In this period of painfully partisan politics, it’s too easy for the focus to be on who won today, instead of the American people’s needs. We’re witnessing just that in two roiling debates–one over the proposed Consumer Financial Protection Agency (CFPA), another over the recent Supreme Court ruling in Citizens United v. Federal Election Commission.
The new CFPA’s sole mandate would be to shield consumers from deceptive and dangerous financial products and practices. It would have the authority to not only write rules to better protect consumers, but also to enforce them. Here’s why we need this strong and independent agency to safeguard consumers.
The government doesn’t systematically look out for the interests of financial product end users. What regulatory authority lies in the Federal Reserve has largely been ignored for decades. That’s how the financial industry’s unscrupulous practices, which contributed heavily to the collapse of our economy, emerged. There’s no reason to believe that continued authority within the Fed would restore fairness to the system.
We need a strong consumer financial protection agency for the same reason we have regulations for food safety, building construction, or for cars–to protect consumers from the perils of the corner-cutting, profit-boosting, bottom-line mentality of big businesses.
Consumers deserve reasonable protection from the often-predatory financial products peddled to them. Those protections must apply not only to banks but also to non-bank institutions, whose outrageous terms and rates target the poor and help perpetuate cycles of poverty for entire communities.
This agency must be independent for two critical reasons. First, it will have to untangle the complex web of regulations that allows banking lawyers to find loopholes between various regulatory agencies. Second, it’s contradictory to have a single agency be responsible for the health of banks and protecting consumers. For instance, hidden fees buried deep within credit card contracts improve profits of banks at the expense of consumers who pay the fees. This puts the agency charged with ensuring the health of banks at odds with the proposed agency in charge of protecting consumers. And it’s the basic reason why banks are fighting this proposal so hard.
A recent Pew Research Center poll found that 59 percent of Americans favor a stronger government hand in regulating the financial industry, while only 33 percent oppose stronger regulation. With a clear majority of Americans showing support for this kind of financial reform, what’s with the endless back and forth? One answer is that there are other very powerful forces at work and, as of late, those forces have been granted even greater access to the inner workings of our government.
The Supreme Court’s Citizens United ruling in January granted unabated financing of campaign communications by corporations, equating political spending with the right to freedom of speech, as listed in the First Amendment. In his first State of the Union address, President Barack Obama expressed his disappointment and fears of the potential impacts of the ruling, stating that it would “open the floodgates for special interests–including foreign corporations–to spend without limit in our elections.”
Obama recognizes that this decision will further undermine our democracy, as it marginalizes the power of individual voters by handing more power to corporations. According to a February poll by The Washington Post and ABC News, 8 out of 10 Americans oppose the Court’s Citizens United ruling.
This Court-approved “power of the purse” casts a shadow over the financial reform debate. The Supreme Court’s ruling will only make efforts to re-regulate the financial industry more difficult in the years to come, so long as financial institutions have the ability to amplify their “voices” by simply writing a larger check.
It’s becoming increasingly apparent that when it comes to lawmaking–whether in the legislative or judicial branch–broad public support (or opposition), unfortunately, is not enough to bring about change. The only effective counter to the influence of corporate purses will be broad public action–a unified movement demanding that we change the terms under which we are governed–and voices that are heard in the process.