I felt certain when I read the Financial Times headline, “Proposal sees consumer watchdog role for Fed,” that I must have woken up in a bizarre parallel universe (but that is probably unfair to pretty much all universes parallel to ours: I imagine it would be very difficult to have one more perverse than ours). But no, sadly, this headline is for real; the only possible good news in this account it that this dreadful idea is far from a done deal.
Putting the proposed consumer financial services watchdog in any existing agency, save perhaps the FDIC, no matter what the professed logic is, is really a plan to neuter it (ironically. Richard Shelby, who was the original moving force against having the proposed new agency be independent, wanted to house it at the FDIC; it is the Democrats who are now responsible for the further devolution of this plan). The Treasury, Fed, and Office of the Comptroller of the Currency are notoriously bank friendly. Think they are gonna do anything to seriously inconvenience their charges? Not on your life. The sole reason the FDIC could be a viable choice is that it is the only Federal bank regulator that is serious about enforcement. And that is due to the simple fact that if they mess up on enforcement, they wind up with more dead banks, which is embarrassing, costly, and a ton more work for them than preventing train wrecks in the first place (to the extent they can).
And as bad a choice as the Treasury was (the former planned place to bury the financial products consumer protection agency), it would be part of the Administration, and hence subject to political pressure. Although the Fed is in the process of getting its wings clipped a tad, has managed the neat trick of playing an increasingly political role (starting with Greenspan, in a break with the practice of past Fed chairman, of weighing in on policy issues) while remaining utterly unaccountable to anyone.
The concerns and realities of ordinary people have simply not registered with the Fed (in fairness, consumer protection has never been part of its charter). But the Fed was negligent in executing duties assigned by Congress on the consumer front. Congress did pass something called HOEPA (Home Ownership and Equity Protection Act) that defined subprime mortgages and called for subprime activity to be reported to the relevant regulators. The Office of the Comptroller of the Currency, which also oversees banks, used HOEPA to monitor subprime lending and rein in extreme behavior. The Fed could have done so, but chose not to. In June 2007, Congress was pressuring a resistant Fed to rein in abusive mortgage practices. And did that have any impact? This update, right before the storm burst, July 2007:
A good old-fashioned showdown is set for this week between the Congress and the Fed. Congressmen are hoppin’ mad at the Fed’s failure not only to act to stem overheated and sometimes predatory subprime lending, but also its patent lack of enthusiasm in doing anything to keep this and other predatory practices from recurring. And they have some justification for their annoyance. While admittedly the Fed regulates only a portion of the institutions that were involved in subprime lending, it failed to use the tools it had available, most notably the Home Ownership and Equity Protection Act (by contrast, the Office of the Comptroller of the Currency, made use of HOEPA and had relatively few abuses among the banks it supervises).
There is a reason the Fed has been so tone deaf on this issue. It does not see borrower protection as part of its job (it isn’t part of the original Fed charter) and the little we’ve seen directly also suggests the Fed is a staunch believer in free market ideology (remember, Greenspan was an acolyte of Ayn Rand and Bernanke hasn’t had the time to put his own stamp on the institution).
Congress is threatening aggressive moves, namely, moving some of its regulatory authority to other agencies, if the Fed doesn’t fall into line.
And consider this quote from Dodd himself:
“They had a job to do, and they didn’t do it,” said Senate Banking Committee Chairman Christopher Dodd, (D., Conn.), of the Fed’s performance. “A lot of people are hurt, and I’m angry about it,” added Mr. Dodd, who is seeking the Democratic presidential nomination.
Yves here. Do we have a single shred of evidence to support the notion that the Fed has undergone a miraculous conversion experience as a result of the crisis and will now act as staunch defender of the little guy? I certainly haven’t seen it.
In fact, the central bank already has broad authority to bar practices it sees as unfair and deceptive. The push to create an independent consumer financial services watchdog was precisely because the Fed and other regulators had been so hopelessly derelict in exercising these duties.
Congress was prepared to strip the Fed of some of its authority three years ago due to its abysmal failure to do anything about subprime abuses, even in the face of rising defaults, media coverage of fraud, and pressure from Capitol Hill. Now Dodd is prepared to reward the Fed for the very same conduct he roundly criticized three years ago. We can only assume he has already started serving his post-Congressional constituency.
