Flush with Cash From Bank Lobbyists, Conservative Dems Are Killing the Consumer Protection We All Need

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Minnick's spokesman tells me he didn't get paid to give the talk, but the Chamber is spending $2 million on an effort to torpedo the CFPA.

Its latest ad is an incredible whopper, arguing that local butchers and bakers will suffer if the CFPA is established, since looking out for consumers will make doing business more expensive. It's not an argument against having a separate agency to protect consumers: the Chamber of Commerce is actually arguing that any form of consumer protection will hurt the economy and making that argument in the middle of a recession caused by bank predation.

"It's the financial equivalent of death panels," Rep. Alan Grayson, D-Fla., said.

The U.S. economy desperately needs to start protecting citizens from financial predation.

The foreclosure epidemic has slipped from the headlines, but it's getting worse by the day. According to data compiled by the bank lobby, more than 5 million homes were at least 60 days overdue or in foreclosure at the end of June. The nonpartisan Center for Responsible Lending expects 9 million homes to be lost to foreclosure by the end of 2012. That's almost 20 percent of all mortgages in the United States.

For a full five years, the entire U.S. mortgage industry was hijacked by what Treasury Secretary Timothy Geithner called "systematic predatory practices without restraint." The rest of the consumer banking industry -- credit cards, checking accounts, payday loans and auto loans -- is a nightmare for too many of its customers.

Banks routinely score more money from penalties and fees than they do on loans. The finance industry reaps roughly $17.5 billion a year from overdraft fees, according to the CRL. To put that number in perspective, the entire banking system posted a combined profit of $10.2 billion in 2008.

Once they get their hooks into tapped-out borrowers, they can be tenacious. Payday lenders routinely charge borrowers interest upwards of 700 percent for small loans used to pay other bills, creating a cycle of debt that can take years to pay off.

This insanity is enabled by dozens of regulatory loopholes and an alphabet soup of multiple federal agencies, all of which are charged primarily with making sure banks don't fail. That focus on protecting bank profits means that today's regulators almost never raise the alarm on predatory practices, until the damage is both epic and public.

The clear solution is to strip these failed agencies of their consumer-protection mandate and give it to a new body that answers only to consumers, not bank balance sheets. If a company is in the business of making loans to consumers, it has to play by the new agency's rules. It's by far the most important reform Obama has proposed in his Wall Street overhaul.

But Minnick and other more-established conservative Democrats are on the attack. One of the most prominent is Rep. Melissa Bean, D-Ill., vice chairwoman of the New Democrat Coalition.

Although not as visible as the Blue Dogs, with whom they share several members, New Democrats are reliable advocates for the conservative economic policies that created today's recession. Although they advertise themselves as "pro-growth" or "pro-business," they're really just "pro-CEO."

Bean and freshman Rep. Jim Himes, D-Conn., a former Goldman Sachs vice president, head the New Democrat's "task force" on financial regulation. Like the Chamber of Commerce and the American Bankers Association, their top goal right now is defanging the CFPA so that Congress can celebrate establishing a new regulator while Wall Street celebrates its powerlessness.

Himes and Bean are being flooded with money from the bank lobby.