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Monday, February 04, 2013

Paul Krugman: Friends of Fraud

Will Senate Republicans be able to kill, or at least defang, the Consumer Financial Protection Bureau?:

Friends of Fraud, by Paul Krugman, Commentary, NY Times: Like many advocates of financial reform, I was a bit disappointed in the bill that finally emerged. Dodd-Frank gave regulators the power to rein in many financial excesses; but ... the financial industry’s wealth and influence can all too easily turn those who are supposed to serve as watchdogs into lap dogs instead.
There was, however, one piece of the reform that was a shining example of how to do it right: the creation of a Consumer Financial Protection Bureau... And sure enough, Senate Republicans are going all out in an attempt to kill that bureau. ...
Now, you might be tempted to say that while we need protection against financial fraud, there’s no need to create another bureaucracy. Why not leave it up to the regulators we already have? The answer is that existing regulatory agencies are basically concerned with bolstering the banks; as a practical, cultural matter they will always put consumer protection on the back burner...
So the consumer protection bureau serves a vital function. But as I said, Senate Republicans are trying to kill it. ...
What Republicans are demanding, basically, is that the protection bureau lose its independence. They want its actions subjected to a veto by other, bank-centered financial regulators, ensuring that consumers will once again be neglected, and they also want to take away its guaranteed funding, opening it to interest-group pressure. These changes would make the agency more or less worthless — but that, of course, is the point. ...
And as always, you should follow the money. Historically, the financial sector has given a lot of money to both parties, with only a modest Republican lean. In the last election, however, it went all in for Republicans, giving them more than twice as much as it gave to Democrats (and favoring Mitt Romney over the president almost three to one). All this money wasn’t enough to buy an election — but it was, arguably, enough to buy a major political party.
Right now, all the media focus is on the obvious hot issues — immigration, guns, the sequester, and so on. But let’s try not to let this one fall through the cracks: just four years after runaway bankers brought the world economy to its knees, Senate Republicans are using every means at their disposal, violating all the usual norms of politics in the process, in an attempt to give the bankers a chance to do it all over again.

    Posted by on Monday, February 4, 2013 at 12:24 AM in Economics, Financial System, Politics, Regulation | Permalink  Comments (16)

          


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