Well, as much as Dodd was not as tough on banks as many would like, his lame duck status is turning Potemkin reforms into an utter joke.
The element of the proposed consumer financial protection agency that would have had a real impact on the predatory practices was the requirement to offer plain vanilla products. But nope, can’t have firms that enjoy extensive support by the state have their
pillagingprofit seeking crimped in any way.
With Dodd on his way out, the consumer financial protection agency is likely to be folded into the Treasury, where it is certain to be neutered. The argument is that the operations of the to-be-created agency might conflict with those of the systemic risk regulator. Huh? First, I’d like to hear some hypothetical examples where the two might disagree. Seems to me safe retail products is pro-stability in the overwhelming majority of cases. Infrequent instances of friction between two agencies with distinct mandates is a pretty weak argument for neutering one of them. And if there were a bona fide tradeoff between consumer protection and stability, it might be salutary to have that conflict be explicit to force examination and debate.
To the news on Dodd, via the Wall Street Journal:
Senate Banking Committee Chairman Christopher Dodd is considering scrapping the idea of creating a Consumer Financial Protection Agency….
Mr. Dodd’s offer is conditional, however: Republicans must agree to create a beefed-up consumer-protection division within another federal agency…
Mr. Dodd’s shift comes amid a new sense of urgency to enact revamped rules governing the financial sector in what is now a narrow window before the November election.
Bipartisan support is believed necessary to pass such legislation, as Democrats aren’t likely to get the 60 Senate votes needed to overcome a potential Republican filibuster. With Mr. Dodd no longer seeking re-election, some of the pressure to apply a populist stamp on new financial regulations has eased.
Mr. Dodd’s openness brings him more in line with the top Republican on the Senate banking panel, Richard Shelby of Alabama, who has referred to the Consumer Financial Protection Agency as a “nanny state.”
Many in Washington and on Wall Street believe the chances of Congress reaching an agreement on financial regulations hinges on whether Messrs. Dodd and Shelby can work out a compromise, and staffs have been locked in intense negotiations for weeks.
Representatives of Messrs. Dodd and Shelby wouldn’t discuss the state of negotiations, other than to say no agreement has been reached.
Talks could fall apart, and Mr. Dodd could still decide to push for creation of an independent agency.