‘HAVE BANKS NO SHAME?,’ by Joe Nocera in today’s N.Y. Times. Go to for complete article. UNBELIEVABLE THESE SLEEZEBAGS ACTING LIKE GREED-MONGERS.

In Uncategorized on October 10, 2009 at 14:13

A few months ago, I asked Simon Johnson, the former International Monetary Fund economist, now a prominent critic of the banking industry, what he thought the banks owed the country after all the government bailouts.

“They can’t pay what they owe!” he began angrily. Then he paused, collected his thoughts and started over: “Tim Geithner saved them on terms extremely favorable to the banks. They should support all of his proposed reforms.”

Mr. Johnson continued, “What gets me is that the banks have continued to oppose consumer protection. How can they be opposed to consumer protection as defined by a man who is the most favorable Treasury secretary they have had in a generation? If he has decided that this is what they need, what moral right do they have to oppose it? It is unconscionable.”

I couldn’t have said it better myself.

Starting on Wednesday, the House Financial Services Committee will take up a number of reforms proposed by the Obama administration, hoping to push them through the committee so they can be voted on the House floor as part of a larger financial reform package. Among the proposals the committee will tackle is, yes, the establishment of a new consumer financial protection agency.

The administration’s outline for this new agency — which would regulate mortgages, credit cards, debit cards, installment loans and any other product issued by a financial institution — was sent up to Capitol Hill in July. Since then, Barney Frank, the committee chairman, has made a number of substantial changes, none of which, I have to say, have strengthened the proposed legislation. He stripped the bill of the much-promoted “plain vanilla” provision, which would have forced, say, mortgage brokers to offer customers a 30-year fixed mortgage alongside any exotic option A.R.M. mortgage they wanted to push.

He has changed the nature of an oversight panel, so that it would consist of the top bank regulators — the very same regulators who did such a miserable job looking out for consumers during the housing bubble. He has tinkered with the way the agency will be financed, making it less onerous for the banking industry and more onerous for nonbank financial institutions that will come under the agency’s purview.

Saddest of all — at least from where I’m sitting — he abandoned the so-called reasonableness standard, which would have forced bankers to make sure their customers both understood the products they were buying and could afford them. Mr. Frank has said that such a provision would put bankers in an “untenable position.” Yet that is precisely what brokers are required to do when they sell a stock or a bond to their customers. Why shouldn’t the same standard apply to a banker making a mortgage loan?

Part of the reason Mr. Frank made those changes is that he needs the support of conservative Democrats if he hopes to turn this bill into law. But it is also because he felt a need to mollify, at least to some extent, the bank lobby, especially the community bankers who populate every Congressional district in the country. Indeed, in a recent missive to its members, the American Bankers Association trumpeted its success in helping make the bill more palatable to the banking industry.

Yet even now, despite its success in reining in the proposed agency, the banking industry is still lobbying fiercely against it. Edward L. Yingling, the president of A.B.A., borrowed a line from “Casablanca” to describe the impulse behind the proposed consumer agency. “They’re rounding up the usual suspects,” he complained to me the other day. “We’re the usual suspects.”

Not long ago, the A.B.A. sent an “action alert” to its member banks, pleading with them to call their congressman in a last-ditch effort to stop the bill. (“Passing more laws that will overly complicate and restrict the products our customers need is detrimental to our banks,” the note read in part.) And even if the bill does pass, the industry is hoping to pervert its purpose, so that it will become a means to stifle competition from nonbank financial institutions.

To which one can only ask: Have they no shame?

“There needs to be more focus on consumers,” Mr. Yingling insisted. “We agree with that.”

Whenever you talk to bankers or their lobbyists about the proposed agency, you hear some variation of what I’ve come to think of as the party line. It’s not that they’re against consumer protection, they say. (Heaven forbid!) Rather, they say, this new agency — larded as it will surely be with thousands of newly deputized bureaucrats, each one eager to impose burdensome new regulations — is simply not the way to go about it.


  1. what a sellout Barney Frank has become. Shame on him.

  2. Consider the presumptuousness in the banking lobby involving itself and insisting that its interests be served in Congress as it fashions financial regulatory reform. That they are in any position to be part of that process is beyond at least John Galbraith. If you are interested, here is my post:

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