Last Updated Mar 3, 2010 2:57 PM EST
The Massachusetts Democrat labeled the Senate plan a "joke," noting that the Fed for years failed to safeguard consumers from radioactive loans before the housing meltdown. Frank, who's leading financial reform efforts in the House, was sufficiently exercised to issue a statement today on the matter:
"I do not support housing the [CFPA] in the Federal Reserve. I continue to vigorously support the House-passed bill that establishes an independent agency with strong rule-writing authority and enforcement powers to implement consumer protections.... My main objection to housing this critical function in the Federal Reserve has been the central bank's historical failure to implement consumer protection as a central part of its mission and role."Other lawmakers have also recently blasted the idea. Sen. Jeff Merkley (D-Oregon) noted yesterday that guarding consumers comes way down on Fed's priority list:
"The Fed's leadership cares first and foremost about monetary policy -- that's in the penthouse. Safety and soundness considerations come next. Then, way down in the basement is consumer protection. While a new consumer division would presumably have more power and independence, there is no reason to believe that the culture of the Fed will change."The issue here is control. Banks want the proposed CFPA to be subservient to the banking regulators over whom they have influence. (That means all of them.) During the housing boom, as lenders carried out legalized loan scams to fill their pockets, the Fed, FDIC, OCC, OTS and other agencies quietly averted their gaze. In other words, these agencies effectively served as the industry's handmaidens in a years-long predatory lending binge.
Senate Republicans now want to bring the CFPA into the fold. An analyst with Concept Capital, which advises investors on public policy, said in a report this week that a plan proposed by Alabama Republican Richard Shelby would "provide a stronger check on the consumer protection agency's powers. This means overreaching restrictions on the ability of banks to assess fees would be less likely."