I think you’re missing the logic of this move. (Don’t get me wrong: I thought the exact same thing as you when I first saw this. But once I thought about it for a while, I figured out the logic of the move, and it actually could end up being quite shrewd.)
Ideally, the CFPA would be a self-funded, independent agency. The great benefit of that arrangement is that it would create an agency (1) whose sole purpose for existing is consumer protection (which is huge, because that means it’ll always find more consumer protection to do), and (2) relatively free from political interference. Housing the CFPA inside Treasury is sub-optimal because the Treasury Secretary is a political appointee, and the CFPA would likely not vigorously enforce consumer protection regulations under Treasury Secretary Phil Gramm. (Plus the CFPA could be de-fanged through the budget process.)
Housing the CFPA inside the FDIC would make the CFPA both self-funding and relatively free from political interference, but there’s a huge jurisdictional problem with that plan. The FDIC only has jurisdiction over commercial banks and thrifts, and one of the main purposes of the CFPA is to regulate all the non-bank lenders out there. (That’s the reason Shelby proposed putting it in the FDIC.) So an FDIC-housed CFPA is a non-starter.
The Fed, on the other hand, does regulate non-banks. It’s also self-funding, and is the regulator most insulated from political interference. So if we set up a CFPA inside the Fed, we will have achieved the goal of having a self-funded regulatory body that’s relatively free from political interference. Now, I know what you’re going to say: “The Fed is institutionally biased in favor of the banking industry, and anyway, Alan Greenspan never would have allowed a strong consumer regulator inside the Fed!” And that’s true. But now we just have to insulate the Fed-housed CFPA, in its rulemaking and enforcement capacities, from the Board of Governors. That can certainly be done, and in a much more subtle and less controversial way than just waging an “Independent CFPA or Bust!” campaign. We don’t need total insulation from the Board of Governors either, because if consumer protection is made part of its charter, then the Board won’t be as hostile to consumer regulation as it has been in the past.
Essentially, the idea would be to have the CFPA leech off of the Fed’s independence. If structured properly, it could be a really shrewd move. Much shrewder than I thought Dodd or his staff was capable, frankly! Seriously, you should write this plan off before we see it.
(I probably should have made this into its own post, but whatever, I’ll post it as a comment.)
Whoops. The second-to-last sentence should (obviously) read: “Seriously, you shouldn’t write this plan off before we see it.”
That’s an interesting conjecture, but I don’t see any reason to believe that the independence of this agency is a goal (if one wanted it to be independent, it would be independent, right?) So your construct is that this move is a way to sidestep the Republicans, specifically Shelby, who was the moving force behind blocking the consumer financial protection agency as an independent operation.
The problem is, everyone tells me that Shelby understands banking regulations better than ANY Congressman or Senator, bar none. And the reason he wanted the consumer financial watchdog to be housed somewhere as opposed to independent was to prevent conflicting directives among regulators. Thus the reason for locating it within an existing regulatory apparatus was BY DESIGN to force the consumer watchdog and whatever regulator it was attached to to hash out their issues between themselves before issuing directives to banks. Since all bank regulators save the FDIC are very bank friendly, putting the watchdog anywhere but in the FDIC guarantees that it will be reined in.
I don’t see a clever (and rather insistent) codger like Shelby letting his core idea be finessed. I’d be delighted to be proven wrong, but I just don’t see this happening.
Why do you not see any reason to think the goal of the proposal is independence? Dodd wanted an independent CFPA — as evidenced by the fact that his first proposed bill included a fully independent CFPA — and this Fed-housed CFPA proposal is coming from Dodd. He knows he can’t get an independent CFPA, so he’s aiming for as much independence as possible. Which, per the reasoning in my earlier comment, means housing it at the Fed.
Sure, Shelby won’t go for it, but who cares what Shelby thinks? This is a Dodd-Corker compromise, and Shelby ultimately can’t do anything to stop it. We only need one Republican to get to 60, and if Corker is willing to break ranks, then Shelby has no leverage. And Corker has to decide whether to break ranks at the committee stage, which means that if he does break ranks, the bill would come to the floor as an (all-important) “bipartisan financial reform bill.” That makes it infinitely more difficult for the “moderate” Dems like Nelson and Lincoln to make a big show of demanding concessions in exchange for their votes. But we don’t need Shelby to get to that point, nor can he stop the Fed-CFPA proposal from getting to that point (if Dodd and Corker finalize an agreement on the proposal).
