Gen. Petraeus Goes to War, Mrs. Petraeus Loses to Car Salesman in Congress

This pretty much says it all: General Petraeus is going to Afghanistan at the President's request to lead the war effort there, but his wife Holly's struggle to defend our troops against the predatory lending practices of car dealers has been lost. Holly will become another military spouse who lost a battle with car dealers while a loved one serves overseas. Both Houses of Congress are apparently willing to "support the troops" only when it doesn't get in the way of doing favors for the guys raising money at those rubber-chicken campaign fundraisers back home.

Let's hope the General has better luck against Mullah Omar than his wife had against Tony Federico. Tony's the auto dealer we wrote about the other day [1] - the one who says he always gets the best deals for his customers, but doesn't want anyone checking to see if that's true or not. In this Congress, the score is now Tony 1, Holly 0.

The House/Senate Committee approved a carve-out for auto dealers that exempts them from oversight by the Consumer Financial Protection Bureau. There are no good policy reasons for that. The argument that "car dealers had nothing to do with the economic crisis" doesn't wash. As Jeff Sovern [2] observed in Politico, reform is designed to prevent the next crisis as much as it is to avoid a repeat of the last one. With nearly a trillion dollars a year written in auto loans each year, and with auto dealers having the same perverse incentives as mortgage brokers, it's a tragedy waiting to happen.

And it's a tragedy that is happening - every day, in communities all over the country. Holly Petraeus stepped in because she was one of many military family members who grew tired of seeing soldiers exploited by fast-talking bait and switch artists at a vulnerable and frightening time in their lives. When it push comes to shove, gladhanding contributors was more important to Congress than looking out for the interests of our soldiers ... and other ordinary citizens. The racially discriminatory patterns behind auto lending didn't disturb them, either, nor did the average of $647 added to the cost of each vehicle as a result of dealer markups. (More info here [3]and here [1].)

Negotiators are working to undo a little of the damage done by this decision. As the AP reported yesterday [4], auto dealers will still be covered by Federal truth-in-lending laws, although the Fed will have to write a justification every time it tried to write rules that specifically deal with auto loans. And there's a plan to create a "fast track" for the Federal Trade Commission to write rules that address auto loans.

But these are band-aids on the gaping wound created by this sweetheart deal. Every lender but one will have to answer to the Consumer Financial Protection Bureau, leaving a messy and confusing two-tiered oversight system that's ripe for exploitation.

We promoted the CREDO/Campaign for America's Future fax campaign [5] last week, saying " Send a fax. Call your Senator and Representative. If you do, we can have you in a nice financial reform package, complete with consumer protections against auto dealer rip offs." Apparently I was overselling - which may qualify me for a job at an auto dealership - but send the fax and make the call anyway. That will let them know you're unhappy, and that you want the FTC and the Federal Reserve to push for the strongest possible regulations. And let the Senators who voted to encourage Tony's giveaway [3] (my Senator, Barbara Boxer, is one of them) know you want them to push for real oversight of these loans.

General Petraeus specializes in counterinsurgency, which is defined as "armed conflict against an insurgency by forces aligned with the recognized government of the territory in which the conflict takes place." Too bad he didn't share some of his techniques with his wife before she went to plead her case before Congress. In the battle between our troops and Tony Federico, the troops never really had a chance.