While the James Comey hearing captured our attention yesterday, the U.S. House of Representatives passed the repeal of oversight for Wall Street institutions. Rep. Kevin Cramer has been a vocal proponent of the changes. The Financial Choice Act, as they’re calling it, would remove increased oversight of “Too big to fail” banks and diminish consumer protections created by Dodd-Frank (2010). To cover up this roll back, proponents point to the changes community banks will receive under the new law.
You may recall, Dodd-Frank was created and implemented after the 2007-2008 market collapse. The law’s intent was to prevent risky, deceptive, and unfair financial practices that, in part, led to the largest financial crisis since the Great Depression. Greater oversight of Wall Street and new consumer protections under the Consumer Financial Protection Bureau (CFPB) were key components of the measure. Both of these components are weakened under the act pushed by Cramer.
All of these pro-Wall Street and anti-consumer changes are pushed under the guise that the bill was intended to help community banks. Regulations and red-tape on lending for local community banks will be reduced. That is a good thing. However, if you want to help community banks simply do it. There is no need to couple these changes. The outright rollback of oversight on Wall Street alone is unpopular, and politicians like Cramer in Washington know that. This is why they placed the changes in the same bill.
The changes in consumer protection blatantly interject politics in the process. Instead of having the ability to rapidly adjust to the fast-paced changes of the financial sector, the bill would require Congressional approval to consumer protection updates. We’ve seen how fast things move through Congress in Washington even under one-party rule. Nor could the CFPB charge hefty fines for unfair and deceptive practices. Remember Wells Fargo created millions of fake accounts to receive customer fees. When they got caught by the CFPB, they were fined $185 million dollars. Under Cramer’s changes, the CFPB would not be allowed to do so in the future.
On top of weakening consumer protections, House Republicans want the CFPB to go through the appropriations process for funding. Currently, the CFPB is funded through a formula of transfers in the Federal Reserve. This allows a level of independence. Republicans have wanted this change since 2012. Add the impacts of campaign donations and the banking lobby, and it isn’t a stretch to wonder if consumer protection will be a priority under the new GOP rules. Just look at how they’d like to treat people with preexisting conditions with Trumpcare for example.
Congress could ease the burden on community banks like those in North Dakota. They can do that without rolling back oversight of the too big to fail institutions on Wall Street. In this bill, the smaller local banks are being used as cover to give big breaks to big banks. Don’t fall for the bait and switch.