Weekly Audit: Why Elizabeth Warren Should Head New Consumer Financial Protection Bureau

Bumped from the diaries with timestamp updated and fold added.

This piece makes good arguments for putting Warren in charge of the CFPB, against Tim Geithner's wishes. I would encourage you to sign this petition from Bold Progressives after signing. Usually petitions don't amount to much (a handful of signatures on a well-known or popular issue? Please), but in this case, they've already got 160k names for an obscure topic. Now that's democracy in action. - Nathan

by Zach Carter, Media Consortium blogger

With the Wall Street reform bill finally cleared through Congress, activists and intellectuals are pushing hard to make sure that this bill isn’t the last word Congress utters about Big Finance. We need deeper and more robust reforms, but it’s also critical to ensure that the new bill is implemented as effectively as possible. Part of that means appointing officials with a proven record as robust reformers—people like Elizabeth Warren.

Too-big-to-fail lives on

What more do we need to keep Big Finance from ravaging the middle class? As Stacy Mitchell notes for Yes! Magazine, the bill Congress just signed off on doesn’t really address the core problems posed by our out-of-control banking system. Too-big-to-fail is alive and well, and lawmakers must push to break up the megabanks during the next legislative cycle or risk another economic calamity. Mitchell writes:

“Since the collapse, giant banks have only grown bigger and more powerful, and less responsive to the needs of the real economy. While the financial reform bill includes several worthwhile measures, it will not set the industry right or entail a fundamental alteration of its scale and structure.”

There are still some great reforms in the current round of legislation, among them the creation of a strong new Consumer Financial Protection Bureau (CFPB) to write and enforce rules on mortgages, credit cards, overdraft fees and more. The first person to head this new regulatory body will be tremendously important to its future. They will set the tone for the bureau’s operations and establish a culture that will define it for years to come.

There's more...

Obama's Last Test

The final financial reform package has been dramatically watered down and is riddled with loopholes. But its supporters (and some critics) say that we shouldn't worry because it at least allows regulators to get tough on the financial industry later -- if they think it's necessary. That is actually true. It does have such provisions.

So, who those regulators are could not be more important. Right now, Tim Geithner is leading the charge to make sure the regulators are as weak and banker-friendly as possible -- as usual. So, he is fighting against Elizabeth Warren.

I don't write this to encourage the president to pick Warren as the head of the Consumer Financial Protection Bureau. That pick is the most obvious thing in the world -- if he cares to actually do consumer protection. Everybody on the planet knows this, and that's precisely why Geithner is fighting against her.

No, I write this to give you a way of knowing for yourself if this financial reform legislation has any chance of working or if it was a Democratic joke all along to pretend they're doing something while continuing to pocket corporate contributions.

Warren is not the only pivotal regulator. I think Gary Gensler at the Commodity Futures Trading Commission is even more important. He's a reformed reformer. He used to work at Goldman Sachs and previously helped to deregulate the industry in the first place. But he has been one of the toughest voices for financial industry reform recently (see, redemption is possible for him and this administration). And his agency can regulate derivatives, stop fraud and limit speculation. That's more important than the Consumer Financial Protection Bureau, which looks to protect consumers on a more micro level.

So, if in a year Elizabeth Warren and Gary Gensler are gone, then you know that it was all a sham. The industry won again and we never really had a chance. If they are still there and they're doing their job of protecting American consumers and taxpayers, then there is hope. We might just pull this economy out before the banks crash it again.

Of course, this is an over-generalization. And our fate is not bound up in just two people. I wouldn't want to put the same kind of faith in them that people did in Obama and hope that everything works out just fine. But they are important indicators. They give us a sense of which direction we're going to go.

The early signs are not good. The Obama administration is reaching out to the Business Roundtable as we speak to see how they can quietly loosen regulations on them again. The CEO of Citigroup says financial reform will not impact their derivative trading at all. And Elizabeth Warren is teetering on the edge as the tools of Wall Street attack her.

We can rally. There can be change. We can have hope. But it's all up to Obama. Which way is he going to go? Is he a smart tactician that's actually going to bring real change in subtle ways through strong regulators or does he think he can play the Washington game a little better and trick us into thinking he gave us real reform while gutting the regulators and protecting the status quo?

No more excuses about the wrong advisors. He can choose right now between good and bad advisors. And everyone knows who is actually trying to do real reform. What's it going to be? You'll know the character of the man by the people he chooses. And you'll also know the economic fate of our country.

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Obama's Last Test

The final financial reform package has been dramatically watered down and is riddled with loopholes. But its supporters (and some critics) say that we shouldn't worry because it at least allows regulators to get tough on the financial industry later -- if they think it's necessary. That is actually true. It does have such provisions.

So, who those regulators are could not be more important. Right now, Tim Geithner is leading the charge to make sure the regulators are as weak and banker-friendly as possible -- as usual. So, he is fighting against Elizabeth Warren.

I don't write this to encourage the president to pick Warren as the head of the Consumer Financial Protection Bureau. That pick is the most obvious thing in the world -- if he cares to actually do consumer protection. Everybody on the planet knows this, and that's precisely why Geithner is fighting against her.

No, I write this to give you a way of knowing for yourself if this financial reform legislation has any chance of working or if it was a Democratic joke all along to pretend they're doing something while continuing to pocket corporate contributions.

