Sen. Chris Dodd (D) broke off negotiations with Sen. Bob Corker(R) yesterday because we would like to think that he came to his senses when seeing Corker’s deal breakers, received a refreshed memory stemming from the HCR fiasco, and due to an outcry from folks like the readers of this website.  Corker was intent on excluding nonbank lenders like finance companies, payday lenders and pawnbrokers from the legislation’s reach.  Not to mention quashing the idea of an independent and stand alone Consumer Financial Protection Agency.  In other words, Corker wanted reform in name only excluding from such regulations all his pet special interests and flipping the bird to the American people.  For a second it looked as if Dodd was going along with it until progressives found out about it and stormed his offices, telephone lines, and email.   He ultimately dropped the negotiations in a statement he made yesterday.  Having said and done all that Sen. Dodd’s statement yesterday is troubling to say the least:

“The proposal that I’ll offer on Monday does reflect a lot of the ideas that Bob Corker and others have brought to the table. It was important to put a proposal on the table, short of a proposal that reflects some broad bipartisan agreement.”

“None of this is a matter of demanding perfection[.]” “The advocates are just demanding some meaningful, sensible, and desperately needed changes and aren’t interested in letting politicians build false confidence and have big press conferences while ignoring the central issues.”

Such comments hint of a watered down, lax, and ineffective proposal instead of REAL financial regulatory reform.. Call Sen. Dodd and demand REAL financial regulatory reform with a standalone and independent Consumer Financial Protection Agency.

U.S. Senator Chris Dodd
448 Russell Building  Washington D.C., 20510
Tel: (202) 224-2823 or email him here

Why is Sen. Chris Dodd, Democrat, allowing  Sen. Bob Corker, Republican,  to run the ship of financial regulatory reform???

• Corker cannot support a standalone Consumer Financial Protection Agency
• Corker unwilling to back mandatory limits on size of banks
• Corker against out-of-court resolution process for banks
• Corker bragging about exempting payday loans from the reform bill by pushing to remove provision that cracks down on payday lenders…a significant contributor to Sen. Corker’s campaign.  You know…the loan sharks who charge low income client as much as 300 percent interest on short term loans.  Did we mention that Corker received a significant amount of his campaign contributions this year from payday lenders?

Seriously Sen. Dodd why are you allowing the banks and payday lender controlled Corker to weaken the financial regulatory reform bill to the point of complete ineffectiveness?  We already know the Republican party is not negotiating in good faith it is simply trying to water down the bill.   What is really crazy is that you are actually considering putting the Consumer Financial Protection Agency under the Federal Reserve?  The Fed controlled consumer protection when the financial crisis happened and protection of the consumer fell by the wayside when it came to the health and safety of the banking industry.  Consumer protection law enforcement toward the banking industry has always been under the jurisdiction of the Federal Reserve and it is REDICULOUS that there is actually a discussion taking place about leaving it there given the circumstances prompting financial regulatory reform in the first place.

Elizabeth Warren, TARP watchdog,  gives a few words of wisdom regarding the Consumer Financial Protection Agency so-called “compromise” currently being discussed in the Senate.  In an recent interview Warren said the following: “[m]y first choice is a strong consumer agency,” the Harvard Law professor and federal bailout watchdog said “[m]y second choice is no agency at all and plenty of blood and teeth left on the floor…….’[m]y 99th choice is some mouthful of mush that doesn’t get the job done,” Warren said.

Warren listed the four things that the Consumer Finance Protection Agency MUST have to be effective:

• A chief appointed by the president, confirmed by the Senate;  
• Independent budget authority, so it won’t be subject to the whims of Congress or an anti-consumer administration;  
• Independent rule-making authority, without interference by bank regulators or others who may focus on bank profitability before focusing on consumers;  
• And independent enforcement powers, so the agency’s investigators can go after abusive lenders. 

“Those are the basic elements of an independent agency,” Warren said. “It’s not as if there’s some fifth thing that was left off that list — that is the list.”  Warren also spoke about the CFPA that was included in the financial regulatory bill passed by the House last December:  “It’s a muscular agency, and that’s what really matters,” Warren said.  ”It’s not perfect — there’s no excuse for excluding used car dealers — but it’s strong,” she said. “The agency that passed the House will get the job done.”

The TARP watchdog believes that it does not matter where the new agency is located but that it has real independence.  Some have disagreed with Warren and argued that housing such an agency in somewhere like the Treasury Department or the Federal Reserve would make a difference in terms of its effectiveness.  We agree.  There is a reason that the bank lobbyists are pushing for a CFPA room rental instead of a house of its own…..proximity matters.

Take a look at the other argument being made by the banks and Sens. Bob Corker (R) and Richard Shelby(R) and a response to it by Rep. Brad Miller (D-NC):

The banks and Dodd’s chief negotiating partners, Sens. Richard Shelby (R-Ala.) and Bob Corker (R-Tenn.) argue that banking regulators must have veto power over consumer protections, because restricting some bank activities could harm the institutions and put at risk their “safety and soundness.”

