Tag Archives: Shahien Nasiripour

Timmy, The Bloggers And The Background, Which Is Apparently A Portrait Of Robert Rubin

Alex Tabarrok:

Yesterday, Tyler, myself and a handful of other economics bloggers had a chance to discuss the economy with Treasury Secretary Geithner and other treasury officials. Here are a few random notes.

There was deep skepticism about the financial industry and about reform from some of the bloggers. More let’s say “radical” approaches such as Treasury taking an equity stake in underwater homes or giving everyone a guaranteed income were brought up. I was surprised to find myself on the side of the more conservative Treasury officials who cogently argued that such reforms were neither politically viable nor likely to work.  Treasury gave a good argument that reform had been deep and meaningful.

A few good lines from a senior treasury official as I recall the gist:

  • “Markets believe we can borrow. The public doesn’t. We need both to move forward on the fiscal front.”
  • “Businesses are investing in a way that shows more confidence than they are talking.” (graph here, see the last year or so AT)

There was a recognition that the Fed could do “dramatic” things but a sense that the theory here was uncertain and untested.

The best question of the day came from Tyler. The discussion was on the financial reform bill and how it changed the incentives of players in the financial industry by creating more risk for them. Tyler interrupted with “What I really want to know is how your incentives have been changed! What is to say that next time the decision will not be made to again bailout the bondholders?”

Felix Salmon:

Treasury’s blogger meeting on Monday has been covered by quite a lot of the participants — see Lounsbury, Tabarrok, and Smith.

On Wednesday, there was another meeting, this time with professional, salaried bloggers, with a decidedly center-left bias. (Tim Fernholz, Mike Allen, Derek Thompson, Shahien Nasiripour, Nick Baumann, Ezra Klein, me. Matt Yglesias was literally left out in the rain, unable to get past Treasury security.)

I half understand why Treasury makes the distinction between the two types of bloggers, but Ezra and I both felt a little jealous that we had to compete with Mike Allen asking about politics when we could have listened to a detailed and wonky discussion between Steve Waldman and Tim Geithner on the subject of bailout incentives.

The discussion was all held on deep background, so I can’t quote anybody. I can tell you that Geithner looked healthier than the past couple of times I’ve seen him: I daresay he’s actually getting some sleep these days, which has got to be a good thing. I also learned a fair amount about how Treasury views the world.

The big picture, at least as I grokked it, is that although the recovery started off stronger than Treasury had hoped, the broad economy is still in a pretty weak position. The Fed is doing its part to try to keep a certain amount of momentum going, but fiscal policy is harder, because it needs the cooperation of Congress. And it’s far from clear what kind of fiscal legislation can be passed at this point.

On housing, the main message from the big conference on Fannie and Freddie is that there’s a broad-based consensus, Rick Santelli rants notwithstanding, that large-scale government participation in the housing market is necessary to prevent further house-price declines. And yes, Treasury would very much like to make sure that house prices don’t fall any more than they have already. There’s no Bush-style policy of trying to maximize homeownership, or anything like that, and indeed Treasury now seems pretty resigned to the fact that its much-vaunted loan-modification program is going to have only a pretty marginal effect, doing more to delay foreclosures than to prevent them. But the very powerful government guarantee on Frannie’s bonds is here to stay, you won’t be surprised to hear. And even delaying foreclosures can be a good thing if it helps to give the broader economy a bit of time to recover.

Naked Capitalism:

Readers may wonder why I haven’t written about my visit on Monday to the Treasury, but truth be told, I headed out afterward with Mike Konczal and Steve Waldman to get a drink, and we all looked at each other quizzically. I said something along the lines of “I’m not certain there is anything to write about,” and they nodded in agreement. I had less than a half page of notes.

That isn’t to say we didn’t spend nearly 2 1/2 hours in a high-ceilinged conference room, and that we didn’t engage with Treasury officials, including Timothy Geithner, in what looked like conversation. But the assumptions of both sides re process as well as substance were so far apart that it often felt like we were talking past each other.

