A group of professors with expertise in consumer and banking law have sent a letter to key House and Senate committee chairmen demanding that Congress enact the Obama administration's proposed reforms of the financial industry.
"Our review of the regulatory approaches at the existing agencies," says the letter, "leads us to conclude that on balance they place a higher value on protecting the interest of financial product vendors who promote complex debt instruments using aggressive sales practices, than they do on protecting the interests of consumers in transparent, safe, and fair financial products."
The 74 legal scholars who put their names on the letter say the key to realigning the government's regulatory approach to the interests of consumers is the creation of an independent regulator, the proposed Consumer Financial Protection Agency. The administration's initiative, first announced in the spring, has been bogged down under the weight of criticism and intense lobbying from Wall Street. In July, House Financial Services Committee chairman Rep. Barney Frank (D-Mass.) punted the issue until after the August recess. And then in September, Frank began paring back the proposal.
Jeff Sovern, a professor at St. John's University School of Law, told LobbyBlog that the professors have nothing to gain from speaking up.
"Unlike the banks, we don't have an economic interest here. And unlike the regulators, we're not trying to protect turf," Sovern said. "In fact, we might have something to lose. A lot of law professors consult, and law professors who take positions opposed by the banks are not going to get calls from the bank asking for work."
Sovern said he was disappointed that Frank's version of the CFPA loses the ability to require firms to offer "plain vanilla" financial products, but "a watered down approach is better than nothing."
Check out the full letter here.
Frank's committee will take up the CFPA in a hearing on Wednesday.