Warren is not the only pivotal regulator. I think Gary Gensler at the Commodity Futures Trading Commission is even more important. He's a reformed reformer. He used to work at Goldman Sachs and previously helped to deregulate the industry in the first place. But he has been one of the toughest voices for financial industry reform recently (see, redemption is possible for him and this administration). And his agency can regulate derivatives, stop fraud and limit speculation. That's more important than the Consumer Financial Protection Bureau, which looks to protect consumers on a more micro level.

So, if in a year Elizabeth Warren and Gary Gensler are gone, then you know that it was all a sham. The industry won again and we never really had a chance. If they are still there and they're doing their job of protecting American consumers and taxpayers, then there is hope. We might just pull this economy out before the banks crash it again.

Of course, this is an over-generalization. And our fate is not bound up in just two people. I wouldn't want to put the same kind of faith in them that people did in Obama and hope that everything works out just fine. But they are important indicators. They give us a sense of which direction we're going to go.

The early signs are not good. The Obama administration is reaching out to the Business Roundtable as we speak to see how they can quietly loosen regulations on them again. The CEO of Citigroup says financial reform will not impact their derivative trading at all. And Elizabeth Warren is teetering on the edge as the tools of Wall Street attack her.

We can rally. There can be change. We can have hope. But it's all up to Obama. Which way is he going to go? Is he a smart tactician that's actually going to bring real change in subtle ways through strong regulators or does he think he can play the Washington game a little better and trick us into thinking he gave us real reform while gutting the regulators and protecting the status quo?

No more excuses about the wrong advisors. He can choose right now between good and bad advisors. And everyone knows who is actually trying to do real reform. What's it going to be? You'll know the character of the man by the people he chooses. And you'll also know the economic fate of our country.

Young Turks on You Tube

 

Follow Cenk Uygur on Twitter: www.twitter.com/TheYoungTurks

Become a Fan of The Young Turks on Facebook: www.facebook.com/tytnation

 

 

Lincoln Amendment or Bust

It looks like the fate of financial reform will get decided on Friday. There have been so many ups and downs in this effort. We've lost so many battles over crucial parts of the bill. It was never that tough to begin with; there are issues with capitalization requirements; there isn't enough control of leverage; the Franken amendment reforming rating agencies should have never been removed. And the list goes on and on (though apparently we have had some recent victories as well).

Despite all of these losses, I'm ready to take half a loaf ... if - and this is a big if - we get to keep the Lincoln amendment on derivatives. It can't be watered down at all. It has to be the real deal. But if that is still in the bill then I think it would be worth voting for - and a real accomplishment for the Democrats.

I have always maintained that complex derivatives were the primary cause of the financial collapse. It's one thing for one bet to go wrong (the subprime market), it's another to have a hundred bets on top of that original bet all go wrong at the same time.

If the banks can't use depositor money as collateral for their betting and they don't get backed up by taxpayers on those bets, then they are free to win or lose them all they like. I have never cared how much profits or losses the banks had, as long as they didn't get the money from us.

I know the Lincoln amendment isn't perfect either and the rest of the bill doesn't have enough restrictions on derivatives (I would ban naked CDS's all together, like Europe is considering). But I'll take this as good starting point. At least the derivatives trading would be split off from taxpayer backed funds and deposits.

I'm afraid if we don't do real financial reform and in a hurry, we are almost certainly headed toward another economic catastrophe. And I'm not sure this bill alone would help us steer away from it. But if the Lincoln amendment passes at least we have fighting chance. Without it, the bill is a joke meant to placate you until the next collapse.

Watch The Young Turks Here

Follow Cenk Uygur on Twitter: www.twitter.com/TheYoungTurks
Follow The Young Turks on Facebook: www.facebook.com/tytnation

 

Lincoln Amendment or Bust

It looks like the fate of financial reform will get decided on Friday. There have been so many ups and downs in this effort. We've lost so many battles over crucial parts of the bill. It was never that tough to begin with; there are issues with capitalization requirements; there isn't enough control of leverage; the Franken amendment reforming rating agencies should have never been removed. And the list goes on and on (though apparently we have had some recent victories as well).

Despite all of these losses, I'm ready to take half a loaf ... if - and this is a big if - we get to keep the Lincoln amendment on derivatives. It can't be watered down at all. It has to be the real deal. But if that is still in the bill then I think it would be worth voting for - and a real accomplishment for the Democrats.

I have always maintained that complex derivatives were the primary cause of the financial collapse. It's one thing for one bet to go wrong (the subprime market), it's another to have a hundred bets on top of that original bet all go wrong at the same time.

If the banks can't use depositor money as collateral for their betting and they don't get backed up by taxpayers on those bets, then they are free to win or lose them all they like. I have never cared how much profits or losses the banks had, as long as they didn't get the money from us.

I know the Lincoln amendment isn't perfect either and the rest of the bill doesn't have enough restrictions on derivatives (I would ban naked CDS's all together, like Europe is considering). But I'll take this as good starting point. At least the derivatives trading would be split off from taxpayer backed funds and deposits.

I'm afraid if we don't do real financial reform and in a hurry, we are almost certainly headed toward another economic catastrophe. And I'm not sure this bill alone would help us steer away from it. But if the Lincoln amendment passes at least we have fighting chance. Without it, the bill is a joke meant to placate you until the next collapse.

Watch The Young Turks Here

Follow Cenk Uygur on Twitter: www.twitter.com/TheYoungTurks
Follow The Young Turks on Facebook: www.facebook.com/tytnation

 

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