Last week I finally made the time to watch Inside Job, the Academy Award winning 2010 documentary about the recent financial crisis. The film does an effective job of clearly explaining the complex series of factors that led up to the crisis, including a headlong rush into deregulation of the financial services industry as well as the creation of ever more complex and risky financial tools. The root of the problem, though, was the revolving door between government and business and the corrupting influence of money on both.
Needless to say, my blood was boiling after watching the film. You can imagine the effect, then, when I learned that on Wednesday, the House Financial Services Committee passed three bills that will cripple the Consumer Financial Protection Bureau, one of the most important innovations in the 2010 Dodd-Frank financial reform law that was a response to the conditions exposed in Inside Job.
The Consumer Financial Protection Bureau has a simple and reasonable purpose: to shield consumers from unfair, misleading, and deceptive lending. While we can rail on and on about people getting themselves into bigger loans than they could afford, a large share of the blame (if not the majority of it) belongs to lending companies that made loans they knew the borrowers couldn’t afford. If you’ve ever looked at the fine print of a lending contract, a credit card agreement, or any other consumer financial services legal document, you know that it is unclear and opaque even for the most educated of consumers.
The purpose of the Republican bills is to deprive the Consumer Financial Protection Bureau of the power to fulfill its mission. Oh, and the fact that they stand to attract a lot of campaign money from financial firms by indicating their willingness to gut laws that protect consumers? Well, that’s probably a motivating factor, too.
As much as I love the idea of free markets and unfettered capitalism, I think there is a place for regulation: when an industry’s actions causes harm to the larger society. Especially in regards to the financial industry, we’ve seen over the last thirty to forty years that as it becomes less regulated, it takes greater and more irresponsible risks. Ultimately, it is the taxpayers of this nation who end up bailing out the shareholders of these companies.
I don’t know if this is an issue that bothers you. I try to keep this blog apolitical, but sometimes I think something of concern is worth sharing. If you’re so motivated, perhaps a quick email to your Representative and Senators to let them know your thoughts about gutting the Consumer Financial Protection Bureau would help ensure that the voice of the citizenry gets heard over the sound of all that money.
Here’s the email I sent to Kevin Yoder, my Representative:
This week, the House Financial Services Committee voted to approve three measures that would considerably weaken the Consumer Financial Protection Bureau. I want you to know that as your constituent, I would like you to VOTE NO on these measures, if and when they reach the floor of the House.
It seems that our politicians have forgotten how we got into the financial mess of 2008. As much as I like free markets, the financial services industry is incapable of policing itself and needs stronger, not weaker, regulation. This is particularly true of consumer finance, where every effort is made by financial institutions to be as opaque as possible in an effort to entrap consumers in a web of bad decisions.
Again, I’d like you to vote in favor of consumers rather than in favor of the financial industry and monied interests. VOTE NO on any reforms or weakening of the Consumer Financial Protection Bureau.