Moody's: Consumer Financial Protection Bureau Will Be Good For Banks

The Consumer Financial Protection Bureau, a central component of the financial reform legislation passed last year, opened for business on July 21. It was met with hostility among Congressional Republicans, who voted a measure through the House that would make it easier to overturn the CFPB's regulations, and with confusion from the public, 80 percent of whom said in a CNN/ORC International poll that they didn't know enough about the bureau to offer an opinion on it.

The CFPB was also met with trepidation on Wall Street, where its job, after all, is to lay down the law. But Moody's Investors Service, one of the world's most closely-watched credit rating agencies, has said that the Bureau will ultimately be a good thing for the financial industry, The New York Times reports.

In a recent note, Moody's called the CFPB "medicine" for U.S. banks and wrote that "the stricter policing of consumer lending products and services will ultimately make banks safer by steering them away from riskier products such as subprime mortgages."

President Obama has nominated Richard Cordray, a former Ohio attorney general, to head the CFPB. It's far from clear whether Cordray will be confirmed -- Senate Republicans have said they will close ranks against him until a number of structural changes are made to the Bureau -- but should he become head of the agency, Cordray is expected to take a firm hand in regulating Wall Street.

While attorney general, Cordray was aggressive in prosecuting financial misconduct. Forbes notes that during his single term, he sued Bank of America and American International Group; he also sued Moody's itself, and its fellow credit-rating agency Standard & Poor's, for awarding AAA ratings to undeserving mortgage-back investments, which resulted in millions in lost pension funds for Ohio workers.

In spite of Moody's prediction that the Bureau will benefit banks -- in part because it will "level the playing field" by applying the same set of oversight standards to nonbanks -- the banking lobby is reportedly pushing for changes to the CFPB, including a five-member board of directors and a delayed transfer of powers to the agency, that critics say will render it less effective.

Comments

[Shaktas Na]

04:05 PM on 07/29/2011

That's Moody's-always so thoughtful

162 LOCAL GOVERNMENTS, 14 HOUSING FINANCE PROGRAMS, AND ONE UNIVERSITY WITH COMBINED $69 BILLION OF DEBT AFFECTED

New York, July 28, 2011 -- Moody's Investors Service has placed under review for possible downgrade the Aaa ratings of 177 public finance credits, affecting a combined $69 billion of outstanding debt. The credits include 162 local governments in 31 states, 14 housing finance programs and one university. A complete list of affected securities and additional analysis is available at www.moodys.com/USRatingActions.

In a previous action on July 19, Moody's placed the ratings of five Aaa U.S. state governments under review for possible downgrade, affecting approximately $24 billion of general obligation and related debt. Those states are Maryland, New Mexico, South Carolina and Tennessee and the Commonwealth of Virginia.

The 162 local governments include 66 cities, 53 counties, 29 school districts and 14 special tax districts. The local governments are located in 31 states, with the heaviest concentrations in Virginia (15 credits) and Massachusetts (14 credits).

* The Colorado Housing and Finance Authority's Single Family Mortgage Bonds and the Single Family Program Bonds, 2009 Class I;

The University of Washington (UW), with $1.3 billion of debt affected, is the only Aaa-rated university that Moody's placed on review for possible downgrade.

http://www.moodys.com/research/MOODYS-PLACES-Aaa-RATINGS-OF-177-US-PUBLIC-FINANCE-ISSUERS?lang=en&cy=global&docid=PR_223648#

[Itaught30yrs]

10:19 AM on 07/27/2011

Republicans oppose this? SHOCKING!

Just what aren't Republicans in opposition too? Seems like anything that looks like Obama touches is TOXIC... which makes you wonder if they really care about middle class Americans or 2012.

Me thinks it's 2012..... What happened to all that "JOBS, JOBS, JOBS" talk before the 2010 election?

It has morphed in to CUT, CAP and BALANCE.... in other words JOBS are on the back burner. In fact I don't think it ever was on the front burner...if it was no gas was lighted to make it important.

If we do not pay attention the Republicans will gut our government.

[ca va pas non]

08:17 AM on 07/27/2011

This will be a recruiting office: Those civil servants in CFPB that you will eventually corrupt and buy to extract their expertise of working the system are about the size of jobs you have created lately.

[castlerider]

01:01 AM on 07/27/2011

Keeping a focus on the big picture, One can see that the CFPB will be greatly overall good for the economy too, because when buyers feel safer, the confidence to purchase increases, which is always translated into dollars.

