
<snip>
The lobbyists' consistent theme is unmistakable: They oppose
meaningful rules in the consumer credit market.
The ABA's reversal reveals that its safety-and-soundness argument is
-- and always was -- a diversion.
The ABA's premise that the country can't have both meaningful
consumer protection and safety and soundness is wrong. In fact, its
defense against an independent consumer agency boils down to this:
If banks can't trick and trap people with fine print and legalese,
they won't be able to turn a profit.
When other industries have argued that tricking their customers is
an essential part of their profit model, they haven't gotten far.
For example, it might be profitable in the short run to substitute
baking soda for antibiotics, but basic safety regulations prevent
such moves -- and the pharmaceutical industry still manages to do
just fine. In fact, the industry flourishes, bringing better,
cheaper products to customers.
Similarly, the consumer agency now before the Senate is designed to
cut out tricks and traps pricing, fine print that no one can read
and sharp practices that strip billions of dollars from consumers.
The ABA's position is particularly galling because it was the lack
of meaningful, independent consumer protection that helped bring
down the entire banking system and cause the current crisis. Without
billions pumped into subprime mortgage lending, the housing bubble
could not have inflated; Lehman and other MBS traders would have
lacked the raw material that fueled their excessive risk taking, and
the destabilization of millions of families and neighborhoods would
not have occurred.
In the weeks ahead, the Senate does not need to decide between
safety and soundness and consumer protection.
But the ABA is right about one thing: The Senate does need to decide
between banks and families.
Elizabeth Warren is the Leo Gottlieb Professor of Law at Harvard
University and is the chairwoman of the Troubled Asset Relief
Program's Congressional Oversight Panel.
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