The fact that the CFPA would be housed in the Fed doesn’t necessarily mean that the Board of Governors would have a veto over CFPA regs — again, the issue would be the CFPA’s insulation from the Board on rulemaking matters. The OCC is technically part of Treasury, but the Treasury Secretary doesn’t get a say on OCC regs. And honestly, the problem is that Fed governors (other than Greenspan) just didn’t care about consumer protection; it’s not like Bernanke is violently opposed to consumer protection regs, he just considers it beneath him. So I can’t see the Fed Board getting all worked up about proposed CFPA regs too often.
I definitely think this proposal could work. It wouldn’t be ideal, but it’s sure as hell better than drawing a line in the sand for the sake of drawing a line in the sand, which is what Krugman et al. want to do (in a not-so-subtle attempt to exorcise their frustrations over having to accept a compromise on health care). If the CFPA doesn’t get a foot in the door in this round of financial reform, it’ll be another 15 years before a CFPA-like entity gets a vote on the Senate floor.
P.S. I’m not sure about Shelby being THE leading banking law expert in Congress — I think that goes hands down to Barney Frank — but Shelby is definitely on a different level than Dodd.
EofC: “It wouldn’t be ideal, but it’s sure as hell better than drawing a line in the sand for the sake of drawing a line in the sand”
It’s not about drawing a line in the sand for the sake of drawing a line in the sand. It is about getting a CFPA, which deserves to be called a CFPA.
A non-independent, encapsulated ‘CFPA’ is NOT a consumer financial protection agency. It will be used to silence Elizabeth Warren (oh shut up, you angry woman, your agency has been founded, go back to your university job) and all other consumer protection supporters.
Also, I do not understand what you mean by ‘CFPA’ being independently funded as part of the FED. Who outside the FED would have anything to say about how much money that agency would get? What if the FED were to decide to give that agency say 2 full-time positions and a $ 100.000 yearly budget?
Also, can you imagine an FDA being part of a ‘organization for pharmaceuticals’ or an EPA being part of a ‘coal organization’?
(2) relatively free from political interference
I think you are actually talking about ‘organisational interference’, i.e. the ability to tell the agency what to do or not to do. Appointees are always political and there always is political intereference no matter how you organize something.
Bernanke is a political appointee and under political influence as well, however Congress or the President can just not tell him what to do or not to do. However, the banksters can.
The US does have seemingly independent agencies all over the place and none of them did do its job.
It is a question of the right people in the right places.
This is another part of the scam, given the well-known
role of the FED as ‘regulator’, lol.Intestingly, in
Great Britain, the Tories also want to rein in the FSA by shelving within the Bank of England..
This whole thing is quite simple; it’s a matter of ROI.
What do consumers give a departing politician? A pension and health care benefits.
What do corporations give to a departing politician? A rich compensation, plush office, tons of perk, a chance to play with the big guys and gals AND a pension with health care benefits.
Res ipsa loquitur
These are the top campaign contributors of Mr. Dodd:
Securities & Investment $1,281,298
Lawyers/Law Firms $752,776
Who do you think pulls this puppets’ strings? Sure no quid pro quo here or anything illegal
There appear to be sound reasons for the establishment of the Consumer Financial Protection Agency; however, I haven’t heard one that passes my smell test.
Now I’ve heard Elizabeth Warren campaign for such an agency and she is a person for whom I have high regard. She speaks well, reasons very well and has a very accurate insight as to what has happened to the middle class.
I do not sense that she has a personal agenda that seeks self aggrandizement and I think that she is well intentioned. She sees a wrong/abuse that needs to be corrected.
Now comes herself, Yves Smith, who comments on the self serving machinations of Congressional committees. Her points are well made and appear to be very much to the issue.
My question is: Do we need a Consumer Financial Protection Agency? My challenges to the concept of consumer protection are as follows:
You signed a loan and mortgage agreement that you did/do not understand? Shame on you, you should have consulted an attorney.
You have a Credit Card and you do not understand the agreement that the card issuer has provided you? Again, shame on you, and again, you should have consulted an attorney.
Why are we having problems with credit cards, auto loans and all manner of consumer credit? My observation is that you inevitably find that the consumer is attempting to spend more that he/she earns. In this regard, I do not see being profligate and/or stupid as being a legitimate justification for the establishment of an agency whose purpose is essentially to protect the consumer from himself. My rule is: if you can’t make the payment, don’t borrow the money.
