Will Dodd kill the CFPA?
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Bloomberg has confirmed the WSJ report that Chris Dodd is seriously considering dropping the Consumer Financial Protection Agency from the Senate’s financial-reform bill. This is hugely depressing news, since it’s predicated on a complete fallacy:
“The most effective solution to strengthen consumer protection is to keep the regulation of the bank and the products it sells within the same regulator,” said Scott Talbott, senior vice president of government affairs at the Financial Services Roundtable, a Washington-based industry trade group.
Er, no. As anybody with a bank account knows, there are many, many cases in which the interests of the bank and the interests of its customers are opposed to each other. A bank regulator exists to keep the banking industry safe and sound, and the more money a bank can squeeze out of your customers — to their personal detriment — the better the financial position of the bank in question.
What’s more, Dodd wants to reduce the powers of the Fed, not expand them. But if he demotes the consumer protection function to a division within the Fed, that will only serve to give the Fed even more in the way of disparate goals. And what existing agency but the Fed could really do this?
It’s hard not to be cynical here and see this as a ploy by Dodd to ensure a high-paying financial-sector sinecure upon his imminent retirement from the Senate. Certainly if Dodd does kill the CFPA, that will be worth many billions of dollars to America’s largest banks. I’m sure they’ll find some suitable way to reward him for his work.