Marketplace Scratch Pad

No trust, no accountability

Scott Jagow Jan 15, 2010

We reported this morning that lame duck Senator Christopher Dodd may drop the idea of a Consumer Financial Protection Agency (CFPA) from the financial reform agenda. It’s a discouraging piece of news for those hoping the “little guy” would finally win a battle with Wall Street.

Instead of creating a stand-alone agency for consumer financial protection, it appears the new thinking is that those powers would be rolled into existing federal agencies. And that’s exactly what the bank lobby has suggested. More from our story:

Here’s Heather Booth with Americans for Financial Reform:

Heather Booth: Without a serious consumer financial protection focus. That would not be real reform. And we think that the politicians understand that this is what Main Street wants and that it’s just a question of are they responding to Main Street or are they responding to Wall Street.

For many people, it really is as simple as that. There’s no telling whether the CFPA would be an effective weapon against consumer abuse or whether creating a new agency is a good idea when the government has enough agencies that fail to do their jobs. It’s the message this decision sends to an American public that has lost nearly every shred of trust in its institutions.

I’m never one to favor politics over the merits of an idea, but it’s a fact of life that this administration is losing support in the polls, and it can’t continue its agenda of “change” if it isn’t reelected. Consider the results of a new National Journal poll:

Fewer than one in 10 express “a lot” of confidence in national banks, corporations, or the federal government. Strikingly, about half of those polled say they have no trust in any of those three institutions to help them. “These government plans aren’t working out, and these corporations are using the government to their benefit,” insisted Scott Holland, whose timber business in Garner, N.C., is bankrupt. “I really don’t trust anybody at this point.”

The lack of trust stems directly from the lack of accountability:

Hope was the great lilting anthem of the Obama campaign, but for many people, hope now seems muffled, as if buried beneath snow. Indeed, in this season of discontent, alienation from the nation’s public and private leadership appears to be hardening like the frozen winter ground…

Just 25 percent of those polled judged that the searing downturn has taught individuals, companies, and government “to make responsible financial decisions.” However, 70 percent said that Americans and their institutions have not learned that lesson “because they have not been held accountable for their mistakes.”

The way Americans see it, not only has there been no punishment or consequence for those mistakes, there’s been no change in the rules. Certain banks are bigger than ever. They’re still considered too big to fail. The government still plans to bail them out if necessary. The financial regulatory reform proposals are getting beat to a pulp by the bank lobbyists, and the politicians seem afraid to genuinely challenge them.

Some people aren’t giving up, although the options for action seem limited. The group Public Citizen has launched a petition pleading with Dodd to grow a backbone:

Late last year, Dodd proposed a strong financial reform package that would rein in Wall Street and create a Consumer Financial Protection Agency to make sure fast-talking lenders can no longer rip off consumers or take risks with our economy that could trigger another financial crisis.

The banksters on Wall Street who blindly drove our economy off a cliff are lobbying as hard as ever against real reform. Dodd should send a clear message to Wall Street that he has another dance partner – the people who are struggling through the Great Recession…

People who feel, as one poll respondent put it, that “there’s just no place to turn.”

We’re here to help you navigate this changed world and economy.

Our mission at Marketplace is to raise the economic intelligence of the country. It’s a tough task, but it’s never been more important.

In the past year, we’ve seen record unemployment, stimulus bills, and reddit users influencing the stock market. Marketplace helps you understand it all, will fact-based, approachable, and unbiased reporting.

Generous support from listeners and readers is what powers our nonprofit news—and your donation today will help provide this essential service. For just $5/month, you can sustain independent journalism that keeps you and thousands of others informed.