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by Sharon Rondeau

Sen. Christopher Dodd (D-CT), Chairman of the Senate Banking Committee, is not seeking re-election this year.

(Apr. 24, 2010) — A bill which would impose new federal regulations on the private sector quietly passed the House of Representatives on December 11, 2009 and has been referred to the Senate Committee on Banking, Housing and Urban Affairs.

HR4173, also known as the “Financial Stability Improvement Act,” is 1,705 pages long and would consolidate the banking, insurance, and mortgage industries by  the Secretary of the Treasury.  It includes the creation of the Consumer Financial Protection Agency (CFPA) which, according to SourceWatch, is at the center of the Obama administration’s overall plans to overhaul financial regulations. This Agency would take certain consumer regulatory responsibility of financial products from seven other agencies and centralize it in one office. It would have the authority and accountability to supervise, examine, and enforce consumer financial protection laws. It will be empowered to make rules, examine balance sheets and issue subpoenas. Any institution that provides consumer financial products such as mortgages, credit cards, student loans, auto loans, payday loans, and other consumer products, including payday lenders and mortgage brokers, will fall under the agency’s jurisdiction. The agency would ban deceptive practices and oversee new consumer financial products.”

Last year, Treasury Secretary Timothy Geithner applauded the plan to create the CFPA when he stated,  “Consumer protection will have an independent seat at the table in our financial regulatory system.  By consolidating accountability in one place, we will reduce gaps in federal supervision and enforcement, drive greater clarity in the information consumers receive around products they are sold, set higher standards for those who sell those products and promote consistent regulation across the system.”

The current version of the bill mandates that “Immediately upon enactment of this title, there is established a Financial Services Oversight Council,” which will be made up of voting members chaired by the Secretary of the Treasury (p. 25).  The Council can form “subsidiary working groups” and “detail permanent staff” (pp. 31-32).

The bill also requires that an audit of the “Federal Reserve System and the Federal reserve banks” be performed within two years of the passage of the legislation (p. 25).  However, on page 40, it states that the “Board of Governors of the Federal Reserve System shall act on behalf of the Council, acting on behalf of the Council.”

Duties of the Council are several, among them, “To advise the Congress on financial domestic and international regulatory developments, including insurance and accounting developments, and make recommendations that will enhance the integrity, efficiency, competitiveness, and stability of the United States financial markets” (p. 27) and “to subject financial companies and financial activities to stricter prudential standards in order to promote financial stability and mitigate systemic risk in accordance with subtitle B” (p. 28).

To date, activity in the Senate has yielded the passage in the Banking Committee of a similar measure which would create a new entity, the “Bureau of Consumer Financial Protection.”  According to the U.S. Chamber of Commerce, “this new regulator would have unprecedented powers and authority to determine the types of financial products consumers can choose from. In fact, the bill extends far beyond traditional financial services products to a vast segment of the economy — in short creating a new regulator for much of the business community.”

A press release dated March 29, 2010 on the website of the Senate Banking Committee chaired by Sen. Christopher Dodd (D-CT) states:

Giant Wall Street banks are spending millions of dollars to lobby against financial reform. These giant firms face one problem, money can’t buy you love. So, to try and sway public opinion, they are trying to take advantage of the well deserved reputation of their responsible smaller colleagues, community banks.

Some giant Wall Street firms abused their customers and took enormous risks that nearly brought down our economy while our nation’s nearly 8,000 community banks have been responsible actors who have paid dearly for big banks’ mistakes. The financial reform bill reflects those differences, imposing greater costs and restrictions on the superbanks, reining in the abuses that caused the crisis, but allowing community banks to continue serving their communities.”

An entry on the Ideal Taxes Association blog by Raymond Richman dated April 23, 2010 describes Obama’s “motives in offering a financial reform bill to regulate Wall Street and the banks has all the appearances of a Mein Kampf strategy for national socialism…Personally, I have little doubt that his principal objective in this so-called reform proposal as it was in the healthcare bill and in taking over GM is to socialize the economy. He will use the next crisis, if we have a double dip as appears likely, to nationalize the banks and Wall Street and the credit card companies.”