But Rep. Brad Miller (D-N.C.) wondered aloud how banks could argue that preventing them from ripping off consumers puts them in jeopardy.

“It would be one thing if they were saying, ‘They’re making us do things that will cause us to lose money.’ But they’re saying, ‘If you don’t let us do these things because they’re abusive to consumers, we won’t make enough money to survive,’” Miller said.

“The legislation doesn’t require the banks to offer anything. It would prohibit certain practices. So their argument is, they have to be able to cheat consumers to stay solvent. I’m not sure I’m persuaded by that argument, or that a bank that has to cheat consumers to stay solvent is one we should keep afloat. Maybe it’s time to send in the FDIC.”

Take a look at some other specs:

How do the banks fend off needed reform? Follow the money. A recent report by Paul Blumenthal of the Sunlight Foundation shows that the 27 members of the House Financial Services Committee have received over one-fourth of their contributions from the FIRE (Finance, insurance and real estate sector). Ranking Republican Spencer Baucus from Alabama opposes the CFPA, arguing that we don’t need “more regulation,” we just need “smart regulation.” He received a staggering 71% of his contributions from the finance sector over the first six months of this year (and 45% of his total contributions over his career). Democrat Melissa Bean who leads the effort to gut state regulatory authority over the banks has received fully 42% of her contributions for the first six months from the banking sector. Not surprisingly, the champions of reform like Rep. Alan Grayson, Maxine Waters, Keith Ellison, Adam Putman, and Carolyn McCarthy all pull in the lowest percentage from the sector.

New credit cardholder rules as affecting the consumer summarized by the Associated Press :

INTEREST RATES

THEN: Banks could raise the interest rate on an account at any time, including the rate on an existing balances, even if you weren’t late on payments.

NOW: The rate cannot be raised in the first year after an account is opened unless an introductory rate has come to an end. After that, cardholders must be notified 45 days in advance of any rate change.

For existing balances, rates can’t be raised unless the account is at least 60 days past due. If payments are made on time for six consecutive months, the original rate must be restored.

There’s still no cap on rates.

DISCLOSURES

THEN: The fine print on cardholder agreements was often difficult to understand. Rates, fees and penalties for other services such as cash advances, for example, could be hard to find. The impact of the interest rate on paying down a balance was hard to compute.

NOW: Cardholders will see how many months it will take to pay off a balance if only minimum payments are made. Statements will also indicate how much needs to be paid each month to pay off a balance within three years.

SERVICE FEES

THEN: Banks could charge as much as they wanted. They could assess annual fees, activation fees and other fees. This was mostly a problem for subprime cards marketed to those with poor credit scores. One popular card, for example, the Premier Bankcard, charged $256 in first-year fees for a $250 credit line.

NOW: Service fees, such as activation and annual fees, will be capped at 25 percent of the credit limit during the first year of use. After that, there is no cap.

GRACE PERIODS

THEN: Some card companies sent out statements not long before payments were due, and sometimes shifted payment due dates from month to month, meaning that payments would not always have enough time to arrive and get processed before being deemed late. As a result, some cardholders ended up getting charged interest or late fees even when they thought they were sending in payments on time.

NOW: The law requires that due dates remain consistent. Statements must be sent out 21 days before the payment due date, and finance charges and fees cannot be applied before that period is up. In practice, about half of card issuers have extended grace periods to as long as 25 days.

OVER-THE-LIMIT FEES

THEN: Banks set credit limits, then routinely allowed charges to exceed those limits. When that happened, though, the customer was charged an over-the-limit fee as high as $39. These fees were often triggered by interest charges or late-payment fees that pushed a balance over the credit limit. What’s more, multiple over-the-limit fees could get charged in a single billing cycle if the balance was paid down and another charge pushed the balance back over the limit.

NOW: The cardholder must specifically agree to permit transactions that exceed the credit limit. Only then can over-the-limit fees be charged. But the fees can’t be triggered by other fees or interest charges. Only one over-the-limit fee may be imposed during a billing cycle. No over-the-limit fees may be charged unless the cardholder has specifically agreed to permit transactions exceeding their authorized credit limit. These fees can no longer be triggered by other fees or interest charges imposed by the card issuer, and only one such fee may be imposed during a billing cycle.

In practice, several of the largest card companies have dropped these fees. Some banks are using pop-up boxes on their Web sites or other methods to obtain consumer authorization.

UNIVERSAL DEFAULT

THEN: If you made a late payment on one credit card or loan, or even late payments for obligations like utility bills, that could trigger interest rate hikes on other credit card accounts.

NOW: Card companies cannot raise interest rates on existing credit card balances. Interest rates can’t rise during the first year an account is open, unless the original agreement spelled out a promotional rate for a limited time.

Consumers with older accounts must be informed of any interest rate increase on new charges at least 45 days in advance. They must also be given a chance to opt out of the hike by canceling the account and paying down the balance at the old interest rate. If an interest rate is increased, the card company must review the account once every six months to assess whether the rate should be dropped.

