Financial regulation proposals are starting to receive mainstream attention. How often do you see an all-star cast of former Saturday Night Live members and Heidi Montag make public policy commentary videos directed by Ron Howard? (scroll down to the bottom of this post for the videos)
These videos are funny, and clearly financial sector regulation is an issue worthy of investigation. But consider the videos’ message at the end: “The banks have billions of dollars to spend to get their message out but your speech is free. Contact your Senators about the CFPA.”
The reality: banks are helping craft the CFPA proposal.
That’s because the CFPA – the Consumer Financial Protection Agency – was actually developed by people who receive millions of dollars from banks. According to the Center for Responsive Politics, Chris Dodd (Chairman of the Senate Banking Committee and architect of the legislation) received his largest portion of campaign contributions from the “securities and investment” industry (which stands to be most affected by financial regulation).
As a result, the CFPA includes many special interest carve outs and exemptions. The biggest exemptions from the CFPA are for Fannie Mae and Freddie Mac, the two government sponsored institutions widely credited with helping cause the financial crisis. The reason they are exempted is probably the same reason they were allowed to grow dangerously big in the first place – campaign money and pressure from special interests.
The end of the ad has a call to action: “Contact your Senator about the CFPA, nothing annoys them more than having to do their jobs.” That’s probably true. But what Senators really need to understand is that corporate loopholes and favored exemptions benefit Wall Street, not Main Street.
Instead of creating a new regulatory agency (by the same people whose policies helped get us in a financial mess), Congress should consider how current regulations could be reformed to lower the cost of doing business.
