One of the nation’s top banking regulators reiterated her
support for an independent agency to protect borrowers from predatory
lenders, putting her at odds with her fellow regulators and the
industry she oversees.
"Consumer abuses were one of the root causes of the financial crisis
and regulatory reform legislation should address this problem," Andrew
Gray, a spokesman for Federal Deposit Insurance Corp. Chairman Sheila
Bair, wrote in an e-mail to Huffington Post. "The FDIC has been on the
record that the ideal way to do this is through an independent agency
with the power to write rules for the banks and non-banks alike."
The statement follows Bair’s remarks Monday on consumer protection
before a conference of state attorneys general in which she said that
the proposed agency "would help community banks, not hurt them,"
reports The Associated Press.
The banking industry fiercely opposes the new agency, fearing it will
burden them with costs. It’s spun the debate in its favor by telling
lawmakers that such an agency will affect access to credit, denying
consumers and small businesses much-needed money.
Consumer advocates naturally support such an agency because for the
first time a federal agency would be charged with the sole purpose of
protecting borrowers. Also, it will be able to end abusive (though
profitable) lending practices, a responsibility currently shared by
seven agencies — none of which appropriately acted in the face of
abusive lending in subprime mortgage products, say consumer groups.
The House of Representatives passed a bill in December calling for the
creation of a Consumer Financial Protection Agency. Senate Banking
Committee Chairman Christopher Dodd (D-Conn.) is retooling his version
of the bill. The latest leaked proposal calls for the agency to be housed inside the Federal Reserve.
"Granting the Fed consumer protection authority would create a lapdog
for Wall Street, not the watchdog consumers need," said Carmen Balber,
Washington Director for Consumer Watchdog, in a statement. "We can’t
cross our fingers and hope the regulators whose failures caused the
crisis in consumer lending will do a better job for the public next
time around."
There’s been widespread criticism of the way federal agencies — most
notably the Fed — have handled their consumer protection
responsibilities.
"I don’t think we’ve done a good job protecting consumers in financial
services," Bair told the crowd Monday. Bair, a Republican, was
appointed to head the FDIC by former President George W. Bush.
Recently-leaked proposals from the Senate Banking Committee would give
other federal regulators veto power over the proposed agency’s
rule-making authority and limit its enforcement powers, crippling moves
that could render the new agency virtually powerless.
"We will continue to work constructively with Congress on this and
other important pieces of regulatory reform legislation," Gray wrote.
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