One part of the dynamic was the home court advantage the Treasury enjoys. This is their drill, their offices, they no doubt used their spiel on others and have it pretty well debugged, and more important, they play well off each other (they give the impression of having good rapport with each other; there was some banter on their side). So they have message discipline and stay unified and still manage to look relaxed and informal. By contrast, we seven bloggers (the others were Tyler Cowen, Alex Tabarrok, Phil Davis, and John Lounsbury) were on hold in the very large corridor till the conference room cleared up, which meant we didn’t even have the chance to ask each other, “And what do you want to ask about?” Our interests were likely to be (and were) somewhat divergent, but it would have been nice to know to what degree.

Despite our heterogeniety, we all took a skeptical posture towards the Treasury team. One has to think they anticipate that, which then begs the question of what they expect to accomplish with these meetings. We aren’t journalists, so the access card does not work; the infrequency and format of these sessions means they don’t build personal rapport (and there are good reasons why not; from our end, it costs time and money to go to DC; from their end, we aren’t important enough to warrant more frequent contact).

So they may have other motivations, but a safe assumption is that they regard this as marketing, and a famous cliche is “50% of what I spend on advertising is wasted, I just don’t know which 50%.” We probably look like part of the wasted 50%, but they can’t be certain, and the costs to them of having this sort of meeting are low, so they might as well keep the experiment going.

Mike Allen at Politico:

ADMINISTRATION MINDMELD: The virtue of action on Social Security is that it demonstrates the ability to begin to affect the long-run deficits. Social Security isn’t the biggest contributor to the problem – that’s still health-care costs. But ti could help a little bit, buy time, and strengthens the odds of a political consensus behind other spending cuts or tax increases. Most importantly, it would establish more CREDIBILITY with the MARKETS. The mood of the world at the moment (slightly excessive, from the administration’s point of view) is that if you don’t do anything with spending cuts, it doesn’t get you credibility.

Tim Fernholz at Tapped on Allen:

Sure makes it seem like the administration wants to cut Social Security, doesn’t it? By chance, I was at the same deep-background briefing where Allen had his “mindmeld,” and I have to say, I don’t think he’s got it right. After reviewing my notes and a recording of the conversation, here’s my take. (The rules for this conversation were no direct quotes and no identifying the senior administration official in question.)

Allen references a part of the conversation that concerned the Deficit Commission and what the official might know about its agenda. The official believed that the largest consensus was forming around an undefined plan to support the long-term solvency of Social Security and was discussing why that hypothetical plan might help bolster political will for other deficit-reduction ideas. The official would note that Social Security is already solvent for decades.

The most important omission from Allen’s item is that the official concluded the conversation by noting that Social Security is not a generous benefit compared to other public pensions around the world and that cutting benefits, even years in advance, would be difficult to justify. More symbolically, Allen doesn’t mention that the official cited Paul Krugman when talking about Social Security’s contributions to the deficit. Finally, the reason the administration official was interested in credibility before the markets is so the government could borrow more money for temporary fiscal stimulus.

Brad DeLong

Matthew Yglesias on Allen:

Brad DeLong glosses this as part of why “Friends Don’t Let Friends Read Politico.” And certainly it is a case study in why you can’t go run and panic after reading a thinly sourced item in a traffic-hungry publication. But part of the issue here, it seems to me, is that DC officialdom ought to realize that its obsession with off the recordy-ness has some serious downsides. Treasury did two meetings this week, one that was with professional blogger types and one that was more with professional economists who also blog, and most of the attendees seem to have come away quite impressed. If that’s the case, wouldn’t people able to listen to a recording of the full session likely also be impressed? And wouldn’t it be easier to clear up misconceptions that Allen’s writeup may have created?

Structural shifts in the media industry away from the “three TV networks and a bunch of local newspaper monopolies” model have shifted the balance of power away from journalists and toward flacks. Consequently, if people want to hold off the record briefings with “senior officials” plenty of writers are going to show up. But merely because people can get away with that kind of thing doesn’t necessarily make it a good idea.

