In a new effort to guarantee the continued right of banks to loot and pillage, 44 Republican senators have written to Obama saying that they won’t approve of any head of the Consumer Financial Protection Bureau ex what these Ministers of Truth choose to call a “restructuring” of the agency.
The arguments made against the agency strain credulity. As the New York Times reports:
“This is about accountability,” said Senator Richard Shelby of Alabama, the ranking Republican member of the Senate Banking Committee. “The bureau, as currently structured, lacks any semblance of the checks and balances inherent in the Constitution. Everyone supports consumer protection, but we should never entrust a single person with this much power and public money.”
Shelby’s blustering is about the CFPB’s budget, which is to be 12% of the Fed’s total. That would make it roughly half the size of the not terribly effective SEC. But Congress controls the SEC’s funding, and there is a direct relationship between what a joke the agency has become and regular threats to cut off its air supply (particularly from the senator from Hedgistan, Joe Lieberman). By contrast, the far more effective FDIC (which has a bigger budget than the SEC) keeps its fees and doesn’t have to go begging to Congress (note the SEC is a profit center and actually uses less money than it collects from the securities industry). Note that the unhappy Republicans are also calling for the CFPB to have a board, as the FDIC does, but that issue is a mere sideshow to the budgetary question.
So Shelby is lying on two fronts: that there are no financial regulators free from Congressional thumbscrews, and that it will have a large amount of money and independence.
And if he really is worried about rich, powerful, rogue financial regulators, why isn’t he taking aim at the Fed first and foremost? It fits his profile far better than the CFPB does.
The real issue, of course, is that an effective CFPB will commit crimes against banking (note that crimes against banking can get you put in jail in Switzerland and they don’t mean just robbing banks. Damaging the reputation of banks also qualifies). Financial firms have behaved so badly in the consumer arena that even a half-hearted effort at consumer protection will inevitably create bad press about banking practices. So it is absolutely necessary to hobble the agency. Warren is not exaggerating when she says:
“Every day, somebody’s got a plan to undercut this agency, to knock it down,” she said. “The conversation is effectively: ‘Oh, we’d really like to kill this thing but it might be too popular for that — that might cause too much blowback. So can we find a way to maim it?’”
Warren has been seen as a non-starter as a head of the agency because she’d never be confirmed. But the requirement that the chief be in place by July 21 necessitates a recess appointment, which would circumvent the approval process. The Republicans are making clear that if that happens, they will extract a few pounds of flesh, say in budget fights.
It was pretty much assumed that the Administration would find someone less inflammatory but still fitting vaguely under the “liberal” brand (particularly now that “liberal” extends well into the center right) to appease the right wing hotheads and still look like they had not completely capitulated. But now that Warren has been doing a good job in staffing up the agency (one of the criticisms made of her was she was a mere academic and hence incapable of running an organization) and various candidates have turned the Administration down, her fans are talking up the idea that she will indeed get the nod.
I’d be delighted for that to be the case, but I don’t see that happening. America is a very big place, and I’m sure if the powers that be look further, they can find someone who will appear adequate. In fact, there might be some logic in holding the “see aren’t you glad this isn’t Warren” candidate back as long as possible to increase Republican anxiety (as in they waste energy shooting at Warren when she isn’t in the running).
Nevertheless, this sorry episode again proves that the primary objective of most members of the ruling classes is preserving and extending their power. Every account of the crisis has shown that bad mortgage lending practices were a major culprit. Having consumers be smarter and better protected should logically be a plus unless your business model depends on cheating them. So the vociferous attacks on the CFPB should clear up any doubts on that front.
is so concerned about an agency whose actions are subject to intervention by the Financial Stability Oversight Counsel as being
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Jesse nailed the Republicans at his blog today:
“Although the Democrats are hardly real reformers, the Republicans are the fawning servants of the corporate oligarchy.”
According to the Open Secrets.org Center for Responsive Politics, their report for Shelby backs your comment up with some interesting data:
Shelby Raised: $8,557,473
Spent: $2,647,169
Cash on Hand: $17,156,632
Last Report: December 31, 2010
Of this amount:
PAC contributions $2,267,950 (27%)
Individual contributions $3,808,466 (45%)
Candidate self-financing $0 (0%)
Other $2,481,057 (29%)
Shelby did not have a viable political opponent, because the stats reveal:
William G. Barnes (D)
Raised: $5,870
Spent: $5,871
Cash on Hand: $0
Last Report: December 31, 2010
PAC contributions $1,000 (17%)
Individual contributions $2,360 (40%)
Candidate self-financing $0 (0%)
Other $2,510 (43%)
Nothing says, ‘oligarchy’ like no viable political opponents, millions in corporate and ‘individual’ (ie, lobbyist) donors, and buckets of cash still on hand.
