Andy Kroll

Andy Kroll

Senior Reporter

Andy Kroll is Mother Jones' Dark Money reporter. He is based in the DC bureau. His work has also appeared at the Wall Street Journal, the Detroit News, the Guardian, the American Prospect, and TomDispatch.com, where he's an associate editor. Email him at akroll (at) motherjones (dot) com. He tweets at @AndrewKroll.

Get my RSS |

Fed Consumer Agency a "Grave Mistake"

| Tue Mar. 2, 2010 2:44 PM EST

Sen. Chris Dodd's leaked proposal to potentially house a consumer-protection agency within the Federal Reserve has been blasted by consumer advocates today. They say the Fed failed to protect consumers from predatory lending and hidden penalties in the run-up to the financial meltdown, and hardly deserves to have an agency tasked with building and enforcing safeguards for consumers under its auspices. "The Federal Reserve is the last place an agency designed to protect consumers should be housed," said John Taylor, the head of the National Community Reinvestment Coalition, in a statement today. "It will be more waste of taxpayers' money because we’ll have to pay for the appearance of protection without getting any." Taylor goes on to say:

As early as 1998 and 1999, we urged Chairman Greenspan and then later Chairman Bernanke to take action against lenders targeting high cost loans to blacks and Hispanics. We presented them hard, cold data backing up these practices, and they did nothing. They refused to send cases to the Justice Department. It took the Federal Reserve board fourteen years to issue rules related to unfair and deceptive lending practices. This was long after the power was granted to them in 1994, and long after we pleaded and cajoled them to do something and, more importantly, after the market collapsed.

Had the Fed exercised their authority and enforced consumer protections, they could have nipped the foreclosure crisis in the bud. Now to turn over consumer protections to the very people who allowed the abuses to happen in the first place is simply beyond belief.

Similarly, Travis Plunkett, legislative director at the Consumer Federation of America, decried yesterday the powerful sway of the financial services industry and their lobbyists on Capitol Hill. It's these forces, Plunkett told the New York Times, that were diluting financial reforms proposed in the Senate—like an independent consumer protection agency—and weakening reform of big banks, mortgage lenders, payday lenders, and so on. "The financial services lobby and particularly the big banks are driving the agenda right now," Plunkett told the Times. "They are the ones gaining ground. Their strategy is clear: death by a thousand cuts."

Advertise on MotherJones.com

Dodd's Financial Hypocrisy

| Tue Mar. 2, 2010 10:10 AM EST

After saying last fall that the Federal Reserve had been "an abysmal failure" in its role protecting consumers, Sen. Chris Dodd (D-Conn.), in the latest twist in the Senate's financial-reform talks, now wants to put the well-being of consumers in the hands of the Federal Reserve, proposing to house a consumer-protection agency within the opaque Fed. The head of this hypothetical consumer agency would be appointed by the White House, according to the Washington Post, and while the agency would have rule-making powers, it would be up to existing regulators to enforce those consumer-oriented rules. It's unclear who'd win out in a power struggle between this Fed-housed consumer agency and other banking regulators, and whether the hypothetical consumer agency's jurisdiction would include certain non-banking institutions. But if there's one thing to take away from this latest leak from Senate's financial-reform negotiations, led by Dodd and Sen. Bob Corker (R-Tenn.), it's this: Dodd's not taking the high road, and appears willing to appease Republicans to almost any length if it helps him gets a bill passed.

This is the same Chris Dodd, you'll remember, who lambasted the Fed last year for its regulatory failures in the run-up to the crisis. In November, Dodd wanted to strip the Fed of practically all of its oversight power, creating a superregulator for financial institutions and leaving the Fed only to deal with monetary policy. And before that Dodd had generally opposed expanding the Fed's power at all, instead supporting the idea of an independent consumer protection agency. Meanwhile, Dodd's main Republican counterpart on the Senate banking committee, Sen. Richard Shelby (R-Ala.), has been an even more boisterous opponent of the Fed on numerous occasions: He's cited the Fed's "history of failure in supervision and regulation" and opposed the renomination of Fed chairman Ben Bernanke, who "fiddled while our markets burned," as Shelby put it.

Undoubtedly, the source of the Fed consumer-protection plan is Corker, the main Republican negotiator on financial reform since Shelby abandoned the talks in mid-February. But is the support of a single Republican senator enough to garner bipartisan backing for handing consumer protection off to the Fed? Or as one Senate aide familiar with the negotiations told Mother Jones recently, "Those who are arguing for real reform are arguing, 'Why even compromise if they're going to oppose it anyway? Why are you negotiating against yourself?'"

Barney Frank to GOP: Man Up on Financial Reform

| Mon Mar. 1, 2010 4:45 PM EST

Rep. Barney Frank (D-Mass.), chair of the powerful House financial services committee, has issued a challenge to Senate Republicans: If GOPers want to kneecap an independent consumer protection agency, they should do it in public, not behind closed doors. "Procedurally, the Senate Republicans are killing this or watering it down," Frank told Mother Jones. "Senate Republicans should stand up publicly and oppose it. At the very least, they have to do that. And there's going to be public reaction against that."