Ezra Klein:

There’s been some meta-discussion over a recent meeting between reporters, bloggers, pundits and Treasury officials. The meeting existed under the worst of all media rules: Background.

On-the-record is, well, on the record. Somebody tells me something and I tell you. Off-the-record is just the opposite: Somebody tells me something and I can’t tell you that I was told this. I can be informed by it, but no one knows how I got the information. The disadvantages of this are obvious. But the advantage is a much more honest and free-flowing conversation.

Background has neither the transparency of being on-the-record or the freedom of being off-the-record. It means I can tell you that someone told me this (“a senior Treasury official”). I really don’t understand why people use it.

But use it they do, and all the time. My favorite background offer from this administration came in an e-mail the night before HealthCare.gov launched. It was a lot of standard information on the new site that I could attribute to an “administration official” if I so chose. Why they wanted anonymity to say things like “HealthCare.gov is a new, easy to use website that helps consumers take control of their health care and make the choices that are right for them by putting the power of information at their fingertips,” I’ll never know. Was Gibbs seriously going to chew someone out for going on-the-record with that?

Mike Konczal at Rortybomb:

On Monday I took part in a blogger meeting with several members of the Treasury Department. Alex Tabarrok has a writeup, as does Yves Smith and John Lounsbury has an extensive one as well.

First off, here’s a picture of me with Robert Rubin’s portrait:

Second, have you ever seen Miracle on 34th Street? Remember at the end when that guy legally is Santa Claus because he has all that mail delivered to him? I felt a little like that seeing “Mike Konczal, Rortybomb” on paper that had Treasury’s seal:

Heh.

It was a pretty casual meet and greet. There weren’t any presentations, nothing to be sold on. We went to questions immediately. Geithner is very smart and personable, and it was very useful to chat with Treasury officials on background over the strengths and weaknesses of the financial reform bill.

[…]

HAMP

– They are sticking by HAMP. The narrative seemed to change from helping homeowners to spacing out the foreclosures. I asked them to repeat it, because the idea that billions of taxpayer dollars are being spent to smooth out foreclosures for banks struck me as new narrative – it’s explicitly extend-and-pretend, and also fairly cynical.

– There was talk about how fiscal policy can’t move through Congress. I asked them about only 0.5% of HAMP being spent and how that could be used without Congress’ permission. Before I suggested that the remainder of the $50bn be divided into two funds, the Digging Holes Across States (DHAS) fund and the Filling Holes Across States (FHAS) fund, two far more socially productive means of spending the HAMP money than what is currently being done with it, I was told that the entire $50bn is expected to be spent by the time the program is over. I didn’t believe it; we will see.

– Overall, there seemed to be a sense of “we are done here” from the meeting. Maybe it was the fact that it is August, the informal manner of the meeting and a news cycle is driven by insane things, but there was a sense with the financial reform bill passed, deadlock in Congress and a Federal Reserve tip-toeing around its mandate things were going to slow down and options are more or less removed from the table. Which is a very scary thought with the economy the way it is.

Atrios:

Really fucking unbelievable. As I think I said to Mike at Netroots Nation, if HAMP is actually a program designed to boost the housing market and funnel money several billion more dollars to banks, it’s also a really fucking horrible and stupid and inefficient way to do that even without the “screwing people over” part.

Shahien Nasiripour at Huffington Post

EARLIER: Meet The Financial Bloggers, Timmy

Timmy Meets With Even More Bloggers

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Timmy And Lizzy, Having A Tizzy

John Hudson at The Atlantic with the round-up

Shahien Nasiripour at The Huffington Post:

Treasury Secretary Timothy Geithner has expressed opposition to the possible nomination of Elizabeth Warren to head the Consumer Financial Protection Bureau, according to a source with knowledge of Geithner’s views.

The financial reform bill passed by the Senate on Thursday mandates the creation of a new federal entity charged with protecting consumers from predatory lenders.

But if Geithner has his way, the most prominent advocate for creating the agency may not be picked to lead it.

