One of the big unsettled issues for the congressional conference committee considering financial reform is whether to create an independent financial consumer protection agency.
That’s what the House bill does. The argument for an independent agency is that consumers need a strong advocate in the financial marketplace.
The Senate decided that an independent consumer financial watchdog wasn’t needed, and that the consumer financial protector should live in, of all places, the Federal Reserve. After all, the Fed already has responsibilities to “implement major laws concerning consumer credit.” We all know how well that worked out.
The problem is that the Fed has functioned as a protector of the big banks, never more so than since the big bank bailout and in the battle over financial reform.
Despite promises for greater transparency, the Fed has repeatedly resisted attempts to get it to disclose all the favors it’s done for financial institutions since the bailout. If the Fed had put up half the fight against bank secrecy that it’s waged on behalf of bank secrets, consumers would never have been subjected to all those lousy subprime loans.
It is telling that no actual consumers or consumer organizations actually think that housing consumer protection inside the Fed is a good idea. Who does? The big banks and the Fed.
For those who still need convincing that a Fed-housed consumer protection agency is a bad idea, the Fed has provided a more recent example of what it means by consumer protection.
Last month it unveiled a database that’s supposed to help people choose the most appropriate credit card.
The database might be useful to professional researchers but provides little that would be of use to ordinary consumers. It presents the credit card statements by company but provides no other search functions, such as comparing credit cards by interest rates or fees.
Some of the presentation suggests that the information was dumped onto the Fed’s website without much thought. Bill Allison, who is editorial director of the Sunlight Foundation, a non-profit organization that digitizes government data and creates online tools to make it accessible to readers, said the following:
“I don't think there's anything wrong with posting it, but this is obviously not data you can search,” Allison told Bailout Sleuth.
He also pointed out that some of the agreements themselves aren't particularly informative. He cited the entry for Barclays Bank Delaware, which notes that the bank may assess fees for late payments and returned checks. “The current amounts of such Account Fees are stated in the Supplement,” the agreement reads.
But that supplement is not contained in the Fed's database. The Fed promises to go back and refine its database. But if they’re not devoting the resources to get this right now, with their ability to protect consumers under the microscope, do you really expect they’ll do better later?
An independent consumer protector is not simply some technicality to be bargained away. We’ve learned from the bubble and its aftermath that consumers need all the help they can get. Contact your congressperson and tell them you’re still paying attention to the reform fight. Check out your congressperson and see if they’re on the conference committee. If they are, your voice is especially important. While you’re at it, contact the president and remind him we won’t settle for any more watering down of financial reform.