Tell Us How You Really Feel, Elizabeth Warren

Let our journalists help you make sense of the noise: Subscribe to the Mother Jones Daily newsletter and get a recap of news that matters.


Elizabeth Warren, the chair of the Congressional Oversight Panel (the group keeping an eye on the bank bailouts), has a long post on the Baseline Scenario about President Barack Obama’s proposal for a Consumer Financial Protection Agency that would regulate financial products. It’s worth reading in full, but I noticed that Warren was incredibly explicit about the problems with the current regulatory system:

For decades, the Federal Reserve and the bank regulators (the OCC and the OTS) have had the legal authority to protect consumers.  They have brought us to this crisis by consistently refusing to exercise that authority.

Stephanie Mencimer wrote about this very phenonomon back in January. It’s an argument I’ve heard from economists like Dean Baker: the regulators had the authority to take steps to stave off the crisis—they just didn’t use that authority. It’s certainly interesting to hear that same argument coming from Warren. She thinks the regulators didn’t do their jobs because of “two structural flaws” in the system:

The first is that financial institutions can now choose their own regulators.  By changing from a bank charter to a thrift charter, for example, a financial institution can change from one regulator to another.  The regulators’ budget comes in large part from the institutions they regulate.  If a big financial institution leaves one regulator, the agency will face a budget shortfall and the agency will likely shrink.  Knowing this, financial institutions can shop around for the regulator that provides the most lax oversight, and regulators can compete by offering to regulate less.  Regulatory arbitrage triggered a race to the bottom among prudential regulators and blocked any hope of real consumer protection.

The second structural reason that prudential regulators failed to exercise their authority to protect consumers is a cultural one: consumer protection staff at existing agencies find themselves at the bottom of the pecking order because these agencies are designed to focus on other matters.  At the Federal Reserve, senior officers and staff wake up every morning thinking about monetary policy.  At the OCC and OTS, agency heads wake up thinking about capital adequacy requirements and safety and soundness.  Consumer protection issues are—at best—an afterthought.

Warren thinks that an independent consumer financial protection agency would go a long way towards addressing those flaws. If it somehow gets past industry lobbyists and actually becomes law, we’ll get a chance to see if she’s right.

UPDATE: There’s also a YouTube video, apparently:

IT'S NOT THAT WE'RE SCREWED WITHOUT TRUMP:

"It's that we're screwed with or without him if we can't show the public that what we do matters for the long term," writes Mother Jones CEO Monika Bauerlein as she kicks off our drive to raise $350,000 in donations from readers by July 17.

This is a big one for us. It's our first time asking for an outpouring of support since screams of FAKE NEWS and so much of what Trump stood for made everything we do so visceral. Like most newsrooms, we face incredibly hard budget realities, and it's unnerving needing to raise big money when traffic is down.

So, as we ask you to consider supporting our team's journalism, we thought we'd slow down and check in about where Mother Jones is and where we're going after the chaotic last several years. This comparatively slow moment is also an urgent one for Mother Jones: You can read more in "Slow News Is Good News," and if you're able to, please support our team's hard-hitting journalism and help us reach our big $350,000 goal with a donation today.

payment methods

IT'S NOT THAT WE'RE SCREWED WITHOUT TRUMP:

"It's that we're screwed with or without him if we can't show the public that what we do matters for the long term," writes Mother Jones CEO Monika Bauerlein as she kicks off our drive to raise $350,000 in donations from readers by July 17.

This is a big one for us. So, as we ask you to consider supporting our team's journalism, we thought we'd slow down and check in about where Mother Jones is and where we're going after the chaotic last several years. This comparatively slow moment is also an urgent one for Mother Jones: You can read more in "Slow News Is Good News," and if you're able to, please support our team's hard-hitting journalism and help us reach our big $350,000 goal with a donation today.

payment methods

We Recommend

Latest

Sign up for our free newsletter

Subscribe to the Mother Jones Daily to have our top stories delivered directly to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate