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Questioning the Fed's "commitment" to consumer protection

July 24, 2009

Toxic mortgages, abusive loans, excessive credit card rates: all these occurred under the “watchful” eye of the Federal Reserve.  This week, Fed Chairman Ben Bernanke appeared in front of both the Senate Banking Committee and House Financial Services Committee to testify about his agency’s “commitment” to consumer protection.

Not surprisingly, Mr. Bernanke claimed that a new agency was unnecessary, and that the Fed adequately covers the needs of consumers.  According to the New York Times, he also said the following:

[H]e did not think conflicts existed between the Fed’s consumer protection and bank oversight roles.  Regulators who oversee banks are best able to understand the policies that affect consumers, he said.

Senator Jeff Merkley, Democrat of Oregon, disagreed: “Frankly, your response frightens me because I think there are occasions that they’re in conflict.”

We’re with Senator Merkley on this one.  The conflict is there, and it’s apparent from the lack of protection that the Fed has given to consumers in the past.  Connections between the Federal Reserve and the banking industry are indusputable, and necessitate the creation of a new regulating agency.

For more on why we need a Consumer Financial Protection Agency, see the blog of our friends over at US PIRG.  They’ve come up with “Ten reasons not to trust the Fed to protect consumers”, and that’s only a start.

Then, visit our Action Center and write to your elected officials about the need for a CFPA!

(Photo: Real Politics)

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