Senate Corporatists do bidding of bailed out Wall Street banks, oppose Consumer Financial Protection Agency

Posted by AzBlueMeanie:

Sen. Bob Corker (R-Tenn.) said recently that, just as Republicans were unanimous in opposing the public plan in the health care debate, so too are they united against an independent consumer financial protection agency, or CFPA — a proposal championed by Elizabeth Warren, head of the TARP oversight panel. Plan for Consumer Protection Agency Falters in Senate « The Washington Independent

Not only are Republicans united against the CFPA, but a handful of Democrats — including Sens. Tim Johnson (S.D.), Ben Nelson (Neb.) and Mark Warner (Va.) — are as well.

Despite the recent Wall Street collapse — a crash that required trillions of dollars in federal help and has left nearly a fifth of the country underemployed — the powerful financial services industry has retained remarkable sway on Capitol Hill. Not only have the nation’s largest firms rebounded to a point where seven- and eight-figure bonuses are again the norm, but they’ve also pumped tens of millions of dollars into K Street to lobby against the Democrats’ reform plans in general and the CFPA in particular. Banks step up spending on lobbying to fight proposed stiffer regulations – Los Angeles Times:

Even as the financial industry has sought to keep a low public profile, some of the country's largest banks have ramped up their spending on lobbying to fight off some of the stiffest regulatory proposals pending in Congress.

Lobbying expenditures jumped 12% from 2008 to $29.8 million last year among the eight banks and private equity firms that spent the most to influence legislation, according to data compiled from disclosure forms filed with Congress.

The biggest spender was JPMorgan Chase & Co., whose lobbying budget rose 12% to $6.2 million, enough for the firm to have more than 30 lobbyists working for it. Among other banks, spending on lobbying rose 27% at Wells Fargo & Co. and 16% at Morgan Stanley.

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Much of the increase in spending on lobbying in 2009 came in the final three months of the year as Congress voted on financial reform bills. Many Washington observers say industry lobbying has been even more intense this year, as President Obama has proposed a new tax on big banks, caps on their size, and curbs on their investment in often lucrative but risky hedge funds and private equity funds.

"This is a watershed moment," said Scott Talbott, a lobbyist for the Financial Services Roundtable, which represents about 100 of the largest financial firms. "The industry will be changed forever after this year."

Bank lobbyists, however, are trying to limit just how much the industry has to change. They are fighting some provisions in the Obama administration's broad industry-overhaul proposal, especially a plan to create a consumer protection agency to oversee financial services.

The White House wants it. Senate leaders support it. The House has already passed it. And, in the wake of the worst financial upheaval since the Great Depression, many consumer groups and state regulators say it’s vital if the country is to avoid another economic collapse. Yet the proposal to create a new consumer financial protection agency is, for all practical purposes, dead on arrival in the Senate. Plan for Consumer Protection Agency Falters in Senate « The Washington Independent:

The industry warns that too much government oversight would stifle innovation and ultimately limit access to the same credit that’s the lifeblood of the economy — not unlike the health insurance industry warning that the public option would ultimately harm the same consumers it’s designed to help. And lawmakers are listening.

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On the one hand, party leaders want to bolster their populist image; on the other, they’ll have to rally the support of at least a few business-friendly senators to get anything at all through the upper chamber, where 60 votes are required to pass everything. Meanwhile, Democrats also don’t want to alienate the same Wall Street firms that gave heavily to the party in 2008. If the enactment of strict new financial regulations was a foregone conclusion in February of 2009, a year later it’s looking like the Democrats will have to settle for weaker tea.

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Not that all Democrats are done fighting for the CFPA. “There needs to be a new agency with new powers for whom this will be a primary mission,” Lawrence Summers, White House National Economic Council director, said last month. More recently, White House Press Secretary Robert Gibbs echoed that sentiment, telling reporters Friday that an independent consumer protection authority remains “a great priority” of President Obama.

Congress is half way there. In December, House Democrats passed a financial reform package that included a stand-alone CFPA. Sponsored by Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, the bill would prohibit certain complex financial products, require greater transparency surrounding terms and rein in misleading marketing campaigns. It received exactly zero Republican votes.

Some state financial regulators warned Tuesday that the industry has evolved quickly, with more and more companies dabbling in the complicated products that few seem to understand. “The fringe sector really isn’t so fringe anymore,” said Sarah Bloom Raskin, Maryland’s commissioner of financial regulation.

Plunkett agreed, noting that the recent turmoil was caused by a series of regulatory failures that allowed the nation’s financial institutions to make a habit of abusive practices — a “parade of horribles,” Plunkett said, that extended well beyond sub-prime mortgage lending into the realm of credit cards, overdraft fees and payday loans. Because no one agency concentrates exclusively on protecting consumers, he said, they were able to focus elsewhere without much consequence — until it was too late.

“It’s a failure of will,” Plunkett said. “No one had consumer protection as a priority.”

And if Sen. Corker and the others have their way, that trend will continue.