In the end, late on Thursday’s Senate passage of the financial regulation bill, the Senate had no time for independent, non-government consumer power. In the end, after listening to swarms of corporate bank, brokerage, hedge fund, private equity, and insurance lobbyists, the Senate had no time for Senator Chuck Schumer’s amendment to create a non-profit Financial Consumers Association (FCA, SA 3772).
In the end, this massive 1500 page bill shifted very little power directly to shareholders and consumers of financial services (meaning just about everyone) either to better use the courts and to organize nationwide to counteract the lobbying muscle of the financial goliaths ready to turn the new regulators into procrastinatory putty.
The FCA proposal (see csrl.org), which Senator Schumer had backed in 1985 when he was dealing with the savings and loan scandal, did not receive the time of day. It would have required the companies to place an invitation to their customers in their mailing and electronic communications (bank statements, bills etc.) inviting consumers to voluntarily join and pay dues to build a powerful consumer lobby to countervail what Thomas Jefferson once called the “monied interests.”
After all, the criminal, reckless, self-enriching collapse of the economy by the Wall Streeters—the millions of lost jobs, the trillions of dollars in lost pensions and savings—Main Streeters deserved some reciprocal gesture for all the Americans who were forced, as taxpayers, savers and workers to bailout the crooks and ultimately pay the costs of this financial disaster.
In the end, the Senate, like the House of Representatives, told their consumers—their voters—to get lost. There was no room for a Financial Consumers Association in the 1500 pages.
The FCA is crucial to assure that many of the other parts of this bill are enforced. For very little in this legislation includes outright prohibitions. Rather the Senate, like the House, delegates the authority, within a broad range of discretion, to a variety of existing agencies, and a new consumer financial protection agency nesting allegedly independently inside the big bankers’ Federal Reserve.
There are so many complex reviews and procedural obstacles for these agencies that the corporate lawyers will collect enough fees to spoil their great-grandchildren. “Paralysis by analysis” is what consumer groups call such legislation. I call them no-law laws—mired in pits of quicksand that mock everything but eternity.
Without an FCA, with millions of members, and hundreds of investigators, organizers, lawyers, economists, accountants and publicists, the good people inside government will lack powerful, knowledgeable public champions to counter industry abuses.
The bill that passed both Houses does not explicitly ban totally speculative derivatives, does not ban banks and other firms above a certain size (where they again become too big to fail), does not declare that the shareholder-owners must have the authority to control their own companies, does not ban companies that mix trading for their own account with other people’s money backed by federal insurance. It does not circumscribe the enormous power of the Federal Reserve, short of a one-time Congressional audit, even after all the Congressional bellowing about the Fed’s derelictions and looking the other way while Wall Street robbed the American people.
Many of the major consumer groups supported the creation of a Financial Consumer Association. Their guarded support of the Senate-passed S.3217 came with the caution that this is an important first step and one that at least recognizes many frauds and rip-offs that still must be curbed.
Yet whether their hopes are even modestly realized will be determined more by how the corporate lawyers wired the bill with many ways to tie up the regulatory processes ad infinitum than anything an unorganized public can demand.
In one major respect, the big bank lobby lost one. They could not stop the creation of a consumer financial protection bureau. But without an FCA, the Bureau will too often find itself with one hand clapping.
However, if that one hand is that of Harvard Law Professor Elizabeth Warren, the odds on favorite to run the Bureau, there will be instances when the big boys on Wall Street will have to face the music.