You are hereHome >
Federal Reserve Questions Administration, Congressional Rollbacks of Wall Street Reform That Threaten CFPB
Recently released minutes of the July meeting of the Federal Open Market Committee, comprised of Federal Reserve governors and regional Federal Reserve Bank presidents, show its concern that proposed Congressional, Treasury Department and White House rollbacks to Wall Street reform could allow "a reemergence of the types of risky practices that contributed to the crisis." The rollbacks target both structural protections against reckless practices and the successful Consumer Financial Protection Bureau. The CFPB, in just six years, has returned nearly $12 Billion to over 29 million consumers harmed by unfair practices of Wall Street banks, payday lenders, credit bureaus and debt collectors.
Meanwhile, in an interview with the Financial Times excerpted in Business Insider, Fed vice-chair Stanley Fischer repeated his previous warnings that risks from the proposed rollbacks to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 were "mind-boggling" and "dangerous." He also said the following:
"It took almost 80 years after 1930 to have another financial crisis that could have been of that magnitude. And now after 10 years everybody wants to go back to a status quo before the great financial crisis. And I find that really extremely dangerous and extremely short-sighted," he told the FT. "One can understand the political dynamics of this thing, but one cannot understand why grown intelligent people reach the conclusion that [you should] get rid of all the things you have put in place in the last 10 years."
From the FOMC Minutes:
"Participants agreed that the regulatory and supervisory tools developed since the financial crisis had played an important role in fostering financial stability. Changes in regulation had likely helped in making the banking system more resilient to major shocks, in promoting more prudent balance sheet management strategies on the part of nonbank financial institutions, and in reducing the degree to which variations in lending to the private sector intensify cycles in output and in asset prices. Participants agreed that it would not be desirable for the current regulatory framework to be changed in ways that allowed a reemergence of the types of risky practices that contributed to the crisis."
The Fed is right to be concerned. In the spring, the Treasury Department held a series of meetings with the financial industry (plus a token one with U.S. PIRG and other advocates) that resulted in a sweeping blueprint for deregulation released in June. We called it a gift to Wall Street. The PIRG-backed Americans for Financial Reform released a report showing that over 3/4 of it exactly matched the recommendations of the association of only the biggest Wall Street banks known as the Clearing House Association.
The U.S. House, also in June, passed the so-called Financial Choice Act, which we call the Wrong Choice Act. While the bill as a stand-alone piece of legislation is dead on arrival in the Senate, at House Financial Services Committee chairman and Choice Act chief sponsor Jeb Hensarling's (TX) behest, the House Appropriations Committee has embedded its worst rollbacks as "riders" into the Financial Services and General Government Appropriations bill, HR3280, which will be considered as part of a must-pass package of 8 rider-laden appropriations bills all smushed together into a toxic, virtually unamendable proposal to fund the government before the current budget expires on September 30. As FSGG subcommittee chair Tom Graves (GA) stated:
"I’m particularly excited about the financial reforms, which slash harmful regulations, streamline outdated agency processes, and rein in the rogue Consumer Financial Protection Bureau."
So is Wall Street, Mr. Graves, so is Wall Street. They are jumping up and down.
But it is good to see that the staid, stoic Federal Reserve Board of Governors is echoing concerns we have been raising for some time. Hopefully, the Senate will reject the demands of the House and of Wall Street's generals, too many of whom are unfortunately embedded at both the White House and Treasury Department.
The idea of the CFPB needs no defense, only more defenders.
Your donation supports WISPIRG's work to stand up for consumers on the issues that matter, especially when powerful interests are blocking progress.