May 06, 2010


WASHINGTON – Today, Senate Banking Committee Chairman Chris Dodd (D-CT) issued the following statement during Senate debate of the Republican amendment to gut consumer protections in the bill to bring accountability to Wall Street.
In his statement, Chairman Dodd provided a point by point critique of the Republican plan.
“Mr. President, over these many months that we’ve been working on financial reform, I’ve spent a lot of time working with my friends across the aisle to build bipartisan consensus.  I’m proud that those efforts have, in many ways, succeeded.  We have worked together to develop language that both sides feel properly addresses the issue of how to liquidate failed firms without costing taxpayers or threatening our economy.  We have worked together to create an early warning system to watch out for the next crisis.”
“But I have said all along, Mr. President, that there is one principle I will not compromise, and that is consumer protection.  The first priority of any financial institution should be its customers.  And consumer protection should be at the heart of our regulatory system.  Unfortunately, as we all know and as many Americans have found out the hard way, our current system leaves consumers vulnerable to being deceived into purchasing risky financial products, if not outright ripped off by greedy Wall Street firms.”
“After all, at the heart of the financial crisis that has cost our nation so dearly were subprime mortgages, sold by unscrupulous lenders to Americans who didn’t understand their terms and who could never have afforded them.”
“Mr. President, as the chairman of the Banking Committee, I know how important it is that the American financial sector be able to thrive, to innovate, to lead the world.  But ordinary families have a right to thrive, too.  Those families have a right to clear and accurate information that will help them to make smart financial decisions.  Those families have a right to know that they won’t be ripped off by some Wall Street scam.”
“The legislation before the Senate creates an independent consumer protection bureau.  That word – independent – is important.  We have seen that, when an agency has consumer protection added to a portfolio already stocked with other objectives, consumer protection falls by the wayside.  We know this to be true, because there are currently seven agencies tasked with consumer protection, not one of which did the job to anyone’s satisfaction in the lead up to the crisis.”
“This legislation will have an independent director, appointed by the President and confirmed by the Senate.  It will have a dedicated and independent budget, paid by the Federal Reserve Board.  It will have a new Office of Financial Literacy to ensure that consumers are able to understand the products and services they’re being offered, and a national toll-free consumer complaint hotline so that Americans have somewhere to go when they need to report a problem.  And, Mr. President, it will be empowered to write consumer protection rules governing any institution – whether it’s a bank or a payday lender – that offers consumer financial services or products.  In short, we are ending this alphabet soup of distracted and ineffective regulators, and replacing it with one single, empowered, competent, focused cop on the consumer protection beat.”
“Now, Republicans has come out an alternative plan for the CPFB.  And, I have to say, I’m surprised.  I knew that my Republican friends weren’t going to agree with consumer protections as strong as the ones in our bill.  In some of my more pessimistic moments, I thought they might even want to maintain the status quo.  But this substitute is worse than the status quo.”
“This substitute actually goes backwards, making it easier for unscrupulous lenders to rip off American consumers.  It’s a stimulus package for scam artists.  And I cannot for the life of me understand how, after months of hearings and months of analysis and months of discussion regarding the fact that this financial crisis started with a failure of consumer protection, anyone could think the right solution is LESS consumer protection.”
“It’s like we’re in a deep hole, and we’ve spent a full year debating how to get out.  The Republican solution?  Keep digging!”
“I’m going to walk through the provisions of this bill, but in short, here’s why it’s simply unacceptable.”
  • “First, when it comes to writing new consumer protection rules, this Wall Street substitute relies on the same regulators who screwed things up in the first place.”
  • “Second, when it comes to enforcing rules, their plan actually makes things worse, reducing regulators’ ability to stop rip-offs and leaving American families MORE vulnerable.”
  • “Third, the Republicans want to raise taxes on community banks and credit unions to pay for regulation that won’t even happen.”
  • “Fourth, they want to make it easier to sell Americans mortgages they can’t afford, which, if you’ve been paying ANY ATTENTION AT ALL, is how we got into this mess in the first place.”
  • “Fifth, just to top it off, the Republican substitute eliminates the provision of my consumer protection proposal that targets discrimination in lending.  How on Earth could anyone be against ending discrimination?”
“Mr. President, if you look at how we got into this crisis, and you conclude that the answer is to WEAKEN consumer protection, you are doing it wrong.”
“Let me go into a little more detail.  The first important change in the Republican substitute is that, instead of having the independent agency write consumer protection rules, it puts that task in the hands of the same distracted and ineffective regulators who failed so badly in the first place.  What would that mean for consumers?  Well, here’s a preview.”
  • “One of those regulators has already demonstrated itself to be anti-consumer, opposing proposed rules to keep credit card companies from retroactively raising interest rates on outstanding balances.  That’s not putting consumer protection at the heart of our financial system.  That’s putting consumer protection in the backseat, where it’s been all along.”
  • “Mr. President, that’s not the worst of it.  The Republican substitute limits enforcement power to ‘large non-bank mortgage originators.’  Other finance companies will avoid enforcement unless they demonstrate a “pattern or practice” of consumer abuses.  In other words, their version of the consumer protection agency won’t be allowed to prevent abuses committed by commercial or banks, payday lenders, check cashers, credit card companies, debt collectors, car dealers, and a wide range of the worst actors in the subprime mortgage industry until it’s already too late for potentially thousands of consumers.”
“It’s like they want to create a police department that’s only allowed to enforce laws against littering.  Maybe they’ll cut down on littering – but by leaving the same ineffective regulators to deal with the rest of the financial sector, they’re essentially turning a blind eye to every other kind of crime.  In fact, it’s like they’re legalizing those crimes, because the Republican substitute actually eliminates existing Federal Trade Commission authority to police unfair and deceptive financial practices in these other sectors.”
“The Republican substitute is worse than the status quo, and the status quo, Mr. President, is very bad indeed.”
  • “Meanwhile, Mr. President, the substitute raises taxes on, well, potentially any non-bank financial services company.”
  • “And it allows the FDIC to raise assessments on banks, including community banks and credit unions.  In fact, their plan would ask community banks and credit unions to pay for the regulation of their non-bank competitors – the same competitors who would be getting a free ride, exempted from any federal oversight whatsoever.”
“My plan is to have the Fed pay for enforcement.  Their plan is to have community banks pay for enforcement – and then not do the enforcement.  That’s a tax increase we don’t need, and one our depository institutions, so critical in rebuilding our economy, cannot afford.”
  • “The amendment also prohibits – prohibits – the establishment of strong mortgage underwriting standards.  I can’t believe that.  We all know how important it is to establish better underwriting standards.  If we’d had rules in place two years ago that required banks and mortgage lenders to make loans only to people who can show that they have the ability to repay them, we wouldn’t be in this mess.  But the Republican amendment would have prohibited the new division he proposes to create from issuing common-sense rules like these.  If you had to pick one thing in this bill to undermine to ensure that we have another financial crisis, this would be it.”
  • “That substitute also eliminates as an objective of the new consumer division the goal of eliminating discrimination.  This goal, I believe, is essential to restoring Americans’ faith in our markets.”
“In short, Mr. President, I can’t work with this.”
“Consumer protection has to be at the heart of this reform.  But we can’t say we did the job if the consumer protection apparatus we set up fails to do the job.  The Republican substitute cripples consumer protection.  And that can’t happen.”
                                                                                # # #