Ding Dong the CFPA is Dead
The Fed should be thrilled, it looks like they get to keep bank supervision after all. At least until the next asshat shows up in Congress and starts breathing down their necks.
Senate Banking Committee negotiators, working through the weekend, agreed to drop the stand-alone consumer agency sought by the Obama administration and opposed by the banking industry, removing an obstacle that has stalled new U.S. financial rules.
Committee Chairman Christopher Dodd, a Connecticut Democrat, joined panel Republicans in seeking an alternative to the Obama proposal. Both parties are still aiming for a deal on placing consumer powers within another regulator, said people with knowledge of the talks who declined to be identified because the discussions are private.
And then there's this:
The financial-services industry opposes the consumer agency more than any other provision in Obama’s plan and has lobbied lawmakers to defeat it. JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon called the agency “just a whole new bureaucracy” on a December conference call with analysts.
“The Senate negotiators are realists,” said Gilbert Schwartz, a former Federal Reserve lawyer and partner at Schwartz & Ballen LLP in Washington. “They recognized that the CFPA was a lightning rod and the only way to get financial reform legislation through was to back away from it.”
You can find Paul Krugman crying over the Republican bullies in an NYT op-ed today if that's the sort of thing you're into.
Personally I'm partial to the Honorable Richard Posner's take on it (via the Becker-Posner blog):
The specific proposal [for a Consumer Financial Protection Agency] seems to me misconceived. Its premise is that the housing bubble and ensuing financial collapse were due in significant part to reckless borrowing to finance home purchases or borrow against home equity in order to obtain cash to buy other goods and services. The argument is that people didn’t realize the risk involved in buying a house with very little (sometimes zero) equity, especially if they financed it by an adjustable-rate mortgage, which might become unaffordable by them if interest rates rose.
No doubt some people didn’t realize they were taking a risk, but I don’t think that that is the explanation for the housing bubble. Almost no one, including sophisticated economists and financiers, realized that the steep increase in housing prices that ended in 2006 was a bubble phenomenon. If it was not, then homebuying wasn’t really risky, because one could anticipate that the market value of one’s house would grow, and this would create sufficient equity to be able to refinance one’s mortgage on attractive terms. There was a speculative element but it did not seem extreme because so few experts believed there was a housing bubble. Among these experts notoriously was Ben Bernanke.