STUDENTS

THEN: Students arriving on college campuses often confronted a gantlet of credit card marketers handing out T-shirts, pizza and other gifts in exchange for filling out card applications. Credit cards were frequently handed out without checking the applicant’s income sources. In 2008, 84 percent of undergraduates had at least one credit card. Average balances topped $3,100.

NOW: Credit cards may no longer be issued to anyone under age 21, unless the applicant has a co-signer, or can show independent means to repay the debt. Colleges must disclose any marketing deals they make with credit card companies. Banks are not allowed to hand out gifts on or near campuses or at college-related events.

A remorseful John S. Reed, former Chairman and CEO of CitiCorp, appeared before the Senate Banking Committee yesterday as he called for full financial regulatory reform including a dedicated consumer-focused financial protection agency.  ”There seems to have been a key failure that none of us anticipated,” Reed said in a prepared statement at a Senate Banking Committee hearing, “namely, individual institutions which are thought to take steps and exercise judgments to insure their self-preservation turned out ‘not to have’ or been incapable of so doing.

The former Chairman and CEO went further:

In response to a question from Senator Bob Corker (R-Tenn.), who called Reed’s testimony “fascinating” given that he presided over Citigroup at a time when it was expanding in all these areas, Reed said it was exactly that experience that informs his view now.
“I learned a lot,” Reed said, joking that this may be the first time he has ever agreed with former Federal Reserve chairman Paul Volcker on anything. “There’s no question that when we put Travelers and Citi together we created a monster.”

“My honest belief having experienced it…is that the system would be stronger if we could provide for some separation where major depositories are not major actors in the capital markets,” Reed said.

“This clearly means that in designing a robust system, we cannot count on that capacity.”  Mr. Reed decribed what the essential elements of financial regulatory reform must be below.

The capital held by financial firms to protect against potential losses “should be significantly increased, maybe doubled.” He added that he thinks the concept of “risk adjusted capital,” a complex system used by regulators to judge whether a bank has adequate cash, “is flawed.”

The industry should be “compartmentalized” to limit the spread of failures and to preserve “cultural boundaries.”

Traded products (to the extent possible) should flow through exchanges. Much of the derivatives market is currently in the dark, traded over the phone rather than through a centralized exchange where regulators could know what’s going on.  

A consumer-focused financial protection agency with a “clear and separate mandate” should be created.

Are you listening Sen. Dodd???

Just because our Congress allows the banks to control our government does not mean that Europe will be doing the same.  Italy seized Bank of America assets for alleged derivatives fraud.  You know, the thing that was a major contributor to the financial meltdown in this country.   So instead of exhibiting alleged “outrage” at the fraud and corruption perpetrated by our banks Italy is doing something about it.

Feb. 3 (Bloomberg) — Italy’s financial police are seizing 73.3 million euros ($102 million) of assets from Bank of America Corp. and a unit of Dexia SA as part of a probe into an alleged derivatives fraud in the region of Apulia.

The police are sequestering a further 30 million euros that the municipality was set to place in a fund managed by the banks on Feb. 6, according to an e-mail from the prosecutor’s office in Bari today. The prosecutor also asked that Charlotte, North Carolina-based Bank of America be banned from doing business with Italian municipalities for two years. A hearing is slated for next month.  Prosecutors allege that when the banks arranged swaps and created a fund that invests money the region set aside to repay 870 million euros of borrowings due in 2023, they misled the region about the economic advantage of the package. Banks skewed the swaps to their advantage to hide fees, the prosecutor said.

Apulia, located in the heel of Italy, joins more than 519 municipalities that face 990 million euros in derivatives losses, according to data compiled by the Bank of Italy. In Milan, prosecutors seized assets from four banks including JPMorgan Chase & Co. and UBS AG and requested they stand trial for alleged fraud. Hearings started in Milan this month…

Bank of America also just announced that it will be paying investment-banking employees $400,000, on average, per employee.  So instead of lending the TARP money to small businesses they are using it pay bonuses.  The blogger below captured the situation exactly.

Crime does pay in the short term. Especially if you can buy off the government and co-op the regulators of a major developed nation…..

People argue that if a nation sets rules for banks, they will just move offshore and keep doing business in any way that they please. This is intended to undermine any reforms and the rule of law. It is possible to ban a company from doing business in your nation if it engages in unlawful practices. As noted here previously, Citi was engaging in trading practices in Europe and Japan that put them on the receiving end of bans for fraud. Globalization is used as a rationale for stripping nations of their sovereign rights, and the people from their ability to rule and protect themselves in accord with their own beliefs and preferences.

http://jessescrossroadscafe.blogspot…

Sen. Chris Dodd mentioned yesterday that the President was too ambitious with his financial regulatory reform plans.  But our guess is that in light of Dodd’s pending and imminent departure from Congress he is currently setting up a lucrative retirement for himself post-Senate.  Ticking off his future employers by passing sweeping and effective financial regulatory form does not bode well for his future plans.  Just saying.

