American Banker is running an article by Bill Wade (subscription required, but free trial available), a former banker . . . explaining why the banking industry should be in favor of a Consumer Financial Protection Agency. Wade repeats many of the arguments made by consumer advocates such as Elizabeth Warren:
“A Consumer Financial Protection Agency can be the vehicle that restores consumer confidence in our products, our services and our institutions. The customers we serve will always need credit and other banking products . . . What they want is simple, clearly explained products and the comfort that someone is looking out for their best interests when financial products are developed and marketed. . . .
“In every existing agency, consumer protection is a secondary or tertiary responsibility, after safety and soundness. Consequently, it is often a regulatory afterthought.
“If we expect attention to be paid to consumer protection and product simplification these functions must be consolidated into a functional entity with rulemaking and enforcement authority. . . .
“For a good portion of my banking career, I have been involved with products registered under the supervision of regulators who continually examine, write rules and look for wrongdoing. It has not always been easy, but my experience has taught me that vigilant, well designed regulations and agencies are the best structure for protecting me as a businessman and the consumers I serve.”
Wade’s main request is that the industry work with Congress to “improve” the CFPA rather than simply dig in its heels and try to kill it. I’m not thrilled about more rewriting of the legislation by the banking lobby. It’s already been “improved” plenty in the House, which took out the plain-vanilla requirement and also exempted the vast majority of banks from direct CFPA examinations (the CFPA will set the rules, but examinations will be done by the primary safety and soundness regulator). But practically speaking it’s better than all-out opposition. And Wade is right: the industry will be better off if customers actually trust it, because otherwise they will switch into cash, which doesn’t help the banking industry.
The problem is that the Republican Party, traditionally the political vehicle of the banking lobby, has its own, separate reasons for wanting to kill the CFPA. My guess is that even if the ABA and the ICBA went to the Republican leadership (Michael Steele? Mitch McConnell? Richard Shelby? John Boehner? Sarah Palin? Is that an oxymoron?) and asked for a constructive attitude toward the CFPA, the Republicans would turn them down, because they see more political value in following the Frank Luntz line and demonizing regulation.