Chris Dodd, Consumer Financial Protection Agency, Federal Reserve, Kabuki theater, Senate Banking Committee, Timothy Geithner, Valerie Jarrett
If there’s anything transparent in this administration of “openness and transparency” it’s the way the well-rehearsed and often-repeated three-act Kabuki theater plays out their alleged attempts at any major reform on any particular issue. It’s as easy to see through as a pane of glass and as easy to see coming as a freight train. Here’s how it goes, again and again:
Act I. The president professes to want (but doesn’t actually want) real reform on a given issue. The House passes a bill containing real reform. The Senate at first seems to embrace it, but then claims ‘woe is us, we can’t pass it without Republican votes.’
Act II. The legislation is watered-down in search of bi-partisan support that the administration and the Senate leadership knows they aren’t going to get in spite of the watering-down.
Act III. What started out as “reform” becomes so weakened as to be of no real affect. Thus, the original goal of the president and his former colleagues and current accomplices in the Senate is achieved–give the appearance of doing something while actually doing nothing.
The latest example is on the creation of the Consumer Financial Protection Agency. In July of last year:
“The Obama administration…proposed legislation for a financial oversight agency designed to protect consumers and investors from unscrupulous deals…The White House sent Congress a 152-page draft bill to create the Consumer Financial Protection Agency, which it says would offer greater consumer protections for such financial products as mortgages, credit cards and loans by establishing simpler and more transparent rules and regulations.
“Consumer protection will have an independent seat at the table in our financial regulatory system,” Treasury Secretary Timothy F. Geithner said.”
At the time, Senate Banking Committee chairman Chris Dodd “called the administration’s bill a “bold and aggressive plan” to defend against a future financial crisis.”
In December the House passed a sweeping financial reform bill which contained an independent consumer protection agency.
Fast forward to Thursday of last week:
“Creating a powerful and independent consumer agency, which is strongly opposed by the financial industry and Republicans, has been the major roadblock in drafting a bill that could pass in the Senate…Dodd has been searching for months for a bipartisan compromise, a move made more urgent after a Republican, Scott Brown, won the special Massachusetts Senate election in January, giving the GOP enough votes to block any Democratic legislation. After negotiations with Sen. Richard C. Shelby (R-Ala.) reached an impasse, Dodd began working with Sen. Bob Corker (R-Tenn.).
The “compromise” reached by Dodd and Corker would take away the independence of the agency and instead making it an arm of the Federal Reserve. This despite the fact that Dodd himself said 4 months ago that Fed’s record on consumer protection was an “abysmal failure,” and more recently, “criticized the Fed’s previous inaction as a main reason for creating such an entity, noting that the central bank took 14 years before enacting rules in 2008 to protect consumers from unscrupulous mortgage lending.”
And where does the Obama administration come down? It appears to be the usual fence-straddling:
“Treasury Secretary Timothy F. Geithner and Valerie Jarrett, a senior White House advisor, met Wednesday with representatives from consumer, labor and other organizations that support a strong, stand-alone consumer agency and told them that “strengthening consumer protections remains a central objective of our financial reform efforts,” according to an administration official.
Although Geithner and Jarrett said they would not accept a bill unless it included a consumer agency with “real independence,” they did not specifically rule out housing it in the Fed or another agency.”
But appearances can be deceiving. With a little reading between the lines one can see what the administration really wants. Geithner is the former president of the New York Fed, Valerie Jarrett is a former member of the board of directors of the Chicago Fed. It seems to be too much of a coincidence that these were the two administration representatives to the negotiations. I would surmise that the president wants the agency in the Fed.
Why? It follows the script–giving the appearance of doing something–creating a consumer protection agency, while actually doing nothing–putting the agency inside the Fed, whose track record on enforcing any kind of regulation is, to use Sen. Dodd’s word, abysmal.
Mission accomplished. The peasants are appeased and the corporate masters are not angered. The campaign contributions continue to flow, and business as usual continues.