03/18/2010 05:12 am ET Updated May 25, 2011

GOP Rep. Tells House Finance Committee That Banks Should "Trump" Consumers

Over at the Wonk Room, Pat Garofalo pulls video of Representative Jeb Hansarling (R-Tex.) sitting on the House Financial Services Committee as they mark up the Consumer Financial Protection Agency legislation, basically saying that banks "ought to trump" the concerns of consumers, always.


HANSARLING: The safety and soundness of the system, taxpayer protection, ought to trump the ability to ban financial products. And let's face it, I understand the chairman said that this new CFPA would not have the ability to set goals, but if you control the product mix, if you can ban products, if you can modify their terms, of what some have estimated could be as much as 10 to 15 percent of our economy, then yes, I conclude you can adversely impact the safety and soundness of these institutions.

Those are the same institutions, mind you, that negatively impacted the safety and soundness of the economy. Garafalo offers a ton of sensible pushback:

So if it can't outright prevent the CFPA from being created, the GOP would like to ensure that it's a toothless agency that can't stand up to the bank regulators. (Hensarling presents this as "taxpayer protection," ostensibly suggesting that, if the banks can make money however they see fit, they'll never need another taxpayer funded bailout.) But the CFPA will only work if it is on equal footing with the bank regulators, with adequate abilities to write and enforce regulations.

This is because many of the products that led to the economic crisis were premised on obfuscation and taking advantage of consumers -- credit cards with retroactive rate hikes, mortgages with payments that exploded after a set number of years, or overdraft fees to which consumers are automatically subjected. As Adam Levitan pointed out at Credit Slips, "the market drives the introduction of bad consumer credit products." "Some of this obfuscation is through fine-print. Some is through product design, as complexity and exploitation of consumers' cognitive biases can mask pricing," he wrote.

If you thought the Congress was at work protecting people like yourself... HA HA! Wrong.

Rep. Hensarling: Banks 'Ought To Trump' Consumers [Wonk Room]

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