While Americans are repeatedly being asked to take it on the chin by our government a bill like ”Make Wall Street Pay for the Restoration of Main Street Act” just make sense.  The American people bailed out Wall Street to the tune of $750 billion and Wall Street repays them by raising the insurance rates, imposing abusive and deceptive credit card fees, and continuing the same practice it engaged in to get us into this maelstrom of a crap storm.  The American people need fair treatment and reciprocity.  Wall Street has pretty much operated with impunity and without repercussions even though it took us into the greatest economic downturn since the Great Depression.  The bill currently being worked on by Democratic Reps. Peter DeFazio (Ore.) and Ed Perlmutter (Colo.), would impose a 0.25 percent tax on the sale and purchase of financial instruments such as stocks, options, derivatives and futures.  The bill would raise $150 billion in tax revenue per year half of which would go to paying down the deficit and the other half would go to creating JOBS, JOBS, JOBS.   See a description of the bill by The Hill below:

The bill, a copy of which was obtained by The Hill, is titled the “Let Wall Street Pay for the Restoration of Main Street Act of 2009.”……..

Half of the $150 billion in tax revenue would go toward reducing the deficit, while the other half would be deposited in a “Job Creation Reserve” to support new jobs.

The job fund would be available to offset the additional costs of the 2009 highway bill and other legislation that creates jobs.

This is a common sense solution that may make too much sense for Congress.

After years of hoarding the power to enact consumer protection rules that would prohibit banks from gouging customers through deceptive and abusive business practices, the Federal Reserve now decides (AFTER Sen. Chris Dodd proposed a bill that would strip it of  its supervisory powers) to pass a rule that prevents banks from automatically charging customers overdraft fees for debit and ATM transactions effective July 1, 2010.  That is unless the bank gets the customer’s permission to do so ahead of time.  The new rule does not apply to checks and electronic bill payments because the Fed has decided (we assume upon counsel from the banks) that customers would want these types of transactions covered.  Hey Fed, guess what?  Banks charge these fees even though they do not actually cover  the offending transaction.  So they charge the excessive fee for the mere attempt of the transaction.  Also, consumers are not stupid.  They know that the Fed’s primary responsibility is looking out for the viability and soundness of banks.  Consumers also know that this disingenuous “act of benevolence” allegedly being done on their behalf  is really designed to keep these abusive penalty fees contributing to the bottom line of the banking industry as long as possible.  The industry makes an obscene $25 to $35 billion yearly in overdraft fees.  So Mr. Bernanke, please do not do consumers any favors.  Make the rule apply to all transactions.  Banks should be required to get the customer’s permission before covering any type of transaction involving the imposition of an overdraft fee….PERIOD!

Another thing…why wait until July 1, 2010 to make the rule effective?  The banking industry has demonstrated how it exploits its customers when given a grace period.  So why give it NINE MONTHS????  Nine months to continue fee gouging customers even more than it is doing now.  The fact that the Fed, with full knowledge of the deceptive practices currently being engaged in by the industry, are delaying the effective date of such an important protection proves that consumer protection is not the Feds priority, the profitability of the banking industry is the Feds priority. 

This is a pathetic attempt by the Federal Reserve to maintain the status quo and prevent its consumer protection arm from being usurped and put in the hands of a regulator who will ACTUALLY use it for the benefit and protection of consumers.  The growing populist anger at the banking industry is what spurred this bone being thrown at consumers but it is a mere pittance in light of the offenses being perpetrated. 

Check out Sen. Dodd’s bill in contrast:

–Require banks to get customers’ consent before enrolling them in an overdraft protection program for ATM and debit card transactions.

–Limit the number of overdraft fees banks can charge to one per month and six per year.

–Require that fees be proportional to the cost of processing the overdraft.

–Require customers be notified, by e-mail, text or traditional mail, when they overdraw their account.

–Require that customers be warned if an ATM or teller transaction will overdraw their account.

Sen. Bernie Sanders introduced the best most succinct bill ever to be considered by Congress.  Take a look.

BILL

To address the concept of ‘‘Too Big To Fail’’ with respect
to certain financial entities.

1     Be it enacted by the Senate and House of Representa-
2 tives of the United States of America in Congress assembled,
3 SECTION 1. SHORT TITLE. 
4     This Act may be cited as the ‘‘Too Big to Fail, Too
5      Big to Exist Act’’.
6 SEC. 2. REPORT TO CONGRESS ON INSTITUTIONS THAT
7                 ARE TOO BIG TO FAIL.
8     Notwithstanding any other provision of law, not later
9     than 90 days after the date of enactment of this Act, the
10   Secretary of the Treasury shall submit to Congress a list of all commercial banks,investment banks, hedge funds,
2     and insurance companies that the Secretary believes are
3     too big to fail (in this Act referred to as the ‘‘Too Big
4     to Fail List’’).
5  SEC. 3. BREAKING-UP TOO BIG TO FAIL INSTITUTIONS.
6     Notwithstanding any other provision of law, begin-
7     ning 1 year after the date of enactment of this Act, the
8     Secretary of the Treasury shall break up entities included
9     on the Too Big To Fail List, so that their failure would
10   no longer cause a catastrophic effect on the United States
11   or global economy without a taxpayer bailout.
12 SEC. 4. DEFINITION.
13     For purposes of this Act, the term ‘‘Too Big to Fail’’
14     means any entity that has grown so large that its failure
15     would have a catastrophic effect on the stability of either
16     the financial system or the United States economy without
17     substantial Government assistance.