Warren, a professor at Harvard Law School whose 2007 journal article advocating the creation of such an agency inspired policymakers to enact it into law, has rocketed to prominence since the onset of the financial crisis as one of the leading reform advocates fighting on behalf of American taxpayers.

Warren has been an aggressive proponent for the bureau in public and behind the scenes, working regularly with President Barack Obama’s top advisers and the Democratic leadership in Congress. Since 2008, she has overseen the Congressional Oversight Panel, a bailout watchdog created to keep tabs on how two administrations spent hundreds of billions of taxpayer dollars to bail out Wall Street while struggling to keep distressed homeowners out of foreclosure and small businesses from collapsing.

Yet while her work on behalf of a federal unit designed solely to protect borrowers from abusive lenders has been embraced by the administration, Warren’s role as a bailout watchdog led to strained relations with the agency her panel has taken to task with brutal reports every month since Obama took office: Geithner’s Treasury Department.

It’s no secret the watchdog and the Treasury Secretary have had a tenuous relationship. Geithner’s critics have enjoyed watching Warren question him during his four appearances before her panel. Her tough, probing questions on the Wall Street bailout and his role in it — often delivered with a smile — are featured on YouTube. One video is headlined “Elizabeth Warren Makes Timmy Geithner Squirm.”

Simon Johnson at Baseline Scenario:

With his track record of survival, Geithner and his team apparently feel they can push hard against Elizabeth Warren and give the new consumer protection job to someone closer to their philosophy – which is much more sympathetic to the banking industry.

This would be a bad mistake – trying the patience of already exasperated Congressional Democrats.  If the Obama administration can’t even complete the deal they implicitly agreed with Senators over the past months, this will set of a firestorm of protest within the party (and with anyone else who is paying attention).

Financial “reform” is already very weak.  If Secretary Geithner gets his way on consumers protection, pretty much all of the Democrats efforts vis-à-vis the financial sector’s treatment of customers have been for naught.

Tim Geithner is sometimes compared to Talleyrand, the French statesman who served the Revolution, Napoleon, and the restored Bourbons – opportunistic and distrusted, but often useful and a great survivor with a brilliant personal career.  In the end, of course, no one – including Talleyrand – proves indispensible.  And everyone of this sort eventually pushes their luck too far.

If the Democratic leadership really wants to win in the November elections, they should think very hard about the further consequences of Mr. Geithner.

Dean Baker at TPM:

Undoubtedly her actions made many people in positions of power uncomfortable. But, that is exactly what we need in order for the new consumer protection agency to be effective.

The Federal Reserve Board already had the power and the responsibility to do the job that the new consumer board has been assigned. The problem was that Ben Bernanke, Alan Greenspan, and their colleagues on the Fed board (with some notable exceptions) never took this responsibility seriously. As a result, consumer protection was a joke.

Shifting the responsibility to a new board does not by itself guarantee that consumer protection in financial matters will now be treated seriously. Just ask the folks at the Mineral and Management Service about their oversight of deep-sea drilling.

Ensuring that the new board carries through its responsibilities in the way that is intended will require a leader with integrity, intelligence and independence. Elizabeth Warren clearly fits that description. Selecting anyone else will be an insult not only to her, but to all the individuals and organizations who worked so hard to bring the Consumer Financial Protection Board into existence.

Felix Salmon:

Shahien Nasiripour says, plausibly enough, that Tim Geithner is opposed to tapping Elizabeth Warren for the job, despite the fact that she’s the obvious choice. I hope he doesn’t get his way. The bureau would never have come into being without Warren pushing it hard; it’s only fair she gets a chance to run it at inception, and shape the way it does business. Even if she has been harsh in her public questioning of Geithner.

