In Defense of Consumer Protection

The Minority Leader of the U.S. Senate, Mitch McConnell (R-KY) wants to prevent President Obama from appointing Elizabeth Warren, Raj Date (or frankly anyone other than the ghost of Adam Smith or Old Man Potter from “It’s a Wonderful Life”) to be the Director of the newly created Consumer Financial Protection Bureau unless and until Democratic leaders agree to essentially defang the agency and permit Congressional oversight and authorization of its budget. He has convinced 44 of his closest Republican friends in the Senate to go along with him.

The head of the U.S. Chamber of Commerce, you know, the guys who are always looking out for the American consumer, has stated that the CFPB is “the most powerful agency ever created” and pretty much implied that Congress may have to destroy it to save his village. It seems crazy that more than a year after passage of the Dodd-Frank Act that created it, and weeks before it officially opens its doors, the CFPB must continue to justify and defend itself, given the financial FUBAR confronting our nation. However, as long as Sen. McConnell and his colleagues are intent on taking the disruptive course and have a platform to do it, we must continue to point out why there is a very real need for the agency and that efforts to kill it are counter-productive for our country and our economy. So, here we go again.

[Related article: Consumer Protection Fight Erupts Into Allegations of Lying]

This weekend I had the privilege of interviewing Holly Petraeus, the newly appointed head of the Office of Service Member affairs of the CFPB, on my weekly radio show on LA station KFWB (AM 980), about how she intends to protect our military families against those financial predators who profit from the distractions of their deployment and the vulnerabilities of their financial illiteracy. Her mission, while critical to our national defense and our economy, is but one of a number of vitally important tasks charged to the CFPB.

Like Elizabeth Warren, Mrs. Petraeus is a dedicated, brilliant, doggedly-determined consumer advocate who has spent much of her life protecting the men and women who defend our nation. She is 4th-generation military and her husband, General David Petraeus, was the commander of all U.S. forces in Iraq, runs the war in Afghanistan and is about to become the next Director of the CIA. You’d think Senator McConnell and his minions wouldn’t want to mess with her. Unfortunately, the fact that she isn’t a politician and is singularly focused on the demanding job of protecting men and women in uniform from economic vultures is sadly working in the Senator’s favor. She’s so busy protecting people that she doesn’t have time to justify her work protecting people.

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The message that seems to be lost on those who oppose the CFPB is that we are in as much of a dogfight on the domestic front as we are with terrorists around the world. We are at war against financial predators and financial illiteracy. And the rules of engagement are as muddy in Maine, New York, Kentucky, Indiana, Montana and California as they are half a world away, because it’s getting harder to distinguish the good guys from the bad guys.

Every day, American consumers, military and civilian alike, are being viciously attacked by those who would take advantage of our lack of financial skills, scam us and steal our identities. Every day, we learn of new abuses by financial institutions (loan modification programs that deceive and destroy, foreclosure mills that have shifted into overdrive again and fee frenzy part two), the breach of the week (SONY, Epsilon, Citibank, Bank of America, the IMF and the U.S. Senate to name a few) and the seeming powerlessness of government to do anything about it (the HAMP Program has been a disaster, the economy is sliding south again and hackers are running wild).

In Defense of Consumer Protection (cont.) »

Image: Consumer Financial Protection Bureau, via Flickr.com

Collective greed and stupidity begat years of irresponsible borrowing, lending and spending; which begat overly aggressive remedial institutional response such as mind-numbing ill-conceived foreclosures, frenzied short sales, indiscriminate account closings and ubiquitous credit line cramdowns; which begat the extinction of millions of small, medium and large economic enterprises deemed small enough to fail; which begat shrinking 401ks, collapsing consumer confidence and economic ruination for millions of Americans; which begat the terrifyingly ballooning government deficit; which could beget the S&P downgrade of America’s credit standing; which will beget the Chinese and our other fair-weather friends fleeing our shores in search of the next best investment.

That said, why do conservatives believe that a strong consumer advocacy and enforcement agency by definition is antithetical to business? It doesn’t have to be a zero-sum game. Doesn’t a level playing field help to eliminate adverse relationships between consumers and business? Isn’t it better when legitimate businesses are fairly competing against other legitimate businesses for the favor of the consumer?

Shouldn’t government and business be promoting financial literacy? Financial illiteracy leads to impulsive and uninformed decisions. Clueless borrowers are a danger to themselves and the businesses with which they do business.

[Related article: More Roadblocks for New Consumer Protection Agency]

Should it not be the policy of this nation to promote a stable housing environment where we strive to keep consumers in their homes and find a way for lenders and institutional investors to mitigate and perhaps fully recover potential losses incurred by irresponsibility on all sides of the selling, lending and borrowing equation?

Wholesale foreclosures that don’t follow the rules of financial engagement foment borrower resistance, generate their own brand of moral hazard, and create an environment of such hostility that trust can never be regained. That doesn’t bode well for business.

Foreclosing on the homes of active duty personnel in violation of federal law, or properties where no mortgage ever existed cannot possibly lead to investor or borrower confidence.

If we believe the concept that “financial readiness” leads to “mission readiness,” how can we allow our soldiers and their families to be defenseless in the face of financial predators and identity thieves who hover around their bases, attempt to beguile them online and work assiduously to lure them into a company store environment of never-ending debt.

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It is ironic to me that those who have been historically protective of the defense budget and supportive of a strong and prepared military, are so callous when it comes to the creation, empowerment and funding of the Consumer Financial Protection Bureau, the one agency designed to defend America’s defenders against the financial predators who cause them stress and distract them. This reminds me of the scandal that erupted during Donald Rumsfeld’s tenure at Defense, when we sent our troops to war in Iraq—where IEDs were hidden under practically every few feet of dirt, vehicle or building—without up-armored Humvees. While Washington postured and debated, our soldiers and their families paid the ultimate price. As public outrage boiled over, Congress finally stood up and got our defenders the protection they so desperately needed. Make no mistake, in the war for consumer protection, the IEDs are predatory loans, rampant foreclosures and countless other financial dangers, and none of us have the armor we need to adequately protect ourselves from them. The fact that our men and women in uniform have to worry about this while trying to fight two wars, as politicians seek to further their agendas, is outrageous.

We all “rise and sleep under the blanket of freedom” that our servicemen and women provide (kudos to Aaron Sorkin’s “A Few Good Men”). Lest we forget, July 21 is but a few short weeks away and without a tough, aggressive leader at the helm and a strong, proactive Consumer Financial Protection Bureau, the economic predators among us, if left to their own devices, would have our military personnel and, indeed millions of Americans, shivering under blankets in homeless shelters.

Image: forwardstl, via Flickr