Consumer Financial Protection or Wall Street Beats Main Street?

News that a newly proposed Consumer Financial Protection Agency will be housed within the Federal Reserve is another shot across the bow in terms of Wall Street owning Washington and beating Main Street.

Am I surprised by these results? Not at all. The power of the Wall Street lobby is enormous and ultimately the crowd in Washington needs the money from Wall Street in order to pretend they represent the interests of Main Street. All the press conferences and politicking on the topic of consumer financial protection truly amount to nothing more than pure bluster. The bottom line of Wall Street banks feeds the bottom line of many politicians in Washington on both sides of the aisle.

Bloomberg provides an insightful perspective on this story in writing, Consumer Agency Within Fed Seen as Victory for Banking Industry:

For consumer advocates, housing a new agency to protect Americans from financial-product abuse within the Federal Reserve would be a defeat after lobbying for an independent body. For banks, it would represent a victory.

Banks say placing the agency with the Fed alleviates their concern that an independent entity would ignore the health of the financial system. Consumer advocates say it’s a mistake because the Fed didn’t succeed in curbing abuses during the subprime lending boom that contributed to the worst financial crisis since the Great Depression.

“We have all sorts of individual agencies that protect Americans, and none of them is subservient to the regulator that is in charge of looking out for the industry,” said Lauren Saunders, managing attorney at the National Consumer Law Center in Washington. “This agency has to be independent so that it can fix the problems the banking regulators failed to fix.”

How do I feel about all of this? The same way I felt a year ago. The question of where and how to develop consumer protection is much less a question of sufficiency (that is, do we have enough regulation and where is it housed) and much more a question of transparency and integrity. Without full and total transparency from those marketing consumer financial products and even greater full and total transparency from those charged with regulating the financial industry, this entire exercise is largely a joke.

I said as much last May in writing, “Future Financial Regulation: Not a Question of Sufficiency, But of Transparency and Integrity“:

Will our future regulatory structure of the financial industry allow capitalism to thrive? Will the political wizards in Washington prioritize personal agendas and expediency over unquestioned transparency and integrity? I believe we are at a critical regulatory crossroads not seen since financial regulations implemented in the Securities Act of 1933.

Do the powers that be both in Washington and Wall Street understand the magnitude of responsibilities and obligations involved in this process? Initial returns are decidedly mixed.  The debate by those intimately involved in the regulatory oversight is typically framed as a question of sufficiency. That is, does the industry have enough regulation or not?

The media often frame the debate in political terms between laissez-faire proponents and those favoring increased government intervention. Both camps are missing the bigger picture, because both camps are feeding from the same trough. Allow me to expound.

The critical regulatory question facing our markets is not of sufficiency but is one of transparency. Regrettably, both ends of the regulatory spectrum do not want to address this glaring shortcoming because it exposes the very nature of the incestuous relationship between Wall Street and Washington.

With news that the proposed Consumer Financial Protection effort will be housed within the Federal Reserve, absolutely NOTHING has changed.

How should American consumers protect themselves? They need to become educated and financially savvy so as not to get trapped by Wall Street or hoodwinked by Washington.

About Larry Doyle 522 Articles

Larry Doyle embarked on his Wall Street career in 1983 as a mortgage-backed securities trader for The First Boston Corporation. He was involved in the growth and development of the secondary mortgage market from its near infancy.

After close to 7 years at First Boston, Larry joined Bear Stearns in early 1990 as a mortgage trader. In 1993, Larry was named a Senior Managing Director at the firm. He left Bear to join Union Bank of Switzerland in late 1996 as Head of Mortgage Trading.

In 1998, after 15 years of trading and precipitated by Swiss Bank’s takeover of UBS, Larry moved from trading to sales as a senior salesperson at Bank of America. His move into sales led him to the role as National Sales Manager for Securitized Products at JP Morgan Chase in 2000. He was integrally involved in developing the department, hiring 40 salespeople, and generating $300 million in sales revenue. He left JP Morgan in 2006.

Throughout his career, Larry eagerly engaged clients and colleagues. He has mentored dozens of junior colleagues, recruited at a number of colleges and universities, and interviewed hundreds. He has also had extensive public speaking experience. Additionally, Larry served as Chair of the Mortgage Trading Committee for the Public Securities Association (PSA) in the mid-90s.

Larry graduated Cum Laude, Phi Beta Kappa in 1983 from the College of the Holy Cross.

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