SHORT and to the point in language that ever American can understand.

After President Obama signed a credit card reform bill in May preventing the credit card industry from assessing arbitrary fees and interest rate hikes to consumers, the credit card industry responded by immediately and arbitrarily increasing interest rates, increasing fees, raising rates retroactively on existing balances,  etc. in an effort to maximize its profits and gouge consumers even more before the new rules take effect in February 2010.  A pew report revealed that every online credit card carrier was using some form of unfair and deceptive practice. 

One hundred percent of credit cards offered online by the leading bank card issuers continue to include practices that will be outlawed once legislation passed in May takes effect next year, according to a new report by the Pew Health Group’s Safe Credit Cards Project.  The report also found that advertised credit card interest rates rose an average of 20 percent in the first two quarters of 2009, even as banks’ cost of lending declined.

Well the House has responded to such tactics by moving up the start date to December 1, 2009.  The House moved the implementation date up to the day the President signs the bill into law.  The Maloney-Frank bill received wide bipartisan support in the final floor vote of 331 to 92.  Below is the current schedule given because the credit card companies deceptively claimed that they needed time to adjust their systems in order to implement the new rules.   

The current schedule. The first portion of the reform act went into effect in August, requiring banks to give 45 days notice on major changes to a contract, including rate hikes. Issuers must also give consumers 21 days notice before a bill comes due.

Also, customers now have the right to reject changes to their contracts — if they do so, they can pay off their balances at their existing rates within five years.

The second part of the reform is currently slated to kick in next Feb. 22. Major changes include prohibiting arbitrary rate increases on existing balances, and requiring that customers opt into the ability to overdraw their accounts.

The third portion is scheduled for Aug. 22, 2010. It calls for “reasonable and proportional” penalty fees, and would require that issuers review all interest rates and reduce them where warranted.

Thanks to the House now we need the Senate to pass this ASAP!

The House Financial Services Committee is on the path to reform by preventing banks and credit unions from engaging in the deceptive practice of covering checks in the order that will gain them the most in overdraft fees.  For example, if a consumer has three checks that come in but have only enough to cover either a single check or two smaller checks, the bank with pay the larger check regardless of whether it came in after the two smaller checks because bouncing the two smaller checks will enable it to impose two separate overdraft fees.  Overdraft fees are the largest consumer fee income for the industry primarily because banks make it easy for consumers to spend more than they have and then admittedly penalize them for it.  Several reps from large banks actually admit to doing this.  They give the consumer the money and then they actually say that the same consumer must be penalized in some way for taking it.  Unbelievable. 

The Committee also are initiating a requirement that forces the overdraft fees to be commensurate with the ACTUAL cost of covering the checks or purchase.  One of the panelist during the Committee hearing hit the nail on the head:

Jean Ann Fox, director of financial services for the Consumer Federation of America, said, “When a bank decides to lend money to consumers by letting a debit purchase go through that should have been denied, the fee is not a deterrent, it’s a profit center.”

Here is additional information from USA Today:

The House Financial Services Committee blasted banks and credit unions at a hearing Friday for routinely paying consumers’ overdrawn transactions, then charging them steep fees. These fees have bolstered banks’ balance sheets during the recession while turning debit cards — which the industry often advertises as a product to help you manage your money — into a debt trap for some consumers.

“Why are overdraft services the only ones where banks can take consumers’ money without their permission?” Rep. Carolyn Maloney, D-N.Y., said at the hearing. “How is this different from Burger King charging you for a burger you didn’t want?” 

Maloney has sponsored a bill with Rep. Barney Frank, D-Mass., requiring banks to get consumers’ permission before covering their overdrafts and charging them a fee. Currently, most banks will automatically enroll customers in these programs.

The legislation, which faces stiff opposition from the banking industry, would also cap the number of overdraft fees consumers can be charged and tie the fees to the transactions’ processing costs. Sen. Chris Dodd, D-Conn., has a similar bill pending in the Senate.

Representave Carolyn Maloney hopes to have the legislation on the President’s desk by Christmas.

The consumer cannot invoke the laws of the Consumer Financial Protection Agency through a civil right of action if a credit card company violates the rules????  The consumer must wait for the overworked Attorney Generals and the state’s (probably captured) Banking Commission  to bring a criminal complaint against the credit card company??  Seriously???  Thousands of consumer are protesting at the American Bankers Association in Chicago due to the arbitrary raising of interest rates and continued gouging of the consumer that the banking industry continues to engage in during this period preceding the full enactment of the Credit Cardholders Bill of Rights.  Call your Congressman and tell them that you want the right to sue credit card companies for deceptive or unscrupulous business practices.

