Consumer Law

The Future of Financial Reform: Looking Ahead

By Deepak Gupta

A few days ago, the indefatigable consumer advocate Ed Mierzwinski of U.S. PIRG had these forward-looking thoughts about financial reform at his Consumer Blog.  "It will be critical," Ed observes, "for public interest groups and the media to do three things over the next few years:"

 

-- First, we need to participate in the implementation of the law to make sure that industry lobbyists, well-versed in the ways of regulatory bureaucracy, don't use the regulatory and transition process to delay or weaken the act's provisions. 

-- Second, we need to watchdog the Congress and make sure it fulfills the oversight and accountability role it largely dropped for over ten years. The proposed act did not take the approach of breaking up the big banks or banning most risky practices. Instead it provides a very good set of tools for regulators to ensure that the banks don't take imprudent risks or do anything stupid. For this to happen, Congress needs to make sure that the administration appoints good regulators and Congress needs to do its job by making sure that those regulators do their jobs. Congress needs also to act swiftly on presidential appointments to the financial system, such as on the President's current nominees for Federal Reserve governor, including Maryland Banking Commissioner Sarah Bloom Raskin. In early August, the president will have another critical appointment available, as the term of John Dugan, head of the obscure but powerful Office of the Comptroller of the Currency (OCC), expires. Dugan has long been a steadfast opponent of states and their attorneys general taking action to protect the public against predatory or risky bank practices at the same time as his own federal agency failed to enact or enforce strong rules. Lately, he has spent most of his time blaming other than his national banks for the crisis. Most people know better. The OCC needs better leadership as its powers as prudential bank regulator are expanded under the bill and the soon-to-be-defunct Office of Thrift Supervision is rolled into it. No one will miss the OTS, which missed the warning signs of numerous bank failures and covered up others. 

-- Third, we need to plan for the future by making sure Congress finishes its unfinished business that wasn't done in the mammoth act. High on that list will be solving the Fannie Mae/Freddie Mac conundrum as the firms are still bleeding billions of dollars. [And] although Congress enacted the landmark Consumer Financial Protection Bureau, it failed to modernize the Federal Trade Commission.

(As a litigator, I'd add that we need to be ready to bring and defend the inevitable litigation, including regulatory challenges, that will arise out of the new legislation and its implementing regs).

Henry Sommer, a distinguished consumer advocate and bankruptcy expert, is also thinking about the past and future of consumer rights, but in much broader terms. He's guest-blogging at Credit Slips and you can read the first in a series of his reflections here, suggesting we may be experiencing a return toward consumer protection after a thirty-year hiatus.

Full post as published by CL&P Blog on July 01, 2010 (boomark / email).