The role of banks in consumer agency

Consumer protection and security

TEXT OF STORY

Tess Vigeland: Today the head of the Federal Deposit Insurance Corporation made another pitch in favor of an independent agency to shield consumers from bad financial products. FDIC chairwoman Sheila Bair insisted that a new agency would help community banks, not hurt them, as opponents have claimed. But there's talk in Washington that the Consumer Financial Protection Agency is DOA.

So, why is it that consumers themselves don't seem to care? Here's our Washington bureau chief John Dimsdale.


JOHN DIMSDALE: Consumer advocates want an independent Consumer Financial Protection Agency to write and enforce rules against predatory lending and excessive interest rates. Senate negotiators want to establish oversight at the Treasury Department or the Federal Deposit Insurance Corporation. But Ed Mierzwinski with the U.S. Public Interest Research Group, says existing bank regulators have never considered consumer protections their primary responsibility.

ED MIERZWINSKI: Their first duty was to protect the banking system itself. Putting the new CFPA inside an agency that has failed for years to protect consumers is one strike against the agency.

He says the first priority for existing regulators would be the financial viability of banks. That's because regulators have become too cozy with banks, says Mike Calhoun, with the Center for Responsible Lending.

MIKE CALHOUN: Many of the bank regulators came to regard the banks as their customers. They are funded by fees that they collect from those banks. And so there's this competition for regulators to be friendly to the banks to encourage them to stay with that agency.

Banks have the right to pick and choose regulators. They fear that an unfettered consumer enforcer could compel them to make unprofitable loans to people who can't make the payments, or keep them from marketing innovative products. Senate negotiators are still aiming to propose a compromise this week.

In Washington, I'm John Dimsdale for Marketplace.

About the author

As head of Marketplace’s Washington, D.C. bureau, John Dimsdale provides insightful commentary on the intersection of government and money for the entire Marketplace portfolio.

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