Whitesburg KY
Mostly sunny
Mostly sunny

Consumer bureau helps prudent too

Froma Harrop

Froma Harrop

Let’s set aside the back-andforth over the recess appointment of Richard Cordray as chief watchdog at the new Consumer Financial Protection Bureau. President Obama named the former Ohio attorney general to lead the agency when the Senate was supposedly out of session, which he’s allowed to do.

Republicans refuse to confirm him without changes that would render the bureau toothless. And they hold that the Senate wasn’t out of session because they had someone whack the gavel every four days, calling the empty chamber to order. Democrats tried the same trick during the George W. Bush administration. The Constitution neglected to define “recess,” so the courts will.

The bigger question is why Republicans oppose an agency that would stop financial companies from cheating and taking advantage of ordinary Americans, which happened to millions during the mortgage mania. They complain that the current setup leaves the bureau “unaccountable” to the American people, in part, because its funding comes automatically out of the Federal Reserve’s budget rather than through the congressional appropriations process.

Unfortunately, the interests of the American people and individual members of Congress are not always one and the same. The funding mechanism was created precisely to remove the power of the purse from the industry’s handmaidens in Congress. During 2007 and 2008, the height of Wall Street excess, conservatives cut the funding for the Securities and Exchange Commission, whose job it was to patrol the markets. They apparently want the ability to deny the Consumer Financial Protection Bureau the means to stand between the unscrupulous financial salesmen and their unsophisticated prey.

Sen. Richard Shelby, the Alabama Republican, further warned that the bureau “will directly affect every American household by limiting their choices when purchasing financial products, restricting the availability of credit to consumers” and so forth.

Limit consumer choice? Restrict the availability of credit? Jolly good, I say. If taking poison off the shelves means limiting consumer choice, that’s OK. And if some people can’t get a loan under reasonable standards, so be it. And really, how does requiring that financial contracts be written in plain English challenge the sanctity of free markets?

There is a moral case for protecting ordinary folk from abusive or fraudulent financial products, but also a selfish one. We who were not foolish, lazy or reckless during the housing bubble also paid a price. When the slick operators’ practices brought the financial markets to their knees, the taxpayers had to bail them out or face another Great Depression. They continue to suffer from the Great Recession that followed. (The operators, meanwhile, ran off with their sacks of upfront fees and the pickings from working-class pockets.)

We don’t want that to happen again, do we? One may argue with reason that other factors also crushed the financial markets — government guarantees for risky mortgages, shoddy and corrupt work by the financial ratings agencies and a policy of low interest rates to keep the game going. But a well-built jetliner has any number of backups ready to keep the thing flying should one system malfunction.

Obviously, there’s lots of money in letting Wall Street feed the little guys into the grinder. The financial, insurance and real estate industries have given Washington politicians $135 million in 2011- 2012, according to the Center for Responsive Politics. Republicans received 56.3 percent of that largesse, versus 37.7 percent going to Democrats.

While many of the contributors are fine, upstanding citizens, one still senses a monetary motive behind the Republican campaign to defang the Consumer Financial Protection Bureau. In the end, the Republican position would seem more aimed at defending the cons than the Constitution. ©2012 The Providence Journal Co.

Leave a Reply