On February 10, 2013 CBS broadcast a “60 Minutes” report concerning the 40,000,000 mistakes made by credit rating agencies. Worse still, not only are mistakes being made which have profoundly negative effects on individual credit reports but the errors are exceedingly difficult to correct. If this situation weren’t sufficiently dismal, we have 43 members of the United States Senate — including Senator Dean Heller (R-NV) — who aren’t helping.
Members of the Republican caucus sent a letter to President Obama on February 1, 2013 expressing their “concern” for the operations of the Consumer Financial Protection Bureau, and their intent to block the nomination of director Cordray until the bureau — which is to exercise oversight of CONSUMER CREDIT REPORTING AGENCIES — until said agency is “reformed” to their satisfaction. The second name on the sign up sheet? Senator Dean Heller, Republican, Nevada.
Here’s the core of their discontent:
“As presently organized, the CFPB is insulated from congressional oversight of its actions and its budget. Far too much power is vested in the sole CFPB director without any meaningful checks and balances.
We again urge the adoptions of the following reforms:
1. Establish a bipartisan board of directors to oversee the Consumer Financial Protection Bureau.
2. Subject the Bureau to the annual appropriation process, similar to other federal regulators.
3. Establish a safety-and-soundness check for the prudential regulators.”
This is essentially a repetition of their complaints in 2011 after the passage of the Dodd Frank Act and the nomination of Mr. Cordray to head the CFPB, and the Banker’s Boys are disturbed about provisions of the financial reform act which placed banks under adult supervision. That “bipartisan board,” for example, is code for replacing the director with a five member committee, to be confirmed by the Senate.
There is nothing so effective in creating gridlock as to have a watchdog agency governed by committee. Especially a committee subject to all the political pressure the Senate can create. What of the second “hostage demand?”
The Republican Senators would “subject the agency to the annual appropriation process.” There is no way to hamstring an oversight agency so quickly as chopping its budget to shreds under the flapping banner of “savings.”
“Despite claims about its unlimited power, the CFPB is the only banking regulator whose budget will be capped (for now, at 12 percent of the total Fed budget) and whose rules can be overturned (by a two-thirds vote from the Financial Stability Oversight Council, a new group of top federal economic policy-makers)” [Nation] (emphasis added)
Thus much for the “rogue” agency, unencumbered by accountability argument. The problem, as perceived by the Republican Senators, Senator Heller included, is that the agency isn’t sufficiently controlled by the American Bankers Association, the U.S. Chamber of Commerce, and the other banking interests which have bankrolled the opposition to financial reform and regulation.
When we tread toward the Safety and Soundness hostage demand we’re approaching some semantic territory in which the intent is couched in bureaucratic jargon. The essential issue is captured in the following analysis:
“The tug-of-war between “safety and soundness” and “consumer protection” is at the heart of this debate. Consumer advocates want a powerful single-body regulator and enforcer that is distinct from safety and soundness regulators. The conservative response is that it’s a very bad idea to have one consumer organization slashing profitable practices — or promoting risk taking — divorced from any safety and soundness responsibility.”
First, it’s assumed that bank regulators of yore were primarily concerned with the “safety and soundness” of the banks under their purview; and, that “safety and soundness” means PROFITABILITY. So, what the Republicans, Senator Heller prominently included, do not want the Consumer Financial Protection Bureau to issue any regulation likely to impact on the PROFITABILITY of the banking institutions.
Thus, while 40 million Americans are grappling with credit reporting agency errors, the Banker’s Boys in the U.S. Senate want (1) a consumer protection agency saddled with management by committee; (2) a committee subject to the political pressure of the Bankers and the Senators who are bankrolled by them; and (3) unable to issue any regulation that might have any negative impact on the profitability of the banks.
Rarely will we see such a blatant display of pure special interest pleading by any group of special interest pleaders. It doesn’t seem to matter to the Banker’s Boys if there are taxpayers expected to bail out the bankers when their traders’ excesses create systemic problems. It doesn’t seem to disturb the Banker’s Boys if there are homeowners subjected to exotic mortgage products — as long as the “safety and soundness” (profitability) of the mortgage bankers is assured. And, it doesn’t appear to trouble the Banker’s Boys if there are American consumers whose own financial “safety and soundness” are at the mercy of banks, mortgage bankers, and credit rating agencies unable, or unwilling, to put their own profitability at any risk in order to create a more positive financial environment for the rest of us.