There are certain things in life I hold to be inevitable truths. First, I have never encountered a vegan or a professional accordion player whom I have found to be even remotely funny. Another is that no matter what the airline or the departure time, my flight from New York to Chicago's O'Hare Airport will be delayed - a lot.
The third, which I learned since assuming the editor's post here, is that there are no ground rules or decorum in a Capitol Hill street fight when it comes to protecting or acquiring new turf.
Along that subject line, there's a bit of a ruckus on the Hill these days, largely centering on one of a seemingly limitless supply of newly created or proposed entities under the current administration - in this case, the Consumer Financial Protection Agency, one of the many facets in a much larger plan to revamp the financial system. The issue isn't the actual creation of the thing, but who gets to run it.
Last month, Treasury Secretary Timothy Geithner told a House Financial Services Committee that a new agency with a core mission of protecting consumers is a necessity because currently the responsibility of consumer protection is scattered among a number of regulators. (And considering the events of the past year, the term "responsibility" is employed quite leisurely.) That, he argued, results in "finger-pointing" among the various oversight bodies. Therefore, a quasi-skirmish has ensued as to who is best suited to be the top watchdog.
Federal Reserve Chairman Ben Bernanke had exactly no reservations about foisting his agency at the top of that list, although Geithner pointed out quite accurately - as have others - that both the Federal Reserve and the Federal Deposit Insurance Corp. each had the power to protect consumers, but each performed their best impressions of Marcel Marceau during the sub-prime lending debacle.
As it's proposed, this new consumer protection entity will "have the power to set standards that consumers understand." It purportedly will be dedicated to those who take out loans or sign up for financial products and services (read: credit cards). The agency is also intended to address some of the root causes of the mortgage crisis by having the ability to oversee all types of home mortgage lenders.
I'll assume that the agency's mandate will be to continuously monitor the financial markets for consumer risks (real or imagined), and that it will be allowed - and here's where it gets a bit Orwellian - to regulate financial product providers, including both banks and non-banks.
Now, I'll be the first one to admit that contract agreements for credit card companies and mortgage offers are far from pithy, and often deceiving, but somehow President Obama managed to keep a straight face while assuring the public that a government-run protection agency will be created and at their disposal to simplify matters.
Many Republicans have, in fact, argued that it borders on foolish (I would push for a stronger term, like "idiocy") to allow Washington bureaucrats to determine what financial products are unfair.
The GOP has proposed stripping the Federal Reserve of any consumer protection powers it currently holds, as well as abolishing the Office of the Comptroller of the Currency and the Office of Thrift Supervision. Instead, they want to install one single regulator for depository institutions that would also extend to consumer protection. The administration quickly countered that its proposed agency could equally monitor non-bank institutions as well.
I have a feeling that this regulatory tug-of-war will carry on far longer than necessary, and the ones who unfortunately will lose will be the consumers.
And that's as predictable as a delayed flight to Chicago.
(c) 2009 Accounting Today and SourceMedia, Inc. All Rights Reserved.
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