Now do credit card issuers engage in trickery? Yes, and the range of nefarious practices is wide and all encompassing. How do we bring this malpractice to heel? You sue them for fraudelent representation and predatory conduct.
There is a balance that needs to be established between what is individual responsibility and what it is that government agencies can and should do for the citizenry. I do not believe that the government can protect me from myself. I question whether the government will protect the citizenry from the actions of the government. I think it is encumbent on the citizenry to protect itself from government by defining and limiting powers and authority that are to be granted to government.
It is my view that what we have before us is a problem that is best addressed by a set of well defined statues that proscribe unethical, fraudulent and predatory conduct in financial transactions.
As to your piece on MER. Anyone who is confronted with a default/foreclosure notice should engage legal consul and demand that the party seeking to foreclose come to court and produce the note and its accompanying mortgage/deed of trust instrument appropriately supported by recorded documentation of the conveyance of the loan to a subsequent party and the grant of power of attorney to MER and whoever represents to the court that they are empowered to act on behalf of owner of the note. There is a very high probability that the party seeking foreclosure will be unable to document its standing.
Some excellent points. Except the people that need the most protection cannot afford to hire an attorney to review every financial document they sign. And why should thousands of people have to go out and hire lawyers to review essentially the same financial document? Wouldn’t it make more sense to have a central authority review such a document and give it their seal of approval?
No you’re creating a bureaucracy to do what is fundamentally a personal responsibility.
siggy: “You sue them for fraudelent representation and predatory conduct.”
well this would be a jobs program for lawyers, but I agree with Chris: it would make society unnecessarily nasty.
What is wrong with testing products before people are exposed to them? Siggy, do you agree with the existence of the FDA? and of the safety board for cars (successfully lobbied by Toyota as we now know). Or do you say: sue them all for selling you a toxic product (like a credit card company, like a drugs company, like a car company)?
Sue!!!! It is the American Way!
Is that a public works project that favors lawyer, yep.
In studying coercion in advertising there was a fellow named Dichter who asked, “Is it wrong to give people what they ‘want’ by taking away their defenses?”. In identifying these so-called strategies of desire, and by manipulation of the vulnerabilities of consumers, lenders invented time payments, installment loans, credit cards all to give the consumer what the advertisers told them they wanted through manipulating their desires. Thereby, creating the colossus of consumer debt. Who wouldn’t want the American Dream if it fits in a monthly payment? The Jones were invented to keep up with by the media and advertisers. Just don’t lose your job. When one examines the power of (illegal)coercive pursuasion technologies (CPT), is it any wonder debt is killing the middle class, or that we are on the verge of fighting three wars simultaneously for another country? Just look at the TV ads for debt and credit cards, as our TV says “Priceless”.
A choice was made. There is advertising on this blog. I haven’t a clue as to what is being advertised. I watch very little TV and I mostly listen to NPR and the local Classical station. I read a lot of newspapers and magazines. I pay no heed to the adds. I’m well aware that the advertising pays for the costs of publication. My point is you don’t have to buy all those tinker toys.
I like to think of myself as being a responsable anarchist. I was taught to see what is and to beware the crowd. While a Consumer Protection Agency has a nice group hug air about it, I’ve never found groups to be very appealing. I grew up in a neighbor in which there were no other children my age. In fact there aren’t many people left in my age cohort. Lately they’ve been dropping like flies who’ve been drinking the DDT.
You want a Consumer Protection Agency, you’ll probably get one. When it arrives you’ll not be protected. Please tell me why it is that you have this burning need to be protected by a government that can’t even do a mediocre job of policing the financial fraud that has occured and which fraud will have the effect of making us all a great deal poorer.
@Siggy: Not all consumer protection appeals lead to government. Quite the contrary, let’s go the other direction to more competition and open markets and away from the oligarcy of the financial industrial complex (FIC). Let’s start by eliminating coercive lobbying by banks, credit card companies, insurance and mortgage companies. That’s not more government its less. Then let’s expand, not restrict internet access to the masses to educate themselves on matters of credit and debt. Who would prohibit more transparency within the FIC? You guessed it, Congress, Senate, Federal Reserve Member Banks’ lobbyists and marketing departments. Ending a con game does not mean bigger government. It means more freedom to expose corrupt and coercive practices and give the means to vulnerable consumers to defend themselves. Caveat emptor starts with allowing transparency in order to become aware! We have to understand and identify the methods of the FIC in order to recognize the threat before damage is done, not after. Individual empowerment does not mean dependency on government, but when violations occur, the perpetrators must have consequences not be rewarded with protected market share, strengthened barriers to entry from competition, and certainly not re-capitalized from the very victims they just coerced.