But compared with more populous states, for corporate interests to control an Alabama senate seat for less than $10,000,000 is probably quite cost effective.
“Although the Democrats are hardly real reformers, …” KFritz
Yep, any real reform will come from libertarians. The Republicans are fascists and the Democrats are lame.
Thank you, I needed a laugh.
You’re right about the Republicans and Dems. As for libertarians, they’re cryptofeudalists. Google “royal libertarian” to understand why.
Where ARE the libertarians? They have spent so much energy whining like neocons that they missed the corporate coup. Nice work at the maginot line, wankers.
“Shelby’s blustering is about the CFPB’s budget, which is to be 12% of the Fed’s total.”
No matter who is placed there, count on funding for the agency to vanish. If you can’t kill it, de-fund it, is the politicians motto.
—–
As an aside, even the US Patent Office has this problem. albeit it, in a different way, as you would think USPO would be a non partisan issue. Alas, as a self funded agency via fees, our politicians thus raid it and use it as a slush fund.
One of the few things we have left going for us in this country, innovation, and the politicians literally pillage funds, and subvert the agency from doing its job.
Since patents stifle innovation, maybe this is not such a bad thing.
That is a philosophical debate as old as the Patent Act itself.
Patents actually encourage research and development twofold. First, designers, investors, start-ups and corporations are ensured their investment(s) in time and capital will be protected, if it/they were to bare fruit.
Secondly, with significant innovation and advancements it actually encourages others to reverse engineer and/or build a better mouse trap as it were. This second point is most important, because in many instances the first design isn’t necessarily the best or most efficient.
I would concede, there are many times it only spurs similar technologies vs advancements in technology. Think Viagra – how many pills do we need that do the same thing. Then again, patent protection is what originally allowed for and or encouraged research and development.
I would assert patent laws force progress and innovation. and wouldn’t throw out the baby with the bathwater, as it encourages more advancements, than stifles innovation.
gs_
err “bear” fruit even
“The bureau, as currently structured, lacks any semblance of the checks and balances inherent in the Constitution.”
Why would this bureau be any less Constitutional than the Fed itself? It’s prima facie closer to Constitutionality than the obviously unconstitutional abdication of the money supply to private banks. So anyone who truly cared about the written Constitution wouldn’t be nitpicking over this trivial, phony agency but would demand the government directly issue money.
And anyone who cared about true democracy would call upon the people to takes all aspects of the economy including currencies directly into their own hands.
The Republicans are making clear that if that happens, they will extract a few pounds of flesh, say in budget fights.
Can’t we stop talking like this? The Republicans (with at least Democrat complicity) will aggressively extract all the flesh they can. To pretend any particular extraction is a reprisal for something the Dems did is never anything but a partisan-warfare pretext.
But the fact is it’s impossible for the Dems, even if they wanted to, to make the Reps play nice by appeasing them.
Just as it’s impossible for the “progressives” to make the Dems themselves less evil.
Part of the discipline America needs is for the people to recognize that both parties are limitlessly evil in intent, and that no act of appeasement (or “reform”) can ever change that.
Can’t we stop talking like this? The Republicans (with at least Democrat complicity) will aggressively extract all the flesh they can. To pretend any particular extraction is a reprisal for something the Dems did is never anything but a partisan-warfare pretext.
Yeah, it’s kind of like saying that Al Queeda will retaliate for the killing of Bin Laden. AQ’s not going to hate us more and the GOP isn’t going to hate the government any more. While there are probably a few reasonable moderates in both organizations; they’re both dominated by an extreemist ideology.
extreemist ideology?
From the dems? Where?
None of this matters, the coming economic collapse will end the TBTF banks as the United States will not have the resources to bail them out again.
On a related note, the shafting that the TBTF’s handed out to their clients, both national and international, has created an incredible amount of bad blood, when the times comes there will be a reckoning.
One small correction to an otherwise excellent item. The CFTC does not have the same self-funding mechanism as the FDIC and other federal banking regulators, as this suggests. Indeed, it is not even authorized to charge user fees, as the SEC does, to off-set its appropriation.
This has made the CFTC particularly vulnerable in congressional budget battles. For example, the original House-passed 2011 continuing resolution would have cut the agency’s $168 million budget by roughly $58 million. If that cut had been approved, it would have decimated the agency, leaving it unable to carry out its current functions let alone its new responsibilities under Dodd-Frank. Fortunately, the Senate intervened and the final 2011 funding bill gave the agency a small funding increase to just over $200 million.
