Friday, June 09, 2017

House has passed Dodd Frank Act Repeal

As the Comey Day saga distracted the bulk of the country, the House GOP quietly passed the Financial CHOICE Act as House Resolution 10, by a party line vote (233-186).

The Financial CHOICE Act shuts down the regulatory measures introduced by the Dodd Frank Wall Street Reform Act of 2010. These measures were put into place in 2010 to prevent a repeat of the near disastrous market crash of 2008. The crash of 2008 nearly caused an economic depression.

One of the biggest changes made by the Financial CHOICE Act is that the Consumer Financial Protection Bureau which polices the activities of large banks now reports to Congress instead of the Federal Reserve. The entire role of the CFPB has been diluted significantly.

Not only have the CFPB funding shifted from its direct line to the Federal Reserve to the Congress driven annual appropriations process, the CFPB director now can be removed by the President without a real cause being given.  Additionally all supervisory ability of the CFPB has been removed, it will only enforce selected laws and not be able to protect consumers from predatory lending.

The CFPB also maintained an open list of complaints against credit scoring agencies which were publicly held responsible for failing to correct errors in peoples' credit scores. This went a long way in ensuring that quality control measures inside credit reporting were put into place.

This act is strongly supported by a lobby group representing debt collectors. The point of the act seems to be to increase business opportunities for the debt collection services side of the economy. With fewer people taking out bad loans, there was less for the debt collectors to do, so I guess they paid Paul Ryan and the GOP to change things in ways that suit them.

The passage of the CHOICE Act (dubbed the Hensarling Bill after the congressman from Texas who sponsored it) has also met with varying degrees of approval in conservative media, but even the talking heads seem wary of commenting on it. The bill appears to have passed without levels of opposition that the ACA repeal elicited solely because the entire country was focused on the TrumpRussia hearings.

Here are my thoughts on this

1) The Dodd Frank Act sought to prevent a repeat of the 2008 collapse. If you take these protections off, the entire saga will repeat.

2) There is a misguided belief among some people that it is good for the financial system to collapse, because it will mean - there is no more debt. It is doesn't work like that - a collapsed financial system will only result in a major boost to predatory alternative lending channels and a massive rise in debt collection visits.

3) One might be tempted to think - "Oh this can't affect me - I don't have pay-day loans or unpaid debt" - again - that is not how it works. Even if you aren't borrowing money directly from a predatory lender, the bank your mortgage or car loan or student loan is coming from may be borrowing money from a predatory lender or might pursue predatory practices. There is no way to firewall yourself from the debt economy.

4) The Financial CHOICE Act taken together with the ACA repeal and the continued GOP support to Trump despite his illegal acts points to the deeply venal and corrupt nature of the GOP.

This will not end well for us or for the GOPers pushing this.

5 Comments:

At 12:04 PM, Blogger Ralphy said...

not to pop anybody's balloon but there is zero chance this bill will survive in the senate in its present form, right now, the bill is just a feel good piece of legislation to please GOPer banking lobbyists.

 
At 10:21 AM, Blogger Ralphy said...

seems bangladeshis diplomats enjoy having slave servants.

 
At 10:26 AM, Blogger Ralphy said...

the federal reserve bank reportedly is going to try to unload some of their $4 trillion plus bond portfolio built up during the recession. this is going to be a neat trick. hope it works.

 
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