On Tuesday, members of a House subcommittee lamented the weakness of consumer protection from predatory lenders -- be they credit card companies, payday lenders, or subprime mortgage-peddlers -- and said improved regulation would have prevented the current economic crisis.
"For the past decade if not longer, American consumers, particularly low-income Americans, have been swimming in shark-infested waters," said Rep. Bobby Rush (D-Ill.), chairman of the subcommittee on commerce, trade, and consumer protection. Lenders "sold their snake oil by taking advantage of circumstances people faced, or with outright deception. Unfortunately, there wasn't a strong enforcement or regulatory authority at the federal level protecting consumers from these abusive practices. The result has been a wrecked economy and, I might add, wrecked lives."
"These schemes were allowed to happen in part because of a fierce anti-regulatory
ideology that was held by the Bush Administration," said Rep. Henry Waxman (D-Calif.), who added that the ideology contributed to disasters from Hurricane Katrina to tainted food.
Jon Leibowitz, chairman of the Federal Trade Commission, appeared before the committee to answer for the government's role in protecting consumers from those sharks in the water.
"What happened at the FTC?" Rush asked Leibowitz. "Why didn't the FTC take aggressive actions against mortgage lenders in the earlier part of this decade?"
"Sometimes the simplest questions most difficult ones to answer," Leibowitz said. "We are a tiny agency by Washington standards ... We have 270 attorneys doing consumer protection ... and we cover the entire waterfront of the economy."
Leibowitz said the FTC has performed well but that it could do better. "Could we have done more? Yes."
The FTC's rulemaking ability should be expanded and the agency should be given authority to bring lawsuits in federal court independently of the Justice Department, Leibowitz said. The FTC supported a bill introduced last year by Sens. Byron Dorgan (D-N.D.) and Daniel Inouye (D-Hawaii) that would have brought about such changes.
Rush spokeswoman Sharon Jenkins told the Huffington Post that new legislation reauthorizing the FTC will come up this year. "They're making a concerted effort to talk to all the stakeholders," Jenkins said.
"It's very encouraging that Congress is seriously considering expanding the FTC's authority," said Deepak Gupta, a lawyer with Public Citizen. A real climate of reform is taking hold in Washington, said Gupta, who points also to a recent proposal by Senate Democrats to create a "Financial Products Safety Commission" to protect consumers from predatory lenders.
"People are waking up to the fact that deregulation is a major contributing factor to the economic crisis," Gupta said.