Apparently Congress has not been to Chicago lately.  It appears that corporate america has once again captured our legislative branch.  When asked why consumers do not have a private right of action in the bill Rep. Barney Frank responded that the Obama Administration didn’t ask for a private right of action.  A private right of action would definitely keeep the credit card industyry on its toes.  We will do more research on this and let you know the pluses and minuses to a private right of action for the consumer.  It is this writer’s opinion that Congress believes that we are paying so much attention to the health care rebate that we forgot about the huge blunder that put us in this recession in the first place.  So it has decided to try and pass “reform” in the way of a gutted consumer protection agency that has no real power or authority.

Not to mention that fact that according to the bill federal law can preempt stronger state banking laws if it can be shown to seriously interfere with national banking, i.e. not uniform. What???

Major financial institutions have been particularly concerned that the CFPA would create a floor, rather than a ceiling, for financial consumer protection standards, which potentially could subject them to fifty different regulatory schemes.  Representatives Mel Watt (D-NC) and Moore offered an amendment to grant preemptive effect to federal law if a state law would have a discriminatory effect on national banks.

Further, there are too many exemptions for certain industries that result in huge limitations on the CFPA powers.  Take a look at the list below:

1. The first amendment offered, by Representative Joe Donnelly (D-IN), exempted manufacturers of modular homes.
2. Representative Brad Miller’s (D-NC) amendment to exempt banks whose assets under management are less than $10 billion and credit unions whose assets are under $1.5 billion from significant parts of CFPA coverage.
3. Chairman Frank’s amendment to clarify that stores that offer store credit will not fall under the CFPA’s purview;
4. Representative Tom Price’s (R-GA) amendment to exempt employee pension benefit plans;
   Representative John Campbell (D-CA) and Bill Posey’s (R-FL) amendment to exempt automobile dealers, including those that finance automobile purchases by non-retail customers;
5. Representative Dennis Moore (D-KS) and Erik Paulsen’s (R-MN) amendment to exempt forms of insurance, including auto, life, and homeowners;
6. Representative Donnelly’s amendment to exempt manufacturers of modular homes.

CONGRESS we NEED REAL REFORM!

Elizabeth Warren, the Chair of the Congressional Oversight Panel and the person who originally proposed the idea of the Consumer Financial Protection Agency in the 2007 said the following during a Congressional hearing regarding TARP funds: “People are angry that even if they have paid their bills on time consistently and never missed a payment, their TARP-assisted banks are unilaterally raising their interest rates or slashing their credit lines,” said Warren, who elaborated further about the populist anger over foreclosures and the lack of small business financing.

And in terms of decreasing credit lines the banks are doing just that.  One particularly notable dirty trick the industry is using is slashing credit lines of their customers so that the customer then ends up over their credit limit.  The banks then charge over-limit fees and/or raise the customer’s interest rate even though the consumer is only over his/her credit limit because the bank lowered the customer’s limit after the purchases were made.  Very unscrupulous.  Another trick the industry is trying as a way to increase your promotional interest rate is by attempting to negotiate your payment each month from a higher percentage of your balance to a lower percentage of your balance if you accept a higher interest rate.  Though industry practice prior to the new regulations was three percent, the rule is that banks can charge you between three and five percent of your balance as a monthly payment.  This is a trick on the consumer because there is nothing in place to prevent that same credit card company from coming back to you the following month to negotiate with you to accept and even higher rate in exchange for a lower payment.  Don’t fall for it.  All of these deceptive tactics are being utilized to take full advantage of the non-existent laws before the Credit Cardholders Bill of Rights goes into full effect in February 2010 and because there is no consumer protection agency.  The credit card companies are attempting to gouge consumers by any means necessary which is why consumers need a protection agency whose sole focus is to prevent such practices.   

Some of the reasons cited by Warren as to why it’s vital that we have  Consumer Financial Protection Agency:

• It is impossible to buy a toaster that has a one-in-five chance of bursting into flames and burning down your house. But it is possible to refinance an existing home with a mortgage that has the same one-in-five chance of putting the family out on the street — and the mortgage won’t even carry a disclosure of that fact to the homeowner.
• Consumers would greatly benefit if an independent commission existed to create safe harbors for credit card agreements or ensure that mortgages didn’t keep individuals confused about interest rate hikes.
• It can be proactive rather than reactive.”Three or four years down the line firms will come up with some new idea that they haven’t thought of yet that will have some destabilizing impact on the market,” said a Warren confidant. “Rather than waiting for Congress to come back and take action, you would have a regulatory agency already set up.” 
• Sens. Durbin, Schumer and Kennedy wrote to Treasury Secretary Geitner urging the creation of CFPA because ”we cannot effectively manage systemic risk and restore the confidence of American families in the financial system without making sure that the financial products themselves are safe.”