David Dayen at Firedoglake:

Boy, and bloggers are called the immature ones. Geithner gets his fee-fees hurt because Warren dares to tell the truth about the Wall Street cartel and the woefully inadequate job Treasury has done, particularly on the foreclosure crisis, and so that makes her unacceptable for a position she literally dreamed up. I think it’s time to end the fiction that the Treasury Department is in any way interested in fundamentally changing the balance of power between Wall Street and consumers. If this report is correct, Geithner is using his power to block someone who would actually make Wall Street nervous from having a position of authority.

At least one progressive group is already fighting back. The Progressive Change Campaign Committee has blasted an email to their supporters demanding that Warren be named the head of the CFPB.

As a Harvard professor, her credentials are impeccable. And she was the one who came up with the idea for the Consumer Financial Protection Bureau — perhaps the best piece of this bill — in the first place.

In short, Warren is perfect for the position and most financial insiders have just assumed she would get it. That’s why it’s so outrageous that Geithner — a longtime Wall Street insider — would attempt to sabotage her appointment.

I will be in a position to gather more information about this in the near future, not only from Treasury, but from Elizabeth Warren. It turns out I’m on a panel with her next week at Netroots Nation. We’ll talk about the Forgotten Foreclosure Crisis along with Sen. Jeff Merkley and the Huffington Post’s Ryan Grim. So if you’re in Vegas, please come out as I speak with the next head of the Consumer Financial Protection Bureau – unless Timmeh has something to say about it.

Matthew Yglesias:

I wouldn’t put a ton of stock in a story based on “a source with knowledge of Geithner’s views” but the two of them have clashed in the past so this could be the case. For example, speaking on the record earlier today Assistant Treasury Secretary for Financial Institutions Michael Barr said Narisipour’s report was wrong, and that he and Geithner both regard her as “exceptionally well-qualified.”

I’m firmly of the view that nobody is indispensable ever, and Warren is no exception to that, but there’s a good prima facie case for her. That’s because good agencies not only need good people at the top, they need good people in the middle and the bottom too. Once an agency’s been up and running for a while, this is largely a question of lock-in. Effective, high-prestige public agencies (the United States Navy, the Federal Reserve) attract a lot of motivated applicants and thus get on a self-reenforcing path of effective personnel and high prestige. But when you start something new, everything is wide open. Launching the agency with someone like Warren—a reasonably well-known high-status individual whose status among people interested in consumer financial protection is very high—will draw other committed people into the new bureau.

Paul Krugman:

There’s also a political aspect. The Obama administration suffers from the perception that it’s been too much in the pocket of Wall Street — partly because there’s at least a grain of truth to the accusation. Appointing a prominent pro-consumer crusader would have to help repair the image, while appointing somebody unknown to the public, especially when expectations are running high, would hurt.

And bear in mind that Warren really is a pioneering expert on household debt and financial distress, who has also shown an ability to work effectively in an official position. Against that, whatever personal quarrels she may or may not have had shouldn’t count at all.

Brian Beutler at TPM:

On a conference call with reporters this afternoon, President Obama’s top political adviser David Axelrod sought to calm the waters. “Elizabeth is certainly a candidate to lead it,” he said.

That sentiment was echoed this morning by Michael Barr, Assistant Treasury Secretary for Financial Institutions. “I don’t know where that came from,” he said on a conference call. “She’s been working closely with me and Secretary Geithner for a year and half to push for this consumer protection bureau. I believe and Secretary Geithner believes that she’s exceptionally well-qualified to run it.”

Geithner and Warren haven’t exactly had a warm public relationship, so the news that he has reservations, and may be trying to block her, is no surprise. Just ask Sheila Bair. But this puts the White House in a tricky spot now if it turns out Obama does not nominate her.

More Simon Johnson at Baseline Scenario:

It’s one thing to block Elizabeth Warren from heading the new Consumer Financial Protection Bureau.

It’s quite another thing to deny in public, for the record, that any such blocking is going on (e.g., see this report; Michael Barr apparently said something quite similar today).

There is a strong groundswell of opinion on this issue from the left – see the BoldProgressives petition.  But the center also feels strongly that, given everything Treasury has said and done over the past few months, it would be a complete travesty not to put the strongest possible regulator in change of protecting consumers.  (See Ted Kaufman on the NYT’s DealBook, giving appropriate credit to the SEC, and apply the same points to broader customer issues going forward.)