“You signed a loan and mortgage agreement that you did/do not understand? Shame on you, you should have consulted an attorney.”
“You have a Credit Card and you do not understand the agreement that the card issuer has provided you? Again, shame on you, and again, you should have consulted an attorney.”
Indeed, Siggy, here you sound uncharacteristically like a randian social Darwinist. Suckers beware. It’s the “least” among us who can’t possibly afford to sue for fraud, and anyway the current toothless regulators have been so captured by bribery that fraud has been rendered nearly impossible to prove.
Ayn Rand, well, I’m insulted. Tried to read her Atlas Shrugged, tossed it. Bunch of claptrap. Some think she was the philosophical second coming of Spinoza or something. I thought she was a bit too central european and very much a peasant with some hair brained views.
Darwinian, well maybe. I do believe that the strong of body and mind do tend to prevail. I don’t smoke anymore. It’s been 15 years since I quite. I went cold turkey no pills, no patches, no hypnosis. I just chose to not smoke. It was a very enlightening experience.
We all make choices, some good some bad, some just so-so. Nonetheless, we make choices. Now, there was a time when retailers offerred lay-away. There was a time when people saved to buy certain goods. Today, no savings. I wonder why.
It is my view that the no savings mentality is induced by the rational expectation of the substantial loss in purchasing power of saved dollars. Will your hoped for Consumer Protection Agency recover your lost purchasing power? Will your Consumer Protection Agency do anything about preserving the purchasing power of our currency?
There’s an eye on the ball writer who frequents this space. I think it’s time we all get our eye on the ball. Its not the abuse of the consumer that’s roiling the water, it’s the currency and its continuing debasement that is a critical engine of this debacle.
[How do we bring this malpractice to heel? You sue them for fraudulent representation and predatory conduct.]
What spectacular, barking nonsense.
If they are allowed to operate they will defraud a million people and be sued by a dozen. That’s easy money right there. If the populace eventually gets wise, invent a new scam.
The would apply to product safety; make the product unsafe enough to kill everyone that uses it and nobody will sue you because they will all be dead.
See the problem? You are encouraging VAST misdeeds on a scale IMPOSSIBLE to comprehend because you would leave it to every individual to recognize damages and spend their lives, spirits and savings to avenge themselves over and over without end.
Again, utter nonsense. Only a seasoned lawyer could advocate that level of leaping corruption.
Per the comment above, lawsuits are not an adequate remedy. You need to have lost at least $300,000 for the economics of litigation to make sense (trust me, I’ve been there). Oh, and by the way, for credit cards and securities transactions, you have to agree to arbitration, remember? From industry-stacked arbitrators? This is not conspiracy theory; even the WSJ has written about it.
That means that all kinds of penny ante fraud is permitted and happens. I’ve had it happen. Chase lied to me about what I’d have to do to have a free business checking account. I grilled the account manager three times, one time a full month after I opened the account. Six months later, I am paying fees despite complying with the terms I was told verbally.
Similarly,it was not uncommon for banks to promise a fixed rate mortgage and give documents for a teaser mortgage at closing. Someone I know, who is a PhD, had this stunt pulled. The WSJ has also reported that this happened to a borrower who did catch it pre signing, and he to have three more goes it with the bank to get them to deliver what he was promised. Three times is not a mere error; it’s chicanery.
And it is well nigh impossible to get a bank to cough up the mortgage form pre-closing (I know people who have had had to make major stinks to do so). Reading a complicate document at the supposed closing, particularly if you have sold your house or given up your rental and NEED to move into the house you are buying also works against buyers being as careful as they should be.
I very much enjoy you blog. You write and reason very well. I tend to agree with most of the positions that you take.