The bill contains a provision which allows for “Financial Company Data Collection” which reads, “The Council or the Board may require the submission of periodic and other reports from any financial company solely for the purpose of assessing the extent to which a financial activity or financial market in which the financial company participates, or the company itself, poses a threat to financial stability” (p. 42).

The Senate Banking Committee version of the bill states that it would create “a new independent watchdog, housed at the Federal Reserve, with the authority to ensure American consumers get the clear, accurate information they need to shop for mortgages, credit cards, and other financial products, and protect them from hidden fees, abusive terms, and deceptive practices.”  It also contains a provision by which Congress could approve, by a two-thirds vote, a recommendation by the Federal Reserve “to require a large, complex company to divest some of its holdings if it poses a grave threat to the financial stability of the United States…” (p. 3).

On Wednesday, the Senate Agriculture Committee passed a bill would also regulate “over-the-counter derivatives” aimed at “targeting the complex financial instruments at the heart of the 2008 global meltdown.”

The website of Stop the CFPA has offered the following analysis of the House and Senate versions of the bill being considered:

Rather than maintaining uniform national consumer protection standards so that  everyone in the country is afforded the same protections, the Senate Discussion Draft opens the door—for the first time in nearly 150 years—to inconsistent, duplicative, and  conflicting mandates between federal and state agencies.

The House bill follows the same erroneous course, adopting a new—and unclear—standard that could allow a significant increase in conflicting state law rules and certainly will produce an explosion of litigation because of its lack of clarity.  The House bill also precludes preemption of state law even if Congress or a federal regulator specifically determines that regulation in the area addressed by the state law would be harmful either to consumers or to the safety and soundness of the banking system.

Regarding debate of the proposal in the Senate, a report from The Hill dated April 23, 2010, stated that “Talks between Democratic and Republican members of the Senate Banking Committee are set to continue throughout the weekend toward a bipartisan agreement on the legislation, though a Monday afternoon deadline looms on the horizon, when Senate Majority Leader Harry Reid (D-Nev.) has scheduled a key procedural vote.  But the GOP will continue to hammer away against the legislation in its current form by arguing that Democratic claims about what the bill will do can’t be trusted.”

According to The Birmingham News, however, there is Republican support for the proposed legislation, and a procedural vote is expected on Monday.

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  1. Since the colonial area there was this little thing called usury law. States were allowed to protect there own citizens from ridiculous interest rates, no matter who sold the financial product.. In 1978, the Supreme court said that banks didn’t have to comply with usury regulations of the state where the borrower was. In 1980, Congress completely pre-empted state regulation of consumer financial protection. Since the 1980s, Federal regulators have had incentives to ignore the mission of protecting consumers from dangerous financial products because financial institutions get to choose their regulator. (Banks can change their charter and get a different regulator) The result is that regulators have incentives to turn a blind eye to consumer abuse. As a reward they get more banks to regulate, and collect more fees.

    The BCFP is a good idea because it takes consumer protection away from the bank regulators. Moreover, there is absolutely no evidence to back up the argument that consumer protection increases systemic risk. Consumer protection failure wasn’t the only cause of the crisis, but it would have prevented it.

    I think we should let existing regulators focus on ensuring bank safety and soundness and actual people should have there own representative at the federal level.

  2. live oak – I certainly hope Lt Col Lakin gets a fair trial–and be granted discovery. I am worried about him also, but somehow in the back of my mind I feel that the military set this up, letting Lakin be the Hero. I said before, I believe they are playing good cop, bad cop and obama will be found guilty.

    I just want this to hurry up and get heard, time is of the essence as we are losing our country day by day.

  3. Actually, this might be the most troubling sentence in this article –

    “According to The Birmingham News, however, there is Republican support for the proposed legislation, and a procedural vote is expected on Monday.”

