For Immediate Release
Public Citizen to Congress: Do Not Defang Consumer Financial Protection Agency – Defeat Bean Amendment
Statement of David Arkush, Director, Public Citizen’s Congress Watch Division
scheduled to vote on the creation of a Consumer Financial Protection
Agency Act (H.R. 3126), proposed by the White House and championed by
Rep. Barney Frank (D-Mass.).
Consumers need a strong watchdog agency to stop the financial
industry from taking advantage of average citizens and destabilizing
the broader economy. Congress is considering a bill to create such an
agency, but the big banks are doing everything in their power to kill
or weaken the proposal. To no one’s surprise, the lawmakers who are
carrying the financial industry’s water have received large amounts of
campaign cash from that industry. For the sake of those Americans who
have lost so much in the economic downturn, lawmakers should serve
their voters, rather than the big banks.
The proposal being considered this week would create a strong
watchdog to prevent destructive and unfair financial practices. This in
turn would bolster the stability of the economy. The Consumer Financial
Protection Agency (CFPA) would replace oversight by failed agencies
like the Fed that have served the banks, not the American public.
Most Democratic members of the committee will vote for this critical
consumer watchdog because they recognize its importance to ending the
squeeze on average Americans by mortgage lenders and credit card
companies – and to averting another economic disaster.
Some Democrats are attempting to weaken the proposal first. Chief
among them is Rep. Melissa Bean (D-Ill.), who is expected to offer an
anti-consumer amendment that would block states from protecting their
own citizens against abusive lending by big banks.
The finance industry has been soaking members of Congress in
campaign cash, and these efforts to weaken the CFPA show that the
effort might pay off. According to data from the Center for Responsive
Politics (CRP), the four largest banks contributed $16.9 million to
federal political campaigns and spent $23 million lobbying in
2008.Two-thirds of Bean’s campaign cash for the 2010 cycle – $438,337
of $668,677 – comes from lobbyists and lobbyist-connected PACs.
Forty-two percent – $269,800 of $668,677 – of Bean’s cash comes from
the finance, insurance and real estate (FIRE) industries. The data also
show that two-thirds of Bean’s campaign money comes from political
action committees (PACs) and that 53 percent of her PAC money is from
Rep. Dennis Moore (D-Kan.) is also working to weaken the agency, and he
too is swimming in industry money. He has received half his campaign
cash this year from the finance sector – $139,097 of $273,683,
including 65 percent of his PAC money ($98,397 of $174,897). More than
60 percent of Moore’s 2009 contributions ($168,469 of his $273,683)
have come from lobbyists and lobbyist-connected PACs. Moore is seeking
to make the agency toothless by taking away its authority to enforce
its own rules.
It is clear that Wall Street has invested handsomely in killing or
maiming the CFPA. The Bean amendment would preserve the very system
that has failed consumers and dragged down the rest of the economy –
one in which federal banking regulators “pre-empt” state consumer
In the past decade, when federal regulators blocked states from
cracking down on predatory lenders, the lenders unleashed the exploding
mortgages and other financial time bombs that put millions out of their
homes and brought down the economy. A recent study published by a
research center at the University of North Carolina found that the
proportion of high-cost mortgages shot up from 16 percent to 46 percent
when the Office of the Comptroller of the Currency gave national banks
and their subsidiaries immunity from state anti-predatory lending laws.
The authors also reported that through June 2008, foreclosure rates
were 12 percent lower in states that had anti-predatory lending laws.
Americans need a strong federal floor of consumer protection – not a
toothless federal regulator that fails to do its job and blocks states
from going theirs.
Pre-emption harms not just consumers, but also community banks. With
pre-emption, there are two sets of rules; small banks must comply with
state laws like usury caps, but big banks are exempt. They can
outcompete smaller banks by using unfair and deceptive practices. The
Bean amendment would preserve the power of big banks at the expense of
consumers and community banks.
We urge members of the committee to oppose the Bean amendment and
any further weakening of the CFPA proposal, and we will watch the votes
on these amendments closely. Weakening the CFPA is the clearest way
members can show that they favor big bankers over their constituents.
We urge the House Financial Service Committee to approve strong CFPA
legislation. Many courageous members of the committee are standing up
to the powerful, moneyed interests of the banking lobby and pushing for
a stronger agency. We wholeheartedly support these efforts and urge
others on the committee to support them as well.
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Public Citizen is a national, nonprofit consumer advocacy organization founded in 1971 to represent consumer interests in Congress, the executive branch and the courts.