The Daily Record

Congress Considering 'Knife' To New Consumer Agency

$103 a week would be too much to get Medicaid; Christie plan to limit new enrollees bars working poor

Daily Record —Monday, May 16, 2011

By Phyllis Salowe-Kaye

In 2008, the U.S. economy suffered its worst financial meltdown since the Great Crash of 1929. Both of these historic disasters were the result of dangerous, unregulated Wall Street banking practices. Despite the magnitude of the crisis in 2008 and massive taxpayer bailouts for the big banks, Wall Street showed no sign of restraint or reform. Instead, they actively opposed any attempt by the government to curb their reckless practices. Fortunately, pressure from the public and consumer advocacy groups moved Congress to pass the landmark the Dodd-Frank Wall Street Reform and Consumer Protection Act in July 2010. Unfortunately, key elements to the reform now are under attack.

Vital to the reform bill was the creation of the Consumer Financial Protection Bureau, the first federal agency with the sole purpose of protecting consumers. CFPB has a clear mandate to stop predatory mortgages and to put an end to the hidden traps associated with credit cards, overdrafts, student and payday loans, which plague the retail lending industry. For decades New Jersey Citizen Action has fought on behalf of its members, including senior citizens and military families for these protections, and our organization was instrumental in the successful passage of the reform bill.

The CFPB is scheduled to become fully operational July 21. Unbelievably, the House already is considering two proposals that, in the words of the CFPB architect Elizabeth Warren, would "put a knife in its ribs." NJCA will make every effort to fend off any such assault.

Opponents of the CFPB characterize the its structure as too "authoritarian," saying it lacks congressional oversight and that its director has vast unchecked powers. In fact, the CFPB is subject to more oversight than any other financial regulatory agency, including the OCC, and is the only one that has a budget ceiling.

The House Financial Services subcommittee already approved three bills that will gut the CFPB. They would give existing bank regulators (the very same regulators who failed to protect consumers before the crash) veto authority over CFPB's decisions. The bills also eliminate the position a CFPB director, and would replace the post with a weaker five-member commission while delaying the operational start date for the CFPB.

These bills are designed to thwart reform and ensure that banks are able to maintain the status quo, no matter the cost. Wall Street is determined more than ever to maximize profits through unethical and irresponsible practices that prey on consumers and destabilize the economy. The U.S. Chamber of Commerce and the American Bankers Association are vigorously advocating for these bills in an effort to eliminate the CFPB. Their pressure tactics have paid off and the House already has voted once to weaken the CFPB's budget. If this new assault on financial reform is successful in the House, let's hope what happens in the House stays in the House.

We also expect a very contentious fight over the anticipated nomination of Warren as the agency's founding director. A fierce consumer advocate and Rutgers Law School graduate, she is the original architect of the idea of the CFPB. Despite some sectors of the banking industry warming up to Warren, Republicans in Congress continue to object strongly to her nomination and the establishment of an effective CFPB in danger.

In 2011, average Americans — from soldiers to factory workers to retirees — continue to suffer from the pervasive fallout of the economy's collapse in 2008. The CFPB must have the tools and leadership to implement its mandate to protect the public. Weakening the CFPB leaves all Americans vulnerable and subject to the same abuses that caused the 2008 crash. Any tampering with the strength of the CFPB means certain failure and even greater harm to the economic health of the nation. The New Jersey congressional delegation must vote "no" on HR1315, HR1121 and HR1667.

Phyllis Salowe-Kaye is executive director of New Jersey Citizen Action.

Top Top | NJCA Homepage | NJCA in the News