Over the weekend, Sen. Chris Dodd (D-Conn.), the banking committee's chairman and leader on financial reform, circulated a plan to create a watered-down consumer-protection agency within the Treasury Department. Frank, who helped pass a financial-reform bil last year that included an independent Consumer Financial Protection Agency, called Dodd's proposal "weaker than I was hoping." Frank added that the draft's stipulation that certain rule-writing by the proposed consumer agency would require approval from a separate risk-management council "is a terrible idea." He also lamented that the consumer agency wouldn't have full authority over payday lenders and debt collection and settlement companies.

If a watered-down version of a consumer-protection agency does emerge in the Senate's final financial-reform bill, Frank said he will fight to make sure a consumer agency with independence and increased authority for consumer protection makes it onto the president's desk. "I'm gonna do everything I can" to make sure the House's Consumer Financial Protection Agency survives, Frank vowed. "I want [Republicans] to take a public vote at the very least."

Richard Shelby, Financial Saboteur?

| Mon Mar. 1, 2010 12:36 PM EST

Did Sen. Richard Shelby (R-Ala.), the Senate banking committee's ranking member, try to sabotage the Senate's financial-reform talks last week by leaking a draft proposal on consumer protection from committee chair Sen. Chris Dodd (D-Conn.)? A source with close knowledge of the Senate's negotiations tells Mother Jones that Shelby, who'd abandoned his role as the Republican lead negotiator and was replaced by Corker, could very well have leaked the two-page proposal to news outlets to kneecap Dodd's ongoing efforts to craft a comprehensive financial-reform bill. "Dodd gave it to Shelby and Corker, so one of them leaked it," the source says. "Shelby could've leaked it to sabotage the talks."

To be sure, the draft proposal has circulated among both Democrats and Republicans involved in financial-reform talks. Both Corker and Shelby, however, have openly opposed an independent consumer protection agency—Corker called it a "non-starter," and Shelby said it was "folly and dangerous." A stronger consumer-protection agency has support elsewhere: The House included an independent Consumer Financial Protection Agency in its reform bill passed in December. And even Dodd himself has previously said that "[t]here needs to be an independent agency that looks out for people when they take out a loan, open a checking account or use a credit card." Dodd's leaked proposal—which would create a Bureau of Financial Protection within the Treasury Department to oversee large banks and some non-bank institutions—has been viewed as a political compromise to his Republican counterparts, yet unnamed sources with knowledge of the ongoing talks have been quoted as saying that the BFP is unpalatable to Corker and Shelby. Because Dodd has tried to keep a tight lid on the progress of his negotiations, it's unclear whether his BFP proposal is still being considered or not. The Senate banking committee is supposed to release a draft of its bill sometime this week.

No Wall St. Reform Better than Dodd?

| Mon Mar. 1, 2010 10:37 AM EST

If you're Paul Krugman, then the answer to that question is, Yes. In his column today, the liberal economist essentially calls the Senate's financial-reform talks a fakery and a sham, adding that the only thing weak financial reform would do "is create a false sense of security and a fig leaf for politicians opposed to any serious action—then fail in the clinch."

The impetus for Krugman's remarks is Sen. Chris Dodd's plan (PDF) to create not an independent consumer protection agency—the kind the House passed and the Obama administration purportedly supports—but a Bureau of Financial Protection housed within the Treasury Department much like the Food and Drug Administration is housed within the Health and Human Services Department. Consumer advocates and experts say Dodd's watered-down version of consumer protection raises numerous questions about the independence and efficacy of a Treasury-housed bureau, especially given the subpar records before the crisis of two other regulators within the Treasury—the Office of Thrift Supervision and the Office of the Comptroller of the Currency. And there's also the problem of no apparent Republican support for Dodd's compromise plan, too.

When it comes to consumer protection, Krugman argues, no reform would be better than what Dodd is proposing:

Some have argued that the job of protecting consumers can and should be done either by the Fed—or as in one compromise that at this point seems unlikely—by a unit within the Treasury Department. But remember, not that long ago Mr. Greenspan was Fed chairman and John Snow was Treasury secretary. Case closed. The only way consumers will be protected under future antiregulation administrations—and believe me, given the power of the financial lobby, there will be such administrations—is if there’s an agency whose whole reason for being is to police bank abuses.

In summary, then, it’s time to draw a line in the sand. No reform, coupled with a campaign to name and shame the people responsible, is better than a cosmetic reform that just covers up failure to act.

Now, while consumer protection is arguably the centerpiece of financial reform, there's still the issue of regulating over-the-counter derivatives, monitoring and reining in banks that become too big and too interconnected to fail, and creating some kind of authority to unwind or "euthanize" institutions when they pose that kind of systemic threat. Which is to say, a watered-down consumer protection agency won't kill the entire bill. But don't be surprised to hear many more reform advocates joining Krugman's line-in-the-sand camp.

Tue Jun. 24, 2014 3:22 PM EDT
Thu Apr. 24, 2014 6:06 AM EDT
Mon Jan. 13, 2014 1:19 PM EST
Mon Dec. 16, 2013 10:47 AM EST
Fri Oct. 18, 2013 12:12 PM EDT