Monday, March 21, 2011

Do the Interests of Commerce Trump the Interests of Consumers?

Elizabeth Warren, by acclamation from consumer protection advocates from across the country, was touted as a favorite and excellent choice to head the Consumer Financial Protection Bureau. While she comes in as an advisor to lay the foundation for this department, she also comes in attempting to make some basic efforts to level set some of the issues that caused our country's financial meltdown in the first place.

It's interesting to me that a country begging for action by the government in the throes of the crisis, now as amnesiacs have determined that government must not stand in progress by imposing regulations that would prevent this crash from happening again. In the process, as New York Times columnist and Nobel prize winner, Paul Krugman has said, this hero was, in an congressional oversight hearing, was made to become a villain...

"In a sane world, Warren — who warned about consumer debt before it was fashionable, and in particular warned about the abusive lending practices that played a significant role in the buildup of that debt — would be an icon of reform. But to listen to the GOP, she’s a power-mad usurper of individual rights, a threat to the solvency of our financial system."

In an account of that hearing by Joe Nocera, also of the New York Times...

"The Wednesday morning hearing was titled “Oversight of the Consumer Financial Protection Bureau.” The only witness was the piñata, otherwise known as Elizabeth Warren, theHarvard law professor hired last year by President Obama to get the new bureau — the only new agency created by the Dodd-Frank financial reform law — up and running. She may or may not be nominated by the president to serve as its first director when it goes live in July, but in the here and now she’s clearly running the joint."
"And thus the real purpose of the hearing: to allow the Republicans who now run the House to box Ms. Warren about the ears. The big banks loathe Ms. Warren, who has made a career out of pointing out all the ways they gouge financial consumers — and whose primary goal is to make such gouging more difficult. So, naturally, the Republicans loathe her too. That she might someday run this bureau terrifies the banks. So, naturally, it terrifies the Republicans..."

"To listen to the House Republicans, you’d think the financial crisis of 2008 was like that infamous season of the long-running soap opera “Dallas,” the one that turned out to be a season-long dream. Subprime mortgages? Too-big-to-fail banks? Unregulated derivatives? No problem! With the exception of their bête noire, Fannie Mae and Freddie Mac, the Republicans act as if nothing needs to be done to prevent another crisis. Indeed, they act as if the crisis never happened."

"It’s not just the House Republicans either. Already the Office of the Comptroller of the Currency has reverted to form, becoming once again a captive of the banks it is supposed to regulate. (It has strenuously opposed the efforts of the A.G.’s to penalize the banks and reform the mortgage modification process, for instance.) The banks themselves act as if they have a God-given right to the profit they made precrisis, and owe the country nothing for the trouble they’ve put us all through. The Justice Department has essentially given up trying to make anyone accountable for the crisis."

"Thank goodness, then, for the attorneys general — and for Ms. Warren. On Main Street, where the attorneys general operate, it is pretty obvious that problems persist. During the subprime boom, many states tried to stop the worst lending abuses, only to be blocked by federal banking regulators. Now that the country is dealing with the aftermath of those abuses — the rising tide of defaults and foreclosures — it is the attorneys general who are, once again, put in the position of trying to stamp out abuses, this time of the foreclosure process itself."

More of CTW's wonkish readers can watch the full 2 1/2 hour video above. Dr. Warren even alludes to the need for consumer protection from the predatory loan industry. But here's the question: isn't it becoming painfully clear that political will is in short supply when it comes to making certain that the interests of individuals isn't trumped by the interests of commerce? Even when we've seen what's happened when we've allowed commerce to run amok?

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