According to the Wall Street Journal, Senator Chris Dodd, Chair of the Senate Banking Committee, is thinking about abandoning the proposed Consumer Financial Protection Agency (CFPA) to gain bipartisan support for banking reform.
The CFPA is the heart of the Obama reform plan, creating an independent agency to police banks on behalf of consumers, cracking down on fraud and abuses like the current practice of hiking credit card interest rates to obscene levels and imposing new bank fees to gouge consumers.
Republicans led by Sen. Richard Shelby, minority leader on the Banking Committee, oppose the agency. Shelby scorns it as part of the nanny state. And the banking lobby is spending big bucks opposing it.
But the reality is that the current regulators all focus on the soundness of the banks, not the concerns of consumers. They failed miserably in policing the widespread fraud that contributed to the housing bubble. And they have sat on their hands as banks have gouged consumers since the bubble burst.
A new agency is essential -- particularly to provide a cop on the beat to police the big banks that are buying up payday lenders and hiking credit card fees and rates.
To abandon this reform to gain "bipartisan support" for reforms is bad policy -- and bad politics. If Republicans want to stand with banks rather than consumers, let them. Bring the bill up, let Republicans filibuster it. Take that argument into the fall elections. It is hard to imagine anything -- other than job growth -- that would do more to bolster Democratic prospects.
Bad politics and bad policy. Perhaps President Obama might pick up the phone to the good Senator now rather than waiting until an unholy deal is struck.
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