I recently tried to do a refi, got sand bagged at closing and walked. Curiously, got a better deal from the original lender, took it and closed in short order. It’s a lot like baseball. The breaks tend to go to teams that make the breaks possible. That is, you make them field the ball, you make them throw it. In financial negotiation in order to win you have to be willing to lose the deal. When you make the deal it is very important to leave some change on the table. You may want to do another deal with the same party at a latter date. You need to give him something to take home and hang on the wall.
Now, suing should really be limited nice big multi-million dollar shots. Thus, on an individual basis credit cards and auto loans and even home loans are pretty much in the realm of being chump change. For that reason, what is needed are laws that fairly define what shall be proscribed conduct the violation of which shall be draconian punishment.
If you think that a Consumer Protection Agency is going to save the bacon of every soul in this country, you would do well to go to a retreat and rumminate on that problem. In my view there is no incentive like joint and several liability. There is no incentive like harsh incarceration to bring a return of ethical conduct.
What really tees me off is the fact that existing laws have been ignored and those we have entrusted to enforce the laws have failed us so badly.
Dodd needs an entire regulatory agency for himself.
Just move on. Your legacy as a paid whore isn’t gonna change by putting some bureaucratic mess over at the FED.
Senator Dodd is a “Friend of Angelo Mozilo” and a partner with Ed Downe who was convicted of insider trading. He is not running for reelection. In his present position, he is operating under a “pre-employment” contract with the financial industry. Next year, when officially out of office, he will, no doubt, be a lobbyist, either directly like Biily Tauzin, or indirectly as a lawyer with a firm with ties to the financial industry. His future compensation is related to the job he does today. I believe that not only will he ensure effective legislation is not passed but that he will oversee the passage of ineffective legislation designed to thwart reform.
I agree with scharfy. Barney Frank in the House and Dodd in the Senate are both whores of the financial industry they are supposed to oversee. The CFPA was gutted in the House partly over Frank’s protest but mostly with his connivance. In the Senate, Dodd never liked it (even in its gutted form), has tried to kill it, and barring that is now seeking to dump it down a deep, dark hole in the Fed.
It is surprising that anyone would think that anything Frank, Dodd, or more generally Congress (both parties) and Obama do is done in good faith or with the public interest in mind. I find myself invoking more and more often what I call the “sensible” paradox. If these people and entities could act sensibly now, then they could have in the past and the disasters we are now faced with would not have occurred. But they weren’t sensible then and they won’t be sensible now.
Dodd is not doddering off to spend more time with the brats after all. He’s feathering his nest as a banksters’ lobbyist—paying it forward.
Just when you think it can’t get any worse, the tragicomic theater gets impossibly absurd. In this animal farm circus, what better place for the sheep pen than the wolves’ den? Saves time and effort. Alternate universe indeed. Life gets more interesting by the day.
What, the FED, plagued by misreads of the economy, whose very abilities to execute current mandates are open to question, its secrecy and lack of accountability ingrained, is now going to be endowed with yet additional powers?
Tis’ a strange world we live in.
The FED, by its own statements, has had no direct regulatory function (consumer or otherwise). Are we now going to allow that inexperience actor (or inept, or compromised) with a weak track record to play a starring role? Sounds like the script for a presidential run.
Is this so called independence in reality a conflict of interest? From the latest crisis we see a organization whose concept of economic wholeness involves supporting large financial institutions, no matter how blundering or unethical. Fine, but what happens when consumer complaints ‘crimp’ a TBTF’s bottom line (as determined by the – TBTF). Whose side is the FED going to take in the matter if they are obligated to support the accused?
Likewise a consumer protection agency is would be a political organism, whose mandate is to protect the public interest (FDA as mentioned). The only independence it needs is from concerns with a vested interest in preserving the system they created. The historic place of regulation has been with government. That regulation has been tainted in cases with over-representation of a particular interest opposing general interest is argument for reform, not removing that agency from a governmental sphere.
You can argue question of whether CFPA (or CFPA as formerly proposed) is a good idea, but to make it part and parcel or the FED is punishing the extreme and can only lead one to assume the motives for such a proposal are to bury it, while lending a facade of consumer activism to those organizations (and individuals) in need.
This is definitely the real non-starter of the whole charade.
I’m pretty sympathetic to the comment above that we don’t really need such an agency.
Instead of the solution that people that people take every mortgage and credit card contract to a lawyer to review, and sue if there is a problem (should people be doing this for rental car contracts as well?), I would like to suggest legislation standardizing the terms for all common debt such as credit card and mortgage terms, and setting out who qualified and who doesn’t qualify for these things.