[pita143]

12:08 AM on 07/27/2011

The fact is when the Consumer has trust in a system they will invest in that system. And right now people DO NOT trust the system. BUT with reasonable protections for the Consumers than the bad guys will be weeded out and the Good Guys will benefit from the additional business that comes their way.

The same with Wall Street. People are hesitant to go back into the Market and as such Wall Street does not benefit from the infusion of new clients and cash. But if reasonable controls were put on them and enforced, than people would be able to trust the Market and return to the market to invest.

Would you trust going to a Restaurant that flatly refused to allow a Health Inspector into their Building? Same idea with Wall Street and Banks.

[hangdogit]

11:19 PM on 07/26/2011

As I recall economic history, the banks fought creation of the SEC in the 30's just like this agency today. The irony is that the SEC -- by boosting investor confidence that the game wasn't rigged against them -- it made the banks much stronger. The same will happen with this agency -- unless the fanatical GOP strangles it.

[PeterNPaul]

06:59 PM on 07/26/2011

Putting the CFPB is an "independent agency" inside the Federal Reserve is akin to putting the Peace Corps in with the Department of Defense. See through it folks, it is a ruse.

[onionboy]

06:24 PM on 07/26/2011

Is that Kenneth from the office? Is he in the administration now?

[onionboy]

06:26 PM on 07/26/2011

Ack! 30 Rock...I meant. Sorry.

[watchclock]

05:52 PM on 07/26/2011

Imagine That!!

[srooge]

05:31 PM on 07/26/2011

bill of rights for workers would be nice.

[getsit]

05:27 PM on 07/26/2011

So the Republicans are doing to the Consumer Protection burea what they did to the Healthcare and financial reform bills. Making them ineffective.

[smo1111]

04:26 PM on 07/26/2011

Why would anyone be Against an agency designed to protect the consumer? Seriously. One would have to love the Almighty Dollar more than their own family to be Against such an agency.

[cats530]

04:41 PM on 07/26/2011

I have absolutely no idea. Those who are rail against consumer protection are usually consumers too, so it really makes no sense.

[getsit]

05:29 PM on 07/26/2011

The teapartiers would say that corporations have a right to abuse the American people. It's not logical at all.

[hollybcars]

10:13 AM on 07/27/2011

I keep waiting to hear an argument that makes sense. Right now what I hear is '
*We need less oversight on the same group that brought this country to it's financial knees.
* We need to reward the middle class taxpayers who bailed out this group and lost jobs and saw their personal wealth plummet - with cuts to programs that serve them
* And as punishment for those who destroyed our economy we will cut their taxes and protect needless loopholes

[planetmango]

09:25 AM on 08/17/2011

well put!!

[sfizi]

04:26 PM on 07/26/2011

Banks ? a bunch of scammers.
maybe the guy will get an extra paycheck at the end of the month..

[teachone]

03:59 PM on 07/26/2011

It is very important that the American people take note of what has gone on in the past two years, each and everytime they place their vote in future elections. I save time and always vote a straight Democratic ticket and NEVER miss out on voting either, as every vote matters!!! Your vote could have kept these republican congress members, who are so intent on protecting and saving the very banks and investment firms who are stealing you all blind and nearly destroyed this country, out of office and will make sure they are never allowed into such a seat again in the future!!! Money may buy souls for some, but there are more of you americans than there are of those who have been purchased! They are only a small percentage of the people in this country and world. The rest of us are honest, ethical, moral, upstanding individuals who cannot be purchased and if we ALL get out and vote EVERY election, we will always win!!!

[indygrits]

07:29 PM on 07/26/2011

Blind faith in the Democrats is not the answer. The Glass-Steagall Act, which kept banks from gambling with "other people's money," was repealed when Clinton was president at the urging of his treasury secretary Robert Rubin (formerly of Goldman Sachs).

[CURARE]

03:49 PM on 07/26/2011

is barak going to pay for its employee? these are unelected official who would regulate our financial system like EPA, men this smells too fishy for me

[DataBoy]

12:11 AM on 07/28/2011

Canada has very tight regulations over banks, run by civil servants, and it works. Canadian banks did not take a bath like all the U.S. ones did in the sub-prime mess because of this.

No, the President won't be paying the salaries of these employees personally -- that's your job, taxpayer, and the price you pay for sanity. Which, clearly, you need.

And while I'm at it, what is, exactly, your problem with the EPA? Do you have a problem with clean air and/or water. Have you heard of the 60's when you could hardly breathe the air in big cities, when polluters had free reign and could dump their poisons in your back yard? (Google "Love Canal"). I want scientists to develop meaningful standards and limitations for pollution, and certainly NOT politician who, like you, seem incapable of critical thinking.