Marketplace Scratch Pad

Fighting for the CFPA

Scott Jagow Mar 2, 2010

It appears Senators are close to a deal on financial regulatory reform. But as I reported yesterday, this deal would put the Consumer Financial Protection Agency in the hands of the Federal Reserve’s bank regulators instead of making it a stand-alone agency. The question now is: Will the president and others fight for an independent CFPA?

For its part, a coalition of business groups is directly opposing the US Chamber of Commerce’s stand that an independent CFPA would hurt small business. The Chamber has put on a relentless campaign to convince Congress that the CFPA would freeze access to credit and create an unwieldy bureaucracy. But Business for Shared Prosperity says otherwise:

“Small businesses are paying the price for an economic crisis they did not create,” said Frank Knapp, President and CEO of the South Carolina Small Business Chamber of Commerce. “When the U.S. Chamber of Commerce opposes the CFPA saying that it would choke off credit to small businesses, they are obviously out of touch with the real crisis in small business lending. While the U.S. Chamber cries crocodile tears for small businesses, it really represents the financial institutions responsible for today’s economic crisis and the pain of small businesses.”

“The reckless practices of our financial industry have devastated businesses, families and our economy,” said U.S. Women’s Chamber of Commerce CEO Margot Dorfman. “Banks that profited from predatory lending are choking businesses now by cutting lines of credit or pulling them entirely for firms that have been in business for decades. It is time for Congressional leaders to support the financial protection and wellbeing of all Americans by establishing the Consumer Financial Protection Agency.”

Business for Shared Prosperity is calling on people to join its effort by signing a statement in support of a strong CFPA. Here’s part of the statement:

Those pushing misleading products with hidden risks undercut lenders offering sound mortgages and other credit. Reckless credit practices fueled the economic crisis that has driven businesses into bankruptcy and homes into foreclosure, destroyed jobs and wealth, and severely undermined our communities and economic prospects. Many businesses that survived the initial meltdown are being hurt by credit cuts and denials, abrupt interest rate and fee hikes, and other financial practices.

Tonight on Marketplace, we’ll be looking at whether the public feels strongly enough about an independent CFPA to put real pressure on Congress. This coalition is clearly saying yes. But will it be enough? Will the president take a stand? If Senator Chris Dodd agrees to put the CFPA under the Fed’s roof, what kind of message does that send? From the Wall Street Journal:

Mr. Dodd will likely have to make a hard sell on any plan to give the Fed new powers to police the way mortgages and other products are offered to consumers. He has been one of the Fed’s biggest critics and routinely blasted the central bank for failing to enforce the consumer-protection powers it already has.

In reality, because of the opposition from Senate Republicans, Dodd may have to choose between getting a CFPA at the Fed or getting no CFPA at all. If he fights too hard for a stand-alone agency, it’s possible a reform bill won’t get passed this year.

As I pointed out yesterday, people like Paul Krugman argue that no bill is better than a weak one. Felix Salmon suggested Dodd should accept the Fed compromise and encourage Elizabeth Warren to start a separate non-governmental consumer watchdog.

The clock is ticking. Bob Keener from Business for Shared Prosperity tells me:

Most media coverage about business and the CFPA has been dominated by the voice of the US Chamber (and Wall Street lobbyists), which has crowded out the voices of millions of REAL business people.

We’d like to help you tell the story of business folks who are NOT in lock step with the US Chamber and the big Wall Street lobbyists.

You’ve heard their call. How important is a stand-alone CFPA to you?

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