FDIC Chairman Sheila Bair Committed To Independent Consumer Agency
One of the nation's top banking regulators reiterated her support for an independent agency to protect borrowers from predatory lenders, putting her at odds with her fellow regulators and the industry she oversees.
"Consumer abuses were one of the root causes of the financial crisis and regulatory reform legislation should address this problem," Andrew Gray, a spokesman for Federal Deposit Insurance Corp. Chairman Sheila Bair, wrote in an e-mail to Huffington Post. "The FDIC has been on the record that the ideal way to do this is through an independent agency with the power to write rules for the banks and non-banks alike."
The statement follows Bair's remarks Monday on consumer protection before a conference of state attorneys general in which she said that the proposed agency "would help community banks, not hurt them," reports The Associated Press.
The banking industry fiercely opposes the new agency, fearing it will burden them with costs. It's spun the debate in its favor by telling lawmakers that such an agency will affect access to credit, denying consumers and small businesses much-needed money.
Consumer advocates naturally support such an agency because for the first time a federal agency would be charged with the sole purpose of protecting borrowers. Also, it will be able to end abusive (though profitable) lending practices, a responsibility currently shared by seven agencies -- none of which appropriately acted in the face of abusive lending in subprime mortgage products, say consumer groups.
The House of Representatives passed a bill in December calling for the creation of a Consumer Financial Protection Agency. Senate Banking Committee Chairman Christopher Dodd (D-Conn.) is retooling his version of the bill. The latest leaked proposal calls for the agency to be housed inside the Federal Reserve.
"Granting the Fed consumer protection authority would create a lapdog for Wall Street, not the watchdog consumers need," said Carmen Balber, Washington Director for Consumer Watchdog, in a statement. "We can't cross our fingers and hope the regulators whose failures caused the crisis in consumer lending will do a better job for the public next time around."
There's been widespread criticism of the way federal agencies -- most notably the Fed -- have handled their consumer protection responsibilities.
"I don't think we've done a good job protecting consumers in financial services," Bair told the crowd Monday. Bair, a Republican, was appointed to head the FDIC by former President George W. Bush.
Recently-leaked proposals from the Senate Banking Committee would give other federal regulators veto power over the proposed agency's rule-making authority and limit its enforcement powers, crippling moves that could render the new agency virtually powerless.
"We will continue to work constructively with Congress on this and other important pieces of regulatory reform legislation," Gray wrote.