    Until the “go along to get along” Republicans open their eyes and take note of the damage both they and the Dems are doing to this country, I doubt there is any hope for reversing this garbage.

    1. Ken,
      You’re absolutely right, however they were talking about Lindsey Grahamnesty…little scumbag weasel…the only Repub RINO to go along with it. Both parties are one and the same to me. They pretend to hate each other when Congress is in session, then they go out and get drunk together afterward. They are all corrupt and all complicit and need to be arrested for aiding and abetting treason.

  4. This is what happens when people vote with their eyes closed….kind of like pinning the tail on the donkey. The American people are definitely getting the back-end of the beast. Its name is socialism, it aims to destroy this country, and is well along that path with a usurper at the helm of our sinking ship. Protect your investments, protect yourselves.

  5. This bill, 4173, will do exactly the opposite of what its title portends … what else is new in this topsy-turvey Obamaland??? It will create financlai havoc (and cost taxpayers far more, even).

  6. The banks “took enormous risks that almost brought down the financial system”, as Dodd said, because the federal gov’t insured the money the banks put up for risk (either explicitly or implicitly), and regulated fannie and freddie into giving a AAA credit rating to junk loans, hiding the risk the banks were taking.

    I’m going to show you right now what a crock the gov’t has been feeding you on this issue.

    The most heavily regulated institutions in america are the ones that went down. The unregulated financial firms didn’t go down. How do we know that? Because the hedge funds were asked to help bail out the banks. That was the grand plan of geithner. To auction off the assets of the banks to hedge funds to bail them out.

    See what i’m talking about? The unregulated financial firms came out ok and the regulated financial firms went under. And now we’re being told that the problem is that the regulated financial firms weren’t regulated enough.

    When an industry is regulated and insured, it will take enormous risk because it “ain’t their money”.

    The hedge funds are more careful because they have no backstop. If they fail, they lose their own money. So they don’t take a chance on failing.

    The gov’t itself has so much unfunded, off balance sheet debt that everyone knows they’ll never pay it back. All we’re waiting for now is the market to acknowledge that fact. Meanwhile, they have the gall to tell private industry to clean up their act.

    One day, we’ll wake up and the world will be changed. Everyone will acknowledge that the gov’t can’t pay off it’s debt and the bond market will implode. The gov’t, not wanting to be seen as “doing nothing”, will do something. And it ought to be obvious what they’ll do from what they’re doing now. They are going to print money and buy up all the govt debt with newly created dollars. Worthless dollars. Be prepared.

    1. Credit markets have already dried up. At USC Graduate School of Business, the Home of Reaganomics, we were taught that government over-borrowing reduces the capital available to business. This results in businesses laying off workers, cutting back on spending and in many cases going Bankrupt.

      In little more than a year the Marxofascist BHO has almost destroyed the Banking system in the US. Hopefully the bankers will wake up before BHO totally destroys the free enterprise system which was his plan from the beginning.

  7. This is just the latest in a series of acts designed to install a Marxofascist regime in America.

    Hopefully, some bankers and business leaders will do what is necessary to legally remove BHO before he completely destroys the US Economy.

    1. The guys suggesting the regulations are the same guys creating the problem. It is the Alinsky spin being applied to justify the regulation which will create a larger problem.

      Can we trust a guy with hands this dirty?

      They have had over at least 76 years to fix it. The problem is the Congress is the beneficiary of the Fed. Congress must be fixed before the Fed will be fixed. This is all a charade for the benefit of the taxpayer so the progressives can sell this regulation idea.

      2010 Congressional investigation Fed melt down

      Federal Reserve Corporation Remarks in Congress, 1934

    2. Leo,
      This is OT a bit, but do you think LTC Lakin is going to get a fair trial and be granted discovery? I believe he is, but I’m still a little worried. I hear the lawyer defending him (Jensen) has only 3 months experience with military trials,however I have not verified it. I hope you see my message.