Consumer Financial Protection Agency

Eighteen former members of the Federal Reserve’s Consumer Advisory Council (CAC) strongly endorsed the idea of an independent Consumer Financial Protection Agency in a letter released last week . Draft legislation released yesterday by Sen. Chris Dodd would instead place the CFPA in the Fed, an idea that the former CAC members specifically rejected.

The letter says that "The Federal Reserve has its hands full with responsibilities relating to safety and soundness and monetary policy." It singles the Fed out for special criticism in its handling of consumer issues under both Democratic and Republican administrations: "In 1994 Congress gave the Federal Reserve the power to outlaw unfair and deceptive practices in the mortgage market. The Federal Reserve waited until 2008 to issue their rule, long after the problem had become a crisis and after the market had collapsed. During that time, we and other consumer protection experts issued reams of comment and testimony calling on them to exercise their authority to protect consumers."

The full text of the letter is below: more »

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Democracy requires vigorous public debate in an open forum, conducted by leaders willing to take a public stand and face the consequences. Today's proposal on banking reform from Sen. Dodd is the product of backroom negotiation and holds nobody accountable. It allows Senators to dodge one of the most critical issues of the day: the financial security of the American public. more »

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A central property of financial capitalism is that price discrepancies will be exploited for profit. This is called arbitrage. It’s an old concept but one that several of our elected representatives seem not to understand. more »

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After more than a year of closed-door negotiations, the President and other Democrats have finally appropriated a Republican phrase by calling for "an up or down vote" on the resulting health reform legislation. Great idea - so great, in fact, that we should do even better on financial reform.

This time, let's have an up-or-down vote on each of the vital policy planks that constitute meaningful reform. Instead of having politicians do their horsetrading in private and leaving the public vote until the end, let's have a public show of hands on the vital economic issues of our time.. more »

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Almost everyone knows that to "pull a Kanye" means to steal the limelight when it rightfully belongs elsewhere. With Sen. Dodd's suggestion that the Consumer Financial Protection Agency be housed in the Federal Reserve, it looked as if Ben Bernanke had successfully "pulled a Kanye" on an independent CFPA. But before Bernanke had time to say "Imma let you finish" to Elizabeth Warren, the Fed Chair was sideswiped by a group of Senators who want to strip away his authority over any but the largest banks.

Now we've got a real mess on our hands. If the CFPA is housed in the Fed, but the Fed doesn't regulate most American banks, how will American consumers get the protection they need? more »

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Nobel Prize-winner Joseph Stiglitz said the Fed was "corrupt," Elizabeth Warren said she wanted to fight for the CFPA until there were "blood and teeth" on the floor, and Robert Rubin said "virtually nobody" sa more »

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