The Slow Death of Financial Regulation

Fight disinformation: Sign up for the free Mother Jones Daily newsletter and follow the news that matters.


So how is Chris Dodd doing in his negotiations with Republicans over financial reform? Felix Salmon points us to a memo from Taylor Griffin and Tony Fratto that suggests a compromise on the Consumer Finance Protection Agency is in the works: “An independent agency with its own source of funding would be established to regulate all federally chartered banks. The agency would have two divisions: one to conduct prudential regulation and one for consumer protection. The agency’s director would decide disputes between the divisions.” Felix comments:

I’m not entirely clear what this means, but it seems, on its face, to imply that the FDIC, OTS, and OCC will all be combined into one agency, which would then have somewhat conflicting goals, when it comes to the zero-sum tug-of-war between banks and consumers. On the one hand, it would be responsible for ensuring that banks are profitable and well-capitalized; on the other hand, it would be responsible for ensuring that banks don’t gouge consumers in their search for adequate profits.

Most worryingly, the consumer-protection part of the agency would only seem to have control over federally chartered banks. That’s a very bad idea indeed, since it’s precisely the non-bank financial institutions — subprime lenders, payday lenders, non-bank credit card companies, Walmart, etc etc — which need as much if not more regulation, from a consumer protection point of view, as the banks.

….So, there’s no good news here, I’m afraid. And I’m inclined to agree [] that if working with Corker means losing the guts of the CFPA, it’s best to ditch him altogether and just try to push something through the Senate with the support of Democrats alone.

As much as I’m in favor of a strong CFPA, I’ve never thought it was the linchpin of financial reform. Much more important are broad, effective limits on leverage and capital requirements. Unfortunately, the Senate bill probably won’t do very much on that front either, and what limits it does put in place are likely to be limited to conventional banks. But as with the CFPA, if the bill’s scope doesn’t include all the non-bank financial institutions, it’s really not likely to do much good.

So I agree with Felix in one sense: if you don’t have rules that go beyond conventional banks, you’re not doing anything very useful. But what I don’t get is his belief that if Bob Corker won’t bend on this, then “it’s best to ditch him altogether and just try to push something through the Senate with the support of Democrats alone.” How exactly can Democrats do this? This kind of regulatory stuff can’t go through reconciliation, and it’s certain to be filibustered. So without some Republican support, passing a bill is impossible. I don’t really see what alternative there is.

AN IMPORTANT UPDATE

We’re falling behind our online fundraising goals and we can’t sustain coming up short on donations month after month. Perhaps you’ve heard? It is impossibly hard in the news business right now, with layoffs intensifying and fancy new startups and funding going kaput.

The crisis facing journalism and democracy isn’t going away anytime soon. And neither is Mother Jones, our readers, or our unique way of doing in-depth reporting that exists to bring about change.

Which is exactly why, despite the challenges we face, we just took a big gulp and joined forces with the Center for Investigative Reporting, a team of ace journalists who create the amazing podcast and public radio show Reveal.

If you can part with even just a few bucks, please help us pick up the pace of donations. We simply can’t afford to keep falling behind on our fundraising targets month after month.

Editor-in-Chief Clara Jeffery said it well to our team recently, and that team 100 percent includes readers like you who make it all possible: “This is a year to prove that we can pull off this merger, grow our audiences and impact, attract more funding and keep growing. More broadly, it’s a year when the very future of both journalism and democracy is on the line. We have to go for every important story, every reader/listener/viewer, and leave it all on the field. I’m very proud of all the hard work that’s gotten us to this moment, and confident that we can meet it.”

Let’s do this. If you can right now, please support Mother Jones and investigative journalism with an urgently needed donation today.

payment methods

AN IMPORTANT UPDATE

We’re falling behind our online fundraising goals and we can’t sustain coming up short on donations month after month. Perhaps you’ve heard? It is impossibly hard in the news business right now, with layoffs intensifying and fancy new startups and funding going kaput.

The crisis facing journalism and democracy isn’t going away anytime soon. And neither is Mother Jones, our readers, or our unique way of doing in-depth reporting that exists to bring about change.

Which is exactly why, despite the challenges we face, we just took a big gulp and joined forces with the Center for Investigative Reporting, a team of ace journalists who create the amazing podcast and public radio show Reveal.

If you can part with even just a few bucks, please help us pick up the pace of donations. We simply can’t afford to keep falling behind on our fundraising targets month after month.

Editor-in-Chief Clara Jeffery said it well to our team recently, and that team 100 percent includes readers like you who make it all possible: “This is a year to prove that we can pull off this merger, grow our audiences and impact, attract more funding and keep growing. More broadly, it’s a year when the very future of both journalism and democracy is on the line. We have to go for every important story, every reader/listener/viewer, and leave it all on the field. I’m very proud of all the hard work that’s gotten us to this moment, and confident that we can meet it.”

Let’s do this. If you can right now, please support Mother Jones and investigative journalism with an urgently needed donation today.

payment methods

We Recommend

Latest

Sign up for our free newsletter

Subscribe to the Mother Jones Daily to have our top stories delivered directly to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate