Strengthening the Case for the CFPA
The case for enacting the Obama Administration’s proposal Consumer Financial Protection Agency (CFPA) just keeps getting stronger. The House Financial Services Committee held hearings on the proposal today, with three particularly notable developments.
First, over sixty law professors who teach consumer and banking law used the occasion to issue a statement of support for the proposed measure. The eight-page statement identifies four key reasons why the CFPA is needed to replace the current fragmented and ineffective system that fails to provide effective protection for consumers. Its footnotes provide a detailed guide to the impressive body of law review articles and other legal scholarship that supports this conclusion.
Second, the written testimony of Michael Calhoun of the Center for Responsible Lending provides an in-depth (36-page) overview of the case for a CFPA, particularly strong in (1) its recounting of the “long record of inaction” by the federal bank regulators who failed to use their powers against the staggering abuses by mortgage lenders, credit card issuers, and bank overdraft “protection” programs and (2) the need to roll back the federal bank regulators’ aggressive preemption of states’ ability to protect their own citizens from financial predators.
Finally, at the hearing itself, an exchange between Committee Chairman Barney Frank and a witness from the Heritage Foundation, a conservative think tank, thoroughly discredited the banking industry’s repeated claim that the proposed legislation’s roll back of federal preemption of state laws would overturn more than 150 years of precedent.
Here’s the account from Congress Daily (sub required):
Frank noted bank regulators had pre-empted state laws only on a case-by-case basis until 2004. That year, the Office of the Comptroller of the Currency issued a rule to pre-empt national banks from a large array of state laws….
Frank asked David John of the Heritage Foundation whether there were serious problems between the conflict of federal and state banking laws prior to 2004. John said he was not aware of any. “I think it helps make the case,” Frank said. ” There is some burden to show us that there were serious problems before that. Frankly, I think the absence of any evidence is a pretty good sign that this was not the case.”
(Photo: gregoryjameswalsh)
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Americans for Fairness in Lending 
Recognizing that your web sites largely imply that consumers are stupid and can’t think for themselves, I must remind you that most college professors are severely liberal and their opinions should not hold sway simply because they teach at colleges. I know; I am one myself. The unintended consequence of your railing against the industries that help people borrow money is that those people are now locked out of borrowing money. Most of the people facing foreclosure knew what they were doing and from my research, asked their lenders to waive escrows because they wanted the lower payment. It’s ludicrous to blame the lenders for borrowers’ blatant attempts at getting more house than they could afford. Covering for them as you do is worse than their transgressions, however. There are many people who benefitted from subprime house loans and now benefit from relaxed requirements allowing subprime auto loans again. Too bad they can’t buy houses anymore because you are trying to close them out.