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Nicole Gelinas
Dodd-Frank’s Protection Racket « Back to Story

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The worst thing about the CFBP is that (according to their Ombudsman) they have no power over banks that are violating the law. PNC Bank is violating the same mortgage laws for which they recently paid billions in fines. The CFPB said they “can investigate” -- but cannot make PNC “follow the law.” I will have to file a lawsuit in federal court if I want PNC (or any bank) to follow the laws and regulations. This is mind boggling.
Dear Nicole Gelinas,

This is an EXCELLENT article and I've shared it via email and FB. You did a superb job by providing details and examples for anyone to understand why Consumer Financial Protection Bureau is dangerous and should be shut down. Thanks to you, it all makes sense!
In tonight's Senate candidate debate, Liz Warren said the Consumer Financial Protection Bureau she headed has saved people half a billion dollars so far, roughly the same as the agency's annual budget.
Great article, Ms. Gelinas. Very informative / enlightening. Now if only someone would "listen" . . . .
Very interesting article, although some meaningful bank reform is necessary, you have to wonder if creation of this agency is just window dressing to let congress avoid tackling the tough issues with their banking patrons and campaign contributors.

LIke it or not banks receive special treatment from the government already, both though the ability to borrow at low rates from the Federal Reserve window, and the Goverment's backstopping of their loans through Fannie and Freddie. Although these agencies have been cast as a political vote getting plot by Barney Frank, does anyone not think the banks were enthusiastic behind the scenes cheerleaders?

And btw - what about lowering the rates charged on credit cards? Again since the goverment is provding the banks with the ability to borrow and create money through the federal reserve this is squarely within the Governments rights to regulate.
Dave C has a point. There are some bank practices that the Mafia couldn't get away with, and all of us could come up with examples. My recent favorite is the "foreign transaction charge" levied on a recent credit card purchase in Equador, which uses the US dollar. A little reasonable push back couldn't hurt.
OF COURSE CFPB is a protection racket, it is run by the biggest and toughest bunch of ganstas in history, the US Government.
Richard Cordray was the Ohio AG who illegally accessed Joe the Plumbers PRIVATE AND PERSONAL INFORMATION and then released it to the public. He's nothing but a Leftist Hack.
Dodd/Frank is as dangerous to country as ObamaCare. It will bankrupt small banks and the mega banks will be under white house control. Congress has no control over this horrendous mess because it is under the Federal Reserve which just happens to have it's leader named by the executive branch. Another Democratic time bomb similar to the Community Reinvestment Act passed in 1977 and direct cause of the Recession.
You really think congress is going to tackle this issue? The current congress is so disfunctional it can't even agree upon simple tax and defense spending. Instead of getting rid of CFPB, how about giving it more teeth to punish the predatory behavior prepetrated on consumers. I worked in a federally elected official's office for a year and saw the illegal acts committed by financial institutions first hand. They were way worse than the examples given in the article, and similarly there will be now charges pressed.
While I hate Dodd/Frank and thinks banks are overregulated, there are some banking and credit practices I think banks should be stomped on harshly for.
One I hear about over and over is the practice of clearing the largest denomination personal check first, in the hope that they can stick consumers with lots of overdraft charges for tiny checks. Like clearing the $500 rent check, and then charging multiple $35 overdraft fees for a number of $10 checks. Some banks even make these charges to consumers with so called overdraft protection. They cover the check, but stick you with a fee anyway.

The practice that hurt me, and probably millions of others occurred during the credit crisis. Banks suddenly lowered existing credit lines and card limits on exisitng current accounts without any negative credit history. I had three banks drop my credit lines a total of $35K in less than a week. Not that big a deal, except that my credit score dropped like a rock due to my credit utilization rate. Now why should my score change just because the bankers needed to reduce their loan exposure? I had one lender (GE) actually close an account, after the loan was paid off with three years of on time payments. Again, if GE doesn't want my buiness, fine, but they shouldn't be able to ding my credit when I paid them on time and in full. Personally I'd like to see some eight figure fines, but I'd settle for rules that keep them from screwing consumers. BTW, I'm a white male Republican over fifty. Print all the stories you want, lots of banks are making most of their money by finding new ways to trip up their customers. Say credit card companies with calculated odd due dates, short payment return windows, and non-standard billing cycles.
We have a relative who works for the CFBP. She tells us they are busy retrofitting and remodeling their headquarters in DC, a building that dates to the 1960's. The remodel is deemed necessary to bring the huge building up to cutting edge "green" standards and will cost hundreds of millions of dollars.
This is a great, well-documented "white paper," not merely an article. I never cease to be amazed at the delusion of liberals/socialists who remain trapped in their utopian vision of the world, namely, that only government can solve our problems. When, in fact, government causes most of our problems, which can be documented throughout modern world history.

I would add that the author addresses the "too big to fail" problem in generalities. I propose the following.

First, the most obvious way to address "too big to fail" is to remove the "too big" part. My solution is to cap national bank deposits at 5%, from the current 10%. This, alone, would cut down the big four traditional banks (JP Morgan, Bank of America, Wells Fargo, and Citigroup) by 50%, at least in terms of bank deposits. It is not healthy that 50-60% of all bank deposits are controlled by four banks.

