In case you hadn't noticed, the U.S. economy is still recovering from a major financial crisis caused by reckless Wall Street practices. As part of its response, Congress in 2010 beefed up two investor cops to clean up crime in the suites and created a new cop to protect consumers. But the new House of Representatives has taken steps to de-fund all three - the investor cops at the Securities and Exchange Commission and the Commodity Futures Trading Commission and the consumer cops at the new Consumer Financial Protection Bureau (CFPB). It's now up to the Senate to save consumer protection.
The dean of U.S. personal finance columnists, Jane Bryant Quinn, says that the CFPB is "badly needed," but that the House "whacked" it.
It's true. If you haven't seen the Academy Award-winning Inside Job yet, let's start with a short history lesson: In 2007-2008, unfair but profitable practices of the big Wall Street banks led to the collapse of the U.S. and world economies. They'd sold predatory mortgages to consumers and then packaged them into risky securities for investors. When this long-running scheme failed, taxpayers were forced by Congress in the fall of 2008 to ante up for an unprecedented bailout of the Wall Street banks because they were "too-big-to-fail." Over the same big banks' furious lobbying and objections, but with broad public support, in July 2010, Congress passed comprehensive Wall Street reform to make sure this wouldn't happen again. The reform included establishment of that landmark consumer cop, the Consumer Financial Protection Bureau (on the web at consumerfinance.gov).
Now, fast forward to February 2011. JP Morgan Chase's Jamie Dimon is living large; he's once again the highest paid Wall Street titan with his recent $17 million bonus, even if his bank had to admit to Congress it had ripped off fighter pilots and other servicemembers and even if it continues to gouge average consumers with high-cost overdraft "protection," a seamy practice many other banks have stopped.
As a first step in rolling back Wall Street reform, the House last week passed a Continuing Resolution (CR) on the budget that kneecaps the three agencies that are critical to policing Wall Street and protecting consumers. The CFTC, which was empowered under the new law to oversee the shadowy derivatives market, and the SEC, which is responsible for implementing major new investor protection reforms, saw deep cuts in their budget, even though both agencies are funded by user fees and actually turn a profit for the taxpayer.
Meanwhile, Professor Elizabeth Warren and her team are building, or "standing up," the new CFPB - the agency designed with only one job, protecting consumers from risky mortgages, tricky credit cards and triple-digit APR payday loans; but it doesn't take charge until July.
But will the CFPB have the resources it needs to protect consumers? Not if the House has its way.
Many members of the House are in denial that the Wall Street collapse even occurred. Leading members of the House, from Majority Whip Eric Cantor (R-VA) to the high-profile Rep. Michele Bachmann (R-MN), want to repeal the entire Dodd-Frank Wall Street Reform and Consumer Protection Act. And new House Financial Services Chair Spencer Bachus (R-AL) says he wants to "serve the banks."
When Congress established the CFPB, it specifically insulated the CFPB's budget authority from Congressional and special-interest meddling, by making its funding not an appropriation but a transfer from the independently-funded Federal Reserve. Not to worry, the House used dubious rules it wrote itself to cut the CFPB budget from $143 million to $80 million anyway. If the House action stands, the CFPB would be the only federal bank regulator subject to political budget cuts. By the way, kingpin Jamie Dimon's take for the last three years? About $84 million.
Let's hope what happened in the House stays in the House. What happened on Wall Street wreaked havoc on jobs, home and retirement values and the economy. In February 2011, average Americans -- from soldiers to factory workers to retirees -- are still suffering from the fallout of the economy's collapse and continued unfair practices by the nation's big banks. Ten million jobs have been lost in the recession, millions of Americans have lost their homes, and those homeowners and the rest of us have lost trillions of dollars in home and retirement fund values.
Meanwhile, the House is trying to starve our consumer cops to death. It's now in the public interest for the U.S. Senate to pass its own budget resolution that puts consumer and investor cops back on the beat. Otherwise, what happened on Wall Street will happen again.
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