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Less than three years ago, the U.S. economy suffered its worst financial meltdown since the Great Crash of 1929. Both had the same cause — dangerous, unregulated Wall Street bank practices. After taxpayers bailed out the big banks in 2008, Wall Street offered no thanks. Instead, they fiercely opposed reforms to stop their reckless gambling. Nevertheless, with overwhelming public support that continues, Congress in July 2010 passed important new financial rules and created the Consumer Financial Protection Bureau (CFPB) to oversee and regulate financial services from a consumer-based perspective.
Now, less than two months before the landmark consumer cop takes over, the U.S. House of Representatives is poised to “stick a knife in its ribs,” in the words of Elizabeth Warren, who has been tasked by President Obama with running the CFPB. Conservative opposition against consumer financial protection was clearly demonstrated during a congressional hearing on May 24, when Warren was confronted with allegations of lying Rep. Patrick McHenry (R-N.C.), chairman of a House oversight subcommittee. Although video of the heated exchange was featured everywhere from the major news networks to late-night talk and comedy shows, the real story is what’s behind the conservative agenda to kill the CFPB before it has a change to do its job.
Consumers need an agency tasked with preventing the predatory mortgages that were a major cause of the collapse, as well as to end unfair tricks and traps on credit cards, overdrafts, student and payday loans, and more. The CFPB is the first federal financial agency with only one job — protecting consumers, including senior citizens, students, and military families.
On May 13th (Friday the 13th for consumers), a House committee approved three gutting proposals. The first gives sweeping veto authority over CFPB's consumer protection decisions to the existing bank regulators — the same ones who failed to protect consumers. The second eliminates the CFPB's director and replaces the position with a weaker 5-member commission or board. The third delays the new bureau's startup date indefinitely, until a director is confirmed — or until the President and Senate capitulate to Wall Street demands.
In May, 44 Senators, enough to block a nominee permanently, sent the President a letter saying they would confirm no director — not Elizabeth Warren or anyone — unless he agrees to the House demands and also eliminates the bureau's independent funding.
These proposals put the foxes in charge of the chicken coop. The U.S. Chamber of Commerce and the American Bankers Association like these ideas. It’s a big step toward their ultimate goal: eliminating the CFPB. At their request, the U.S. House has already voted once to weaken its budget, although the Senate rejected their proposal.
It's time to look at these proposals as what they are: industry-backed efforts to allow them to continue business as usual with virtually no regulation. We've seen that movie. We lived through it. We're still living through its aftermath. What happened on Wall Street wreaked havoc on jobs, home and retirement values, and the economy as a whole. In 2011, average Americans — from soldiers to factory workers to retirees — continue to suffer from the fallout of the economy's collapse. We need a strong consumer cop on the beat. Otherwise, what happened on Wall Street will happen again. Weakening the CFPB is the wrong way to go.
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