President Obama’s 2012 budget proposes to increase CFTC funding to $308 million and off-set a portion of that amount ($117 million) with user fees. Industry, however, is resisting. Apparently, $117 million — an amount that wouldn’t even make a ripple in one investment bank’s end-of-year bonus pool — is just too big a price to pay in support of increased regulation. Even if the user-fee proposal is approved, and it definitely faces an up-hill battle, the CFTC would remain subject to congressional appropriations.
Members of Congress, including some like Sen. Durbin who should know better, insist that we need to keep these agencies subject to the congressional appropriations process in order to ensure adequate congressional oversight. But as you note, this “oversight” is far more likely to be used by members of Congress to rein the agencies in than to spur them on. There is no doubt that the Republicans who signed this letter have the same fate in mind for the CFPB.
Whoops and I actually heard Gary Gensler discuss how the CFTC needs a bigger budget allocation to meet all its new duties under Dodd Frank. Aargh. Will fix the post.
From Shelby’s gullet, pallet and blowwhole we hear all about the sanctity of “National Defense” which means profits for his nation raping contractors takes precedence over housing, jobs, health care and so forth for everyone else who isn’t in the MIC. He generally approves prison construction and the expansion of armed stasi.
Shelby famoulsy voted against the measure to restore habeas corpus rights. Previously he was a southern Dim, but then switched parties in ’94 and to add further violence to injury, the sleezebag replaced the reasonable Paul Sarbanes @ Banking Housing and Urban Affairs. Alabama must Impeach!
In dribs and drabs for peace, buckets of money for war
@Yves: “Shelby’s blustering is about the CFPB’s budget, which is to be 12% of the Fed’s total. That would make it roughly half the size of the not terribly effective SEC. But Congress controls the SEC’s funding, and there is a direct relationship between what a joke the agency has become and regular threats to cut off its air supply (particularly from the senator from Hedgistan, Joe Lieberman). By contrast, the far more effective FDIC (which has a bigger budget than the SEC) and the CFTC keep their fees and don’t have to go begging to Congress (note the SEC is a profit center and actually uses less money than it collects from the securities industry). Note that the unhappy Republicans are also calling for the CFPB to have a board, as the FDIC does, but that issue is a mere sideshow to the budgetary question.”
The reverse argument–which I am sure you are aware of–is that organizations funded by fees from industry (e.g., the Nuclear Regulatory Commission and FINRA) are seen as being more vulnerable to regulatory capture. Independent funding from Congress has long been seen as a means of ensuring proper insulation from the industry being regulated.
At a fundamental level, government functions should be directly accountable to elected representatives. As has been pointed out, the Federal Reserve is a serious and glaring violation of that principle, and FINRA is another questionable case.
The attempt to insulate government functions from Congressional control is, at its core, a vote of no confidence in the Congress, and hence in the democratic principles of the state. If you dislike Congressional control over regulation–and I am sensing some of that in your comments–than the solution is to change Congress, not separate regulation out into unaccountable technocratic fiefdoms.
Peripheral Visionary said: “If you dislike Congressional control over regulation…than the solution is to change Congress….”
But that would require that we have a democracy, which we do not have.
Like anyone who spews any version of, “if you don’t like the law, change it”, he really means to say, Let Them Eat Cake.
And what’s wrong with cake? You Americans are so spoiled!
We have within our power the ability to cripple the financial industry with a pair of scissors and a withdrawal slip. Cut up your credit cards, and withdraw your money from the TBTF banks. Unfortunately, those most screwed by the TBTF banks will be the last ones to do either. Yves–do you ever get tired of trying to save American consumers from themselves?
I’m going to interpret this as an interesting symptom that The System is really, really in trouble. If the best spokesman they can find is Sen Richard Shelby (R-Al), a man whose state just got smacked by the kind of climate change events that he has long denied were possible, a man who 15 months ago was publicly revealed to have placed *70 holds* on appointees to the Pentagon, State Dept, and other federal agencies in order to screw US-based Boeing over a pork barrel item for Airbus that he wanted for his state, then The Powers That Be are shooting themselves in both feet.
More, please!
Excuse me while I go stock up on popcorn ;-)
… (note that crimes against banking can get you put in jail in Switzerland and they don’t mean just robbing banks. Damaging the reputation of banks also qualifies). Yves Smith
What if we had honest banks instead of legal embezzlers? Then what would their reputations matter? Bank runs would be harmless. Since demand deposits could not be lent out then they could all be withdrawn with no damage to the banks.
But no. We as a society insist that money can be in two places at one – in someone’s checking account and lent out to someone else at the same time.
And then we wonder why our economy is unstable!
Something about “foundations of sand” comes to mind.
Have you ever heard of the Pilgrims of St. Michael? They have a publication called The Michael Journal that hits some of the same notes you do about the banks.
Their stance seems to be anti-union, however, so I don’t know how that squares with your beliefs.
They are a Catholic organization if I’m not mistaken.
