RebelCapitalist: Financial Information for the Rest of Us | Democrats help Financial Conglomerates Win

Democrats help Financial Conglomerates Win

Dec 10, 2009 | By: Mr_Blue | Tags: consumer protection, cfpa, new democrat coalition

That’s right a coalition called the New Democrat Coalition, who has worked hard for their Wall Street benefactors to water down, weaken and/or kill financial regulatory reform, scored a big victory for the financial conglomerates.

Huffington Post’s Shahien Nasiripour (who has been doing some fine reporting) reported that the New Democrat Coalition scored a ‘compromise’ late last night that served to weaken consumer protection laws in the states. One of the important original provisions of the proposed Consumer Financial Protection Agency legislation allowed states to enforce their consumer protections laws against national banks, particularly financial conglomerates.

The financial conglomerates make a ton of money off of unsuspecting consumers whether through predatory lending or higher bank fees and they hated this provision because states’ consumer protection laws tend to be more strict than federal laws and regulations and it is easier for the financial conglomerates to roll, fool or cajole federal regulators than state. The financial conglomerates wanted what is called preemption meaning that federal regulators can step in and preempt any state laws and regulations. The Office of Comptroller of the Currency (OCC) exercised the doctrine of preemption very frequently and broadly during the build-up of the subprime lending crisis. When ever a financial conglomerate would cry about a state being too strict the OCC would come to their rescue and preempt state regulators.

Here is the reported ‘compromise’:

As part of the new deal, [Rep. Barney]Frank will incorporate preemption-friendly language from New Democrat Melissa Bean of Illinois into his amendment to financial overhaul legislation. The deal slightly dials back the OCC’s broad preemption authority, a House aide said late Wednesday. Per the compromise, the agency would have to preempt laws on a case-by-case basis.

The effects could be wide-ranging. If the OCC preempts a law and determines that it applies to a particular category of laws, that single preemption determination would then apply to all similar measures in the future. Also, the OCC would have the authority to preempt state laws that “materially impair” a national bank’s operations. Capping ATM fees, for instance, could fall into this category as it would have a material impact on a bank’s profits.

So, basically, nothing changes. We go back to same situation we had during the build-up to the subprime mortgage crisis. The whole purpose behind the financial regulatory reform was to hold the financial conglomerates accountable so as to avoid another financial crisis in the near future. Obviously, financial conglomerates don’t want accountability and their are using their hacks, such as New Democrat Coalition, to kill any legislation that serves to tame these “Too big to Fail” institutions.

Good luck.