This can now go only one of two ways.

  1. Elizabeth Warren gets the job.  Bridges are mended and the White House regains some political capital.  Secretary Geithner is weakened slightly but he’ll recover.
  2. Someone else gets the job, despite Treasury’s claims that Elizabeth Warren was not blocked.  The deception in this scenario would be nauseating – and completely blatant.  “Everyone was considered on their merits” and “the best candidate won” will convince who exactly?

Despite the growing public reaction, outcome #2 is the most likely and the White House needs to understand this, plain and clear – there will be complete and utter revulsion at its handling of financial regulatory reform both on this specific issue and much more broadly.  The administration’s position in this area is already weak, its achievements remain minimal, its speaking points are lame, and the patience of even well-inclined people is wearing thin.

Failing to appoint Elizabeth Warren would be the straw that breaks the camel’s back.  It will go down in the history books as a turning point – downwards – for this administration.

UPDATE: John Talbott at HuffPo

Jim Newell at Gawker

UPDATE #2: Jonathan Karl and Matthew Jaffe at ABC News

Felix Salmon

Mike Konczal

Joseph Lawler at The American Spectator

UPDATE #3: Pat Garofalo at Think Progress

UPDATE #4: Noam Scheiber at TNR

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Chris Dodd And The Piranhas

Calculated Risk:

Binyamin Appelbaum, at the WaPo, reports that Senators Dodd and Corker (Tenn) are nearing a deal to give authority for financial consumer protection to the Federal Reserve.

Uh, wasn’t the Fed already responsible for consumer financial protection?

[…]

The WSJ also reports that the Senators are near an agreement on a dissolution process for large failing non-bank financial companies, This would include wiping out the shareholders, and requiring other creditors to take losses … the details will be interesting.

Just as Congress enters the final stretch of the financial regulatory reform effort, one of the Treasury Department’s leading liaisons to the Hill, Damon Munchus, is bailing out to go work for a financial services lobbying and consulting firm.

Munchus was one of Treasury’s chief negotiators with the House Financial Services Committee.

“This is not a mid-season trade in the NBA, where players just change jerseys and play the same way,” said Rep. Brad Miller (D-N.C.), a member of the committee. “There should be at least some kind of cooling off period.”

When he joined the Obama administration, Munchus — like all other appointees — signed an agreement not to lobby the administration for two years after leaving the government.

But the pledge says nothing about lobbying Congress, which is absolutely part of what Munchus will do for his new employer, The Cypress Group.

Digby:

There are a lot of factors that led to our dysfunctional system but this is the central one that touches all the others. The Village is a company town, and I don’t mean the government, I mean Big Business and Wall Street. It’s incestuous, corrupt and perhaps worst of all, completely inefficient and ineffectual, even for The Company. After all, Uncle Alan Greenspan eventually had to admit that these Mini Galts are incapable of even properly acting in their own self-interest by keeping American businesses competitive and the financial system working.

Instead they are operating like a tank full of piranhas rushing about furiously gobbling up everything in sight with no thought to whether or not there will be anything left tomorrow. That’s fine for fish, but humans are supposed to be a little bit more evolved. Certainly one would expect the elite leadership of the most powerful country in the world to have enough sense to realize that allowing the financial sector to have unfettered free rein again is just a tad risky. Left to their own devices there will be nothing left of this democracy and economy but bare bones.

But, hey, I’m sure this Damon chap in a fine fellow whom they all like very much. And besides he might be in a position to hire one day too …

Update: From Jamie Dimon’s mouth to Dodd’s ear. They’re going to put it in the Fed.

Why even bother?