The Americans for Fairness in Lending has cited the top six reasons for having the Consumer Financial Protection Agency:

• Consumer protection would be the CFPA’s only mission, so consumer interests would not be subordinated to other concerns.
• The CFPA would regulate all companies that are involved in consumer lending, so that companies would not be able to seek out a regulator with looser standards or to avoid regulation entirely.
• The CFPA would impose the same rules on all companies offering the same products, regardless of their charter or corporate form, so all consumers getting the same type of loan would receive the same protections.
• The CFPA would have the authority to both write and enforce rules, thus eliminating the disconnect that can lead to gaps in the current system.
• As the single agency charged with consumer financial protection, the CFPA would have the motivation and the resources to be able to collect the data, carry out the research, and develop the expertise that are needed to regulate effectively.
• With its data, expertise, and unified authority, the CFPA would be able to respond to new abusive practices and products promptly and effectively.

Americans for Financial Reform sums it up:

• A strong federal commitment to robust consumer protection is central to restoring and maintaining a sound economy.  The nation’s financial crisis grew out of the proliferation of inappropriate and unsustainable lending practices that could have and should have been prevented.  That failure harmed millions of American families, undermined the safety and soundness of the lending institutions themselves, and imperiled the economy as a whole.

THE WHITE HOUSE

Office of the Press Secretary
__________________________________________________________________________
For Immediate Release                                               September 14, 2009

REMARKS BY THE PRESIDENT
ON FINANCIAL RESCUE AND REFORM

Federal Hall
New York, New York

11:59 A.M. EDT

THE PRESIDENT:  Thank you very much.  It is wonderful to be back in New York after having just been here last week.  It is a beautiful day and we have some extraordinary guests here in the Hall today.  I just want to mention a few.

First of all from my economic team, somebody who I think has done extraordinary work on behalf of all Americans and has helped to strengthen our financial system immeasurably, Secretary Tim Geithner — please give him a big round of applause.  (Applause.)  Somebody who is continually guiding me and keeping me straight on the numbers, the chair of the Council of Economic Advisers, Christina Romer is here.  (Applause.)  We have an extraordinary economic recovery board and as chairman somebody who knows more about the financial markets and the economy generally than just about anybody in this country, Paul Volcker.  Thank you, Paul.  (Applause.)  The outstanding mayor of the city of New York, Mr. Michael Bloomberg.  (Applause.)  We have Assembly Speaker Sheldon Silver is here, as well; thank you.  (Applause.)

We have a host of members of Congress, but there’s one that I have to single out because he is going to be helping to shape the agenda going forward to make sure that we have one of the strongest, most dynamic, and most innovative financial markets in the world for many years to come, and that’s my good friend, Barney Frank.  (Applause.)  I also want Read the rest of this entry »

The President is giving a speech today on the progress that has been made with respect to overhauling our financial regulatory system.  The credit card and the rest of the financial industry has unleashed its lobbyists on Capitol Hill to the tune of millions of dollars in an effort to thwart the administration’s efforts to overhaul the financial regulatory system.  More specifically preventing the creation of the Consumer Financial Protection Agency is the industry’s highest objective. 

Mr. President we desperately need this agency and cannot afford to continue spreading the responsibility for protecting consumers within the financial markets among ten different agencies that have other much higher priorities.  The agencies currently delegated with this task failed miserably as was demonstrated by the near financial collapse.  Further, and as noted by your chair of the Congressional Oversight Panel, Elizabeth Warren, “[c]onsumer financial products were the front end of the destabilization of the American economic system.”  Obviously all ten regulatory agencies currently charged with consumer protection responsibilities were distracted with other priorities prior to and during the financial meltdown and therefore would not give this aspect of regulatory reform the attention it needs.  We need an agency whose sole mission, purpose, and focus is protecting consumers. In addition, there appears to be a conflict of interest with bank regulators like the Federal Reserve taking on the consumer protection aspect of financial regulatory reform.  A bank regulator’s primary goal is the “safety and soundness” of banks and a bank’s profitability even if its at the expense of exploiting consumers.  Therefore, consumer protection cannot be a high priority at the same time as the profitability and soundness of banks being a priority.  Bank regulating agencies will be less inclined to enforce consumer protection laws if a bank is failing because the regulators main job is to help prevent the bank from failing and the risk of the manipulation or unfair practices perpetrated against the consumer is secondary.  Also, because companies can choose which agency regulates them by how it decides to form as a corporation (e.g. charter, bank, etc.), bank regulators are incentivized to regulate without bite or not be tough on banks because such a reputation will result in banks choosing one of the other nine agencies to regulate it by choosing a different corporate form to operate under.

In short Mr. President, we need the Consumer Financial Protection Agency more than ever because banks have already begun re-engaging in the same irresponsible risk-taking behavior that caused the current recession and the credit card industry is already engaging in deceptive practices as a work around to recently passed consumer protection laws.  As for the financial industry, it is engaging in excessive risk-taking again because no significant changes have been made to the financial regulatory system.  Unfortunately turf-protecting regulators, lobbyists, and Congress have slowed the overhaul process down considerably but we cannot afford to continue at this snail’s pace.  Because banks are again taking risks far greater than the CYA capital they have on hand our financial system is again in jeopardy.  The banking industry continues to operate under the assumption that they are “too big to fail” and that is not healthy for consumers.

