Washington, DC – The Consumer Federation of America (CFA) today commended the Senate Banking Committee for moving quickly to enact comprehensive legislation to overhaul the regulation of financial services. Unfortunately, only 18 months after bringing the economy to the brink of collapse, large bank and Wall Street lobbyists are working hard to gut this legislation.
As the Senate Banking Committee begins consideration of the ―Restoring American Financial Stability Act,‖ CFA released a handy ―consumer’s guide‖ to help concerned citizens determine whether the American people or the big banks will be the real beneficiaries of this legislation.
―Recklessness among big banks and Wall Street firms and regulatory failures by federal agencies triggered a prolonged recession that continues to cause great hardship for many Americans,‖ said CFA Legislative Director Travis Plunkett. ―The American people are looking to the Senate to strengthen consumer and investor protections and restore the safety and soundness of the financial system by closing gaps in the regulatory system.‖
Currently, it is unclear how many of the 500 amendments to the bill that have been proposed will actually be considered. Some could be adopted as part of the underlying bill, others could be offered and withdrawn without a vote, and some may never be offered for debate. CFA has identified amendments in two key areas where Senators will face a stark choice between consumer and business interests:
Creation of a truly independent consumer financial regulator to rein in abusive lending by banks, credit card issuers, mortgage and payday loan companies and auto dealers.
Strengthened protections for average investors and new powers for shareholders to hold the managers and directors of the companies they own accountable.
―How these amendments fare could tell us a lot about whether the public interest or special interests are winning out as the bill moves forward,‖ Plunkett said. ―Unfortunately, bank and business lobbyists have spent millions – an estimated $1 million per member of Congress – to defeat and weaken desperately needed financial reforms like these.‖
―The proposed new consumer financial protection regulator has been singled out by banks as a leading target for weakening amendments, particularly concerning its independence from indifferent and hostile bank regulators and its oversight and enforcement powers to address unfair, deceptive or abusive practices that target consumers, no matter what type of entity engages in these bad practices,‖ continued Plunkett.
In some areas, industry pressure has already had a negative effect. ―In response to lobbying by brokers and insurance agents, the bill’s single most important provision to protect average investors – a requirement that brokers and insurance agents act in customers’ best interests when recommending securities – has already been stripped from the bill, as has a provision allowing defrauded investors to sue those who aid and abet the fraud,‖ said CFA Director of Investor Protection Barbara Roper. ―Meanwhile, a provision authorizing the SEC to limit forced arbitration is threatened, measures to give shareholders new powers to hold company managers and directors accountable for their actions face weakening amendments, and even a provision seeking to give investors a greater voice in investor protection regulatory policy has come under attack. In the age of Madoff, these would hardly seem like controversial measures, but Wall Street has found at least a handful of senators ready and willing to champion its cause and resist modest new investor protections,‖ Roper added.
―Americans need to know who’s on their side and who is offering amendments that will leave them vulnerable to dangerous gaps in our regulatory system for which consumers and taxpayers have had to foot the bill,‖ said Susan Weinstock, Financial Reform Campaign Director for CFA. ―We strongly encourage all Americans to follow this debate and let their Senators know how they feel about the positions their members are taking.‖