Tim Fernholz at Tapped:

We’ve been tracking the various consumer financial protection compromises coming from the Senate Banking Committee, but it’s been hard to say where individual senators stand on the provision. I’ve been trying to contact the committee’s 13 Democrats to get a sense of where they stand on the issue. Chair Chris Dodd is still negotiating, but here’s what I’ve found so far from the other members:

  • Rhode Island Senator Jack Reed’s spokesperson points me to these comments the senator made to the Providence Journal at the end of February:

    “I’m fighting hard for the Consumer Financial Protection Agency, which is the best way to ensure that regulators will always put consumers before Wall St. going forward. There must be a sufficiently independent regulator with the tools and authority to focus on protecting consumers. As negotiations continue in the Senate, some proposals may change the form of the agency, but I am hopeful that this body will recognize the importance of consumer protection and will put in place the critical protections we need.”

  • New Jersey Senator Robert Menendez’s spokesperson tells me the senator is still considering the latest proposals, adding that “he has been supportive generally of an independent agency. I don’t know what he’s heard of this proposal.” Menendez, the head of the Senate Democrats’ political arm, is key to this discussion if Democrats intend to campaign on protecting consumers next fall.
  • Progressive Ohio Senator Sherrod Brown’s office says that “Sen. Brown is still reviewing the proposal. He continues to believe that American families need a strong, independent agency whose sole mission is looking out for their financial security.”
  • Virginia Senator Mark Warner, who worked closely with lead Republican negotiator Bob Corker to develop resolution authorities for the Senate’s regulatory overhaul, has no comment, according to his spokesperson.
  • Update: South Dakota Senator Tim Johnson’s office points me to the senator’s statement from a subscription-only CQ piece:

    “I’m pragmatic about it,” said Tim Johnson of South Dakota, the No. 2 Democrat on the Senate Banking panel, who is in line to become chairman after Dodd retires next year. “It doesn’t matter to me where it is housed so long as it is a substantial improvement.”

Silla Brush at The Hill:

Sen. Charles Schumer (D-N.Y.) cast doubt on a new compromise proposal for consumer financial protections, threatening its future in the Senate before it has been unveiled.

Schumer said he is ” very leery of any consumer regulator being placed inside the Fed.”

Senate Banking Committee Chairman Chris Dodd (D-Conn.) and Sen. Bob Corker (R-Tenn.) are pitching a proposal to put a consumer protection office at the Federal Reserve. The proposal is significantly different than the administration’s original effort to set up a standalone entity.

Schumer’s comments are the strongest indication of how difficult it will be for the proposal to garner support in the Senate.

“In my 20 years of trying to get the Federal Reserve to properly protect consumers, it has been an uphill, and very often unsuccessful, battle,” Schumer said.

David Dayen at Firedoglake:

The only change from the status quo in this iteration of consumer protection, part of a deal between Dodd and Sen. Bob Corker (R-TN), is that the President would appoint an independent consumer protection chief with their own budget and the mandate to write rules. However, the same regulators at the Fed who missed – or ignored – subprime mortgages and outrageous credit card practices would be responsible for enforcement.

Dodd first sought, along with the White House, an independent CFPA. Then he proposed it get housed at the Treasury Department. Now we have it back to the Fed, where the same people responsible for blowing the economy before would have another chance to do it again.

The President is likely to sign off on this, as per a statement last night, if it “includes independent appointment, an independent budget, and an independent ability to set and enforce clear rules of road to protect American families.” Enforcement would be at issue in this proposal. And one can reasonably question how “independent” the enforcement would be if housed at the Fed, no matter how the legislation is written.

Even business organizations have pushed for a strong CFPA. Just yesterday, the U.S. Women’s Chamber of Commerce, U.S. Hispanic Chamber of Commerce, South Carolina Small Business Chamber of Commerce, American Made Alliance, Main Street Alliance and multiple state business organizations signed a broad statement of support. “Businesses and consumers need a CFPA with independent rule-making and enforcement authority, not a weak bureau subservient to regulators concerned with protecting large banks rather than protecting small businesses and consumers,” said Tim Duncan, Chairman of American Business Leaders for Financial Reform. This coalition represents far more businesses than the US Chamber of Commerce. That statement is on the flip.

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