Oct. 13, 2009
Public Citizen to Congress: Do Not Defang Consumer Financial Protection Agency – Defeat Bean Amendment
Statement of David Arkush, Director, Public Citizen’s Congress Watch Division
Note: On Thursday, the House Financial Services Committee is scheduled to vote on the creation of a Consumer Financial Protection Agency Act (H.R. 3126), proposed by the White House and championed by Rep. Barney Frank (D-Mass.).
Consumers need a strong watchdog agency to stop the financial industry from taking advantage of average citizens and destabilizing the broader economy. Congress is considering a bill to create such an agency, but the big banks are doing everything in their power to kill or weaken the proposal. To no one’s surprise, the lawmakers who are carrying the financial industry’s water have received large amounts of campaign cash from that industry. For the sake of those Americans who have lost so much in the economic downturn, lawmakers should serve their voters, rather than the big banks.
The proposal being considered this week would create a strong watchdog to prevent destructive and unfair financial practices. This in turn would bolster the stability of the economy. The Consumer Financial Protection Agency (CFPA) would replace oversight by failed agencies like the Fed that have served the banks, not the American public.
Most Democratic members of the committee will vote for this critical consumer watchdog because they recognize its importance to ending the squeeze on average Americans by mortgage lenders and credit card companies – and to averting another economic disaster.
Some Democrats are attempting to weaken the proposal first. Chief among them is Rep. Melissa Bean (D-Ill.), who is expected to offer an anti-consumer amendment that would block states from protecting their own citizens against abusive lending by big banks.
The finance industry has been soaking members of Congress in campaign cash, and these efforts to weaken the CFPA show that the effort might pay off. According to data from the Center for Responsive Politics (CRP), the four largest banks contributed $16.9 million to federal political campaigns and spent $23 million lobbying in 2008.Two-thirds of Bean’s campaign cash for the 2010 cycle – $438,337 of $668,677 – comes from lobbyists and lobbyist-connected PACs. Forty-two percent – $269,800 of $668,677 – of Bean’s cash comes from the finance, insurance and real estate (FIRE) industries. The data also show that two-thirds of Bean’s campaign money comes from political action committees (PACs) and that 53 percent of her PAC money is from FIRE industries.
Rep. Dennis Moore (D-Kan.) is also working to weaken the agency, and he too is swimming in industry money. He has received half his campaign cash this year from the finance sector – $139,097 of $273,683, including 65 percent of his PAC money ($98,397 of $174,897). More than 60 percent of Moore’s 2009 contributions ($168,469 of his $273,683) have come from lobbyists and lobbyist-connected PACs. Moore is seeking to make the agency toothless by taking away its authority to enforce its own rules.
It is clear that Wall Street has invested handsomely in killing or maiming the CFPA. The Bean amendment would preserve the very system that has failed consumers and dragged down the rest of the economy – one in which federal banking regulators “pre-empt” state consumer protection laws.
In the past decade, when federal regulators blocked states from cracking down on predatory lenders, the lenders unleashed the exploding mortgages and other financial time bombs that put millions out of their homes and brought down the economy. A recent study published by a research center at the University of North Carolina found that the proportion of high-cost mortgages shot up from 16 percent to 46 percent when the Office of the Comptroller of the Currency gave national banks and their subsidiaries immunity from state anti-predatory lending laws. The authors also reported that through June 2008, foreclosure rates were 12 percent lower in states that had anti-predatory lending laws. Americans need a strong federal floor of consumer protection – not a toothless federal regulator that fails to do its job and blocks states from going theirs.
Pre-emption harms not just consumers, but also community banks. With pre-emption, there are two sets of rules; small banks must comply with state laws like usury caps, but big banks are exempt. They can outcompete smaller banks by using unfair and deceptive practices. The Bean amendment would preserve the power of big banks at the expense of consumers and community banks.
We urge members of the committee to oppose the Bean amendment and any further weakening of the CFPA proposal, and we will watch the votes on these amendments closely. Weakening the CFPA is the clearest way members can show that they favor big bankers over their constituents.
We urge the House Financial Service Committee to approve strong CFPA legislation. Many courageous members of the committee are standing up to the powerful, moneyed interests of the banking lobby and pushing for a stronger agency. We wholeheartedly support these efforts and urge others on the committee to support them as well.