Therefore Mr. President, please continue to press hard and fast with regulatory reform including creating the vitally important Consumer Financial Protection Agency.  We will not reiterate the stakes as we are sure that you are very much aware.

Being touted as the biggest regulatory overhaul since the Great Depression, President Obama will announce specifics today of his “new foundation” for the financial industry.   The five primary elements of the administration’s plan for regulatory reform are: 

1. Promote Robust Supervision and Regulation of Financial Firms: Tougher oversight of financial institutions through expansion of the role and increasing the powers of the Federal Reserve by giving it greater oversight over financial institutions such as banks and insurance companies.  
2. Establish Comprehensive Regulation of Financial Markets: Increased focus on market infrastructure by regulating previously less regulated  products such as over-the-counter derivatives.  For example, the administration will propose regulations requiring originators of new securities to have “skin in the game” by requiring that such originators hold a continued equity stake in the securities even after the securities are largely sold off. 
3. Protect Consumers and Investors from Financial Abuse: Creating the Consumer Financial Protection Agency (CFPA) which will be a regulatory agency responsible for protecting consumers who have credit cards, mortgages, or other financial products and will serve as a consumer watchdog.  According to a senior administration official, the new agency will establish “a very clear line of accountability around products that they deem abusive of consumers, or misleading.”  The new Agency will also have the authority to “reform our mortgage laws.”  One such law will require that “consumers receive a single, simple, integrated federal mortgage disclosure.” 
4. Provide the Government with Tools it needs to Manage Financial Crisis:  Giving the administration greater power to dismantle financial firms falling into financial difficulties so as to preempt the kind of systemic problems suffered in the current economic meltdown. 
5. Raise International Regulatory Standards and Improve International Cooperation:  Coordination of financial regulation with governments around the globe so as to synchronize global oversight of financial markets.

“The goal is to integrate the system, make sure that there are not any gaps, and to make sure that we have a updating of the regulatory system that worked back in the 1930s, but doesn’t work with the kinds of financial instruments and the kinds of global capital markets that exist today…..and we’re confident that we’ve struck the right balance.”   -President Obama, Bloomberg Television. 

See the full and official 85-page white paper of regulatory plan here.

UPDATE:  The President’s remarks

12:53 P.M. EDT

THE PRESIDENT: Thank you very much.

Since taking office, my administration has mounted what I think has to be acknowledged as an extraordinary response to a historic economic crisis. But even as we take decisive action to repair the damage to our economy, we’re working hard to build a new foundation for sustained economic growth. This will not be easy. We know that this recession is not the result of one failure, but of many. And many of the toughest challenges we face are the product of a cascade of mistakes and missed opportunities which took place over the course of decades.

That’s why, as part of this new foundation, we’re seeking to build an energy economy that creates new jobs and new businesses to free us from our dependence on foreign oil. We want to foster an education system that instills in each generation the capacity to turn ideas into innovations, and innovations into industries and jobs. And as I discussed on Monday at the American Medical Association, we want to reform our health care system so that we can remain healthy and competitive.  Read the rest of this entry »

The credit card companies are already retaliating against the Credit Card Bill of Rights that passed through the Senate yesterday.  The industry has decided to go after their best customers in two ways.  First, by charging an annual fee to consumers and second by charging interest on purchases as soon as the purchase is made rather than giving the industry standard grace period.  Well the Obama administration and Congress is firing back.  The White House is actively discussing adding a new regulatory commission that regulates the credit card industry.  This would be part of the major overhaul of the financial industry that the administration has in the works.  The new commission would have broad authority to protect consumers who use mortgages, credit cards, and mutual funds.  In addition, the proposed commission’s authority would be concentrated in one place with consumer protection as one of its main priorities.  This no doubt will result in tougher rules for the financial industry generally and the credit card industry specifically.

Some of the new requirements are:

• Payment summary must show length of time it will take you to pay off your credit card bill if only the minimum payment is paid each month.  The payment summary must also include how much interest you will pay over time if only the minimum payment is made.
• Credit card bill must be sent out 21 days before payment due date
• Credit card companies cannot retroactively change the rate on existing balances unless the card is 60 days delinquent
• Consumer payments above the minimum payment applies first to balance with highest rate
• Teaser rates cannot be changed for the first year that the account is opened and promotional rates must last at least six months
• Over limit fees cannot be charged unless consumer has expressly authorized such transactions beforehand
• Minors under the age of 21 must provide consent of a parent that they will be liable for the debt or prove to the credit card company that the under 21 consumer has the means to repay the debt. 

The Obama administration and Congress hopes that this regulation will help to deter consumers from over leveraging themselves in addition to protecting consumers from predatory practices.