It would be nice if people could find a place to live without taking alot of debt. Maybe property owners could lease out part of their property to people capable of making the lease payments for short periods. The terms of these contracts could also be standardized by law. OK, I’m being a bit snarky.
But the proposed agency does sound alot like one of those bandaid solutions, that distract from the underlying problems and eventually makes them more complex.
Another approach Consumer Protection SOLUTION for FORECLOSURE
There won’t be a meaningful reduction in foreclosure until the legal process of foreclosure includes the legal mandate of the borrower to become an authorized and legal participant in the proceedings.
Yes, Absolutely the borrower defaulted, but there were many different reasons why the borrower defaulted.
But I am here to tell you that the Mortgage Banks had a greater responsibility that played a significant role in the foreclosure process.
The main element in foreclosure is control, only the bank or lender has absolute control. The law favors the bank. The borrower for all practical purposes has no rights. Remember the Banks conduct their business with impunity and can do anything it wants to do; foreclose, modify, forbearance short sale, etc.
The Banks control every facet of the mortgage loan process from application to loan approval or denial. The Banks control every facet of the foreclosure process.
Banks are not under any legal obligation to modify their mortgage loans. Banks are not afraid of reprisal from the borrower since they have no rights. The Congress through the US Treasury banking regulators licensed and chartered these banks to lend mortgage money and enacted no legislation to address, or curtail the aberrant lending activities of these mortgage lenders.
The question then is, was this a license to steal, so to speak, when Congress licensed and chartered these banks?
Conversely, the Congress were negligent in their oversight of the US Treasury’s federal banking regulators like the Office of Thrift Supervision that committed malfeasance in their lack of supervision, regulation and enforcement of violations of laws, rules and regulations committed by federal mortgage banks and lenders. The Office of Thrift Supervision has made malfeasance an art form.
The banking regulators lack of supervision regulation and enforcement of banks unethical lending activities exacerbated and magnified aberrant mortgage lending activities which contributed to this foreclosure crisis.
The Office of Thrift Supervision has stated in writing that there are no Federal Consumer Banking Regulations. From my viewpoint that translates to the Borrower has no rights.
Accordingly, the Office of Thrift Supervision had culpability in the foreclosures by federal lenders and banks.
Realistically, the answer to foreclosure actually is very straight forward – include and make it mandatory that the mortgage borrower become an equal legal participant in the solution of a problem through mandatory neutral arbitration with their federally chartered bank who legally owns and holds their mortgage within the same regulatory system that the banks lends its mortgage money.
This could be accomplished physically through an arbitrator within the federal bankruptcy system.
Create a transparent federal mortgage loan transaction with fairness and equity to insure ethical conduct of the parties throughout the life of a mortgage loan.
In addition give equal rights to the parties of equal weight by engaging a neutral designated arbitrator to problem solve a fair and equitable solution to the issues raised by either party. It levels the playing field, so to speak.
Thus the arbitrator would also act as a monitoring entity for the banks compliance to banking laws as required by their federal regulator and how effective the regulators supervision has impacted the bank in question.
Establish rights for a mortgage borrower to question, object or contest what they consider unethical lending behavior on the part of the federally chartered bank within the same regulatory system in which the bank or lender lends its mortgage money.
This should result in productive and effective solutions to problems that normally would turn into a lawsuit or foreclosure.
Give the Federal arbitrator the absolute authority to determine the issues and to settle the issues between the Borrower and the Lender.
The Congress through legislation is obligated to give the mortgage borrower a legal forum to be heard.
Based on the fact of millions and millions of foreclosures where the mortgage borrower has no rights and no voice added to the fact the federal regulators were negligent in performing their responsibilities with a Congress that was complicit would suggest that mandatory arbitration administered by the federal bankruptcy system should produce the most reasonable results.
Financial Industry Lobbies Congress for New Banker’s Protection Agency
Financial Industry Lobbies Congress for New Banker’s Protection Agency
The Bankers will never permit this to materialize.
Aleady it has gone from a proposed Independent Stand Alone Agency to maybe part of the Fed or Treasury Department.
If it is not independent you have the same malfeasance as we have now. The idea is to give consumers rights.
The banks will NOT permit that to happen. It cuts down on how much they can steal in a fiscal year.