Financial Reform: Empower the People

Dear President Obama, Senator Schumer and Senator Shelby:

On the eve of the portentous Senate debate over the extent to which the
financial industry is to be so as to avert future megacollapses on the
backs of taxpayers, workers and consumers, a great gap has been left
unattended.

That gap pertains to the continued powerlessness of the investors and
consumers-the people who bear the ultimate brunt of Wall Street's
recklessness, avarice and crimes and who have the greatest interest in
strong regulatory enforcement.

Among all the amendments filed for the upcoming Senate debate, only
amendment number 29, introduced by Senator Schumer, provides a facility
to establish an independent non-governmental non-profit Financial
Consumers' Association (FCA).

Amendment 29 includes the following for funding this unique institution:

"...the financial industry has enjoyed virtually unlimited access to
represent its interest before Congress, the courts, and State and
Federal regulators, while financial services consumers have had limited
representation before Congress and financial regulatory entities;" and

"...the Federal Government has a substantial interest in the creation of a
public purpose, democratically controlled, self-funded, nationwide
membership association of financial services consumers to enhance their
representation and to effectively combat unsound financial practices."

Anyone modestly familiar with the history of regulatory failures knows
that the gross disparity of power and organized advocacy between big
business and consumers outside of government leads to an absence of fair
standards and law enforcement.

It also leads, as everyone knows, to massive taxpayer bailouts,
subsidies and guarantees when these giant banks and other financial
firms immolate themselves, after enriching their bosses, while engulfing
tens of millions of innocent people in the subsequent economic
conflagration.

Given all the privileges and costly rescues for culpable corporations
that flow regularly from Washington, D.C., adopting ever so mildly the
principle of reciprocity makes a powerful case for facilitating a
nationwide Financial Consumers' Association-one that would be composed
of voluntary memberships by consumers who, through their annual dues,
will sustain the FCA for an expert place at the table.

Senator Schumer, when he was a Congressman during the savings and loan
bailout in the nineteen eighties, introduced such a proposal. But the
bankers took the $150 billion bailout and blocked this reciprocal
respect for depositors in the House Banking Committee.

Then Representative Schumer and his supporting colleagues on that
Committee understood that without the supposed beneficiaries of
regulatory authority being organized to make regulation and deterrence
work, the Savings and Loan collapse could happen again. And so they
became prophetic beyond their wildest nightmares.

Before he died in a plane crash in 2002, Senator Paul Wellstone
recognized the need for such a facility, when he introduced the Consumer
and Shareholder Protection Association Act.

A key enhancing feature in amendment 29 is a requirement that
invitations to membership in the FCA be included in the billing
envelopes or electronic communications of financial institutions with
their customers. At no expense to these vendors, these notices would
ensure that the maximum number of consumers are invited to join and fund
such a democratically run, educational and advocacy organization.

In early 2009 I met with Chairman Christopher Dodd and explained the
nature and importance of the FCA and Senator Schumer's earlier role in
advancing this civic innovation. He seemed receptive to the idea and
urged us to have his colleague Senator Schumer take the lead, which he
has done with amendment 29 just a few weeks ago. Senator Shelby and I
have also discussed the FCA proposal.

The major valiant but overwhelmed consumer groups, who experience daily
this enormous imbalance of power between corporations and consumers,
presently stacked by unprecedented amounts of federal funds and bailout
facilities for the misbehaving companies, support the creation of a
self-funded FCA.

The Federal Government has long paid for facilities in the U.S.
Department of Agriculture for agricultural businesses to band together
and assess themselves to promote beef, corn, cotton and other
commodities to increase their profits. By contrast the FCA, once
launched, would be composed of consumers paying their own way to
preserve their hard-earned savings from predatory financial speculators.

Allow one prediction. Even if the ultimate legislation comes out
stronger than expected on such matters as derivatives, rating agencies,
too big to fail, using depositor funds for speculation, and the consumer
financial regulatory bureau, unless the consumer-investor is afforded
modest facilities to band together with their experts and advocates, the
laws will hardly be enforced with sufficient budgets, personnel and
regulatory will power.

Give the consumer a modest round in this prolonged deliberation
following the destructive events of 2008.

Sincerely,

Ralph Nader

(For more information, see: csrl.org)