Another virtue of this is that it would provide a lot more business for smaller banks, thereby bolstering their asset base and financial soundness. We need healthier second-tier size banks, eg, Sun Trust, BB&T, etc., as well as much smaller banks.

Second, we should reinstate Glass-Steagall (G-S), the Depression-era law that separated commercial and investment banking for 67 years. I do not recall a financial meltdown such as we incurred during 2007-2008 happening during this period, other than the S&L crisis, which was a different issue. One reason for this was that traditional, commercial, retail banks were prohibited from risky investments of the type that investment banks such as Goldman and Morgan Stanley participate in routinely. And the investment banks were prohibited from commercial, retail banking.

A reinstatement of G-S would return Goldman and Morgan Stanley to investment bank status, in which they would not be regulated as commercial banks. Many conservatives such as myself applauded the repeal of G-S as an anachronistic "regulation" that was no longer needed. We were wrong as we failed to consider the perverse incentives of bankers with access to other people's money and the human foibles imbedded in the mind of man.

The country's financial/banking system and people's money is too important to allow for the type of risk-taking that occurs with investment banking. Investors are a different class than banking customers, and a different level of regulation should be applied.

Commercial banking used to be, and should be, a conservative, relatively risk-free type of business. But the pressures from stock market demand over time got the commercial banking industry to lobby Congress to eliminate the impediment of G-S that kept them from taking more risk, which they thought would elevate their stock prices. It worked for a while, but finally blew up the whole system.

Conservatives might complain about returning to the more "regulated" era of G-S. But I submit that the record between 1932 and 1999 with regard to the soundness of traditional, commercial banks was a good one, and had G-S been in place during the 2000s, at least the traditional banks would have been insulated from some of the more insane risks that they took with depositors' money -- and the requisite rescue of the banking system that the taxpayers have been called upon to bailout.

Some will argue that the issue of mortgage risk, securitization, and the corruption of Fannie and Freddie are separate from that of G-S. This is true to some extent. Nonetheless, the big banks took risks and got involved with exotic financial instruments that would have likely been prohibited by G-S. Moreover, the coincidence of the repeal of G-S in 1999 and the beginning of the housing bubble in 2000 or 2001 -- and the subsequent meltdown 6-7 years later -- is too rich to ignore.

In sum, force the big banks to become smaller, treat commercial banking like the regulated industry that it is -- thereby alerting Wall Street that big stock gains aren't to be had there -- and reinstate the wall of separation that used to exist between commercial and investment banking. While no panacea against fraud and bad decisions, it would preempt many of the financial disasters incurred in the past decade.
Why do you think it's not working as well as it should be? Would it be because the banks and the politicians gutted it and pulled it's teeth?
None of the foolishness revealed in this article will stop until the credit and financial issues here as well are tagged to the committees and individual congresspersons responsible for them over time. While members of both parties are to name, disproportionately I believe you will find the liberals in Congress are responding and catering to the pressure brought to bear by the CBC. Some enterprising and courageous journalist who has the fortitude to take on this fascistic cabal responsible for most of our problems in the economy, will do us all a very big service. The CBC was virtually single handedly responsible for the financial meltdown of '07-08 and no one understands this. Before they take down the entire system we would do well to shut this vile group down.
It won't take long for the CFPB to get to the heart of the matter and begin attacking the central enabling function of the entire consumer credit industry - FICO scores/credit ratings. After all, it's pretty obvious that various favored groups have lower average credit ratings than the population as a whole. And, isn't this ipso facto evidence of discrimination built into the system? Here is a place where their clumsy meddling can truly do catastrophic industry-wide damage.
Conservative Joy July 19, 2012 at 2:12 PM
Sorry, I omitted the most important word, i.e. NOTI Added it below:

understand some states have a filed a court case about the constitutionality of the CFPB due to the fact that it does NOT meet the Checks and Balances provisions our Founding Father included in our Constitution. I pray the Supreme Court rules it is as unconstitutional as many believe it is.
Conservative Joy July 19, 2012 at 2:10 PM
I understand some states have a filed a court case about the constitutionality of the CFPB due to the fact that it does meet the Checks and Balances provisions our Founding Father included in our Constitution. I pray the Supreme Court rules it is as unconstitutional as many believe it is.
Kathryn: Could you explain? I'm truly interested -
This is one of the most irresponsible articles I have ever read. It is full of speculation and logical errors, claiming to be fact.
You can't protect people from themselves.
More of the same old same old. If it ain't broken, create a government agency to watchdog and regulate it, and it soon will be. I am struggling, but can't remember where the Constitution gives FedGov any authority over private money transactions other than to establish the value of coinage used in such transactions.... the one thing it has utterly failed to do for a long time.

I finally figured out why so many care issuers will swarm toward any newly formed business with dozens of credit card offers..... the consumer regs don't apply to business redit cards. Higher interest rates, more penalties, the same nasty consumer rules now illegal still apply to those. And this federal watchdog outfit can't touch them, because its not "consumer" debt, its "business" debt. But in any small business, there is no difference. One more way FedGov "helps" small businesses. I am NOT impressed......