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On a recent C-SPAN show, Richard Cordray, director of the federal Consumer Financial Protection Bureau, (CFPB) confirmed that the new federal agency that hasn’t done much in its first 14 months except expand an already bloated and wasteful government during a recession. The CFPB is the result of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act and claims to be “focused on one goal: watching out for American consumers in the market for consumer financial products and services.”
“Beginning in 2007, the United States faced the most severe financial crisis since the Great Depression,” the CFPB explains. “Millions of Americans saw their home values drop, their savings shrink, their jobs eliminated, and their small businesses lose financing. Credit dried up, and countless consumer loans—many improperly made to begin with—went into default. Today, we’re still in the process of recovering.” Further, “In June 2009, President Obama proposed to address failures of consumer protection by establishing a new financial agency to focus directly on consumers, rather than on bank safety and soundness or on monetary policy.”
No hint that government policy, regulation or failure could have played any role whatsoever in the financial crisis. No mention of the Community Reinvestment Act, despite considerable evidence that the 1977 Carter-Era CRA, with its lax lending standards, is a key part of the problem.
In the government view, the financial crisis is entirely the work of powerful, predatory companies, and the only solution is a new federal government agency, without which consumers are helpless. The CFPB’s sole big victory is an agreement with Capitol One to refund $150 million in fees and pay a fine of $25 million. That has not resolved any crisis and the bureau’s aggressive style will further complicate lending, increase costs, drive lenders into other fields, and leave consumers with fewer choices.
Opponents charge that the CFPB duplicates the work of existing bank regulators and the Federal Trade Commission. They were right. The CFPB is pure government building, larding Leviathan through a crisis government played a major role in causing. Relief is not on the way but look for more CFPB on C-SPAN.
Federal agencies are easy to start but practically impossible to abolish, regardless of performance. CFPB staff’s high salaries and gold-plated benefits are paid out of taxes on working Americans. Bureau bosses have a vested interest in the preservation and expansion of their new federal agency, a stake in the continuing crisis.