Their stance seems to be anti-union, however, so I don’t know how that squares with your beliefs. DownSouth
I have no problem with unions as long as they are voluntary. And these days, some counter to the government backed banker’s union, the banking system, seems highly desirable.
No. I have never heard of the Pilgrims of St. Michael. My background is libertarian and more recently, the Old Testament.
I have no problem with unions as long as they are voluntary.
Right to work = divide and conquer
It is impossible for individual workers to bargain equitably with inhuman privatized tyrannies, aka corporations. Unlike the corporation the worker needs to eat. If workers could pit management against itself in the same way perhaps right to work would be unnecessary. As it is, you’re reiterating a corporate talking point that turns workers into items on a dessert tray.
Please do not compare workers with dessert. Workers disgust me.
Having consumers be smarter and better protected should logically be a plus unless your business model depends on cheating them. Yves Smith
It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning. http://www.brainyquote.com/quotes/quotes/h/henryford136294.html#ixzz1LaThFniS
“People need to be informed and starting feeding their concerns (in mass) to their representatives.”
Yes send in your faxes and phone calls. The lobbyists are sitting in their offices, en masse, with bagfuls of cash.
I believe they are sitting in the offices of their Swiss bankers with said cash.
How many protection agencies and bureaus does it take to get to the center of a tootsie roll pop?
Really, can we get the agencies that exist to do their job? We don’t need more of the same – we need effective laws, regulations, and enforcement.
People need to be informed and starting feeding their concerns (in mass) to their representatives.
One of my favorite photos from the financial crisis is this one of a scheming Shelby and Dodd.
http://jessel.100megsfree3.com/091223_shelby_dodd_ap_218.jpg
If it was only evil men then they could be replaced but it is the system itself that is wicked.
I have to agree with Yves in what the Republicans are up to but we have to stay involved never-the-less. I try doing my part by educating my peers and anyone that will listen. The sad part is that our country will continue to decline until they fix these pesky little banking problems.
Personally I think the Republicans are playing with fire as I see that the majority of the population gets it now. That wasn’t true even a year or two ago but we’re approaching a critical milestone and is in my opinion when things will truly start to change. I think it’s around 80% of the population being on the same page. You’ll always have 20% of the population that will continue to worship Donald Trump and Sarah Palin but most I think are coming around.
As usual, thanks for another post that nails it.
I wonder if there is any reason that the President can’t simply the CFPB into a law enforcement agency, or, for that matter, detail FBI agents to staff and operate it. Then, in order to “de-fund” the CFPB, Congress would have to de-fund the FBI – something that will almost certainly never happen.
Does anyone know of a reason why this can’t (or shouldn’t) be done?
Oops, missed a word. The first sentence should say “…simply turn the CFPB…”
Sorry.
The American public need to inundate their Congressmen with letters or emails of protest, to ensure that Elizabeth Warren is confirmed, as head of the CFPB, and her budget protected. There is a reason why bankers hate her.
I’m An Admirer.
Anyone who still believes this is a functional democracy is deluded. Case in point: Opposition to the bailout ran 80%+ against. There was NO shortage of phone calls and faxes. Yet we saw how speedily Congress rushed to the aid of its masters. To quote Jesse’s comment above, Yes send in your faxes and phone calls. The lobbyists are sitting in their offices, en masse, with bagfuls of cash. And every little Congressman knows that when he grows up, if he’s very very good, he can become a lobbyist too.
It was supposed to be a representative democracy. Unfortunately for you guys, only the top .1% is represented.
Anyone suggesting the legal theft enabled by our wall street centric govt leaders is a repub or dem problem is a disservice, and must assume the public is as dumb as our politicians assume we are.
There isn’t a sliver of difference in the wall street centric views held by Shelby, Dodd, Frank, Rubin, Paulson, Geithner, Greenspan, Bernanke, et al.
Pay close enough attention and you will see the parties flip their positions as often as congressional and presidential control flips…..all in order to maintain the status quo and gradual but perceptible transfer of wealth. Anyone suggesting one party or the other will fix this is not credible and not paying attention. krb
Looks like you’ve got a forgotten paste trailing off the end of the article.
Good! These are MY republicans doing MY bidding. As long as there is still a middle class here, their work is not done.
For your information, my little peasants, today I wined and dined with the next president of the Oligarchic States of America, and one of MY corporations just donated 5 million dollars to his 2012 campaign. What are you going to do about it, my little chumps? Vote against ME? Exercise your constitutional rights? Go ahead, punks, make my day!… LOL
FatCat
You realize that once the middle class goes, us fat cats will have to fight it out amongst ourselves to see who gets to be #1 fat cat and rule the world?
Law of the jungle my friend. May the fattest cat win.