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Des Moines Register Op-Ed: Banking bill protects American consumers

Submitted by on July 15, 2010 – 8:36 am
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This op-ed by AFR Steering Committee Member Cathy Lesser Mansfield appeared in the Des Moines Register today in response to Senator Grassley’s announcement that he will not vote for financial reform.

Iowa Sen. Chuck Grassley’s decision not to support the banking bill before the Senate this week is bad for Iowa. He claims the bill is good for Wall Street, and not for consumers, but he is wrong. The bill is a good one, and consumer organizations around the country are unanimously in support of this bill.

The legislation at issue – the Dodd-Frank Wall Street Reform and Consumer Protection Act – will overhaul the financial services industry, protect consumers from dangerous financial products and inject transparency into the financial dealings of banks and other financial institutions. If this bill does not pass, borrowers, families, neighborhoods, city and state economies, investors and financial markets will remain vulnerable to the dire consequences of unmonitored and unrestrained lending and investing.

I have been practicing, teaching and writing about consumer protection law for two decades. I am one of the many people who did see a crisis coming a decade ago, and tried to get Washington’s attention.

My colleagues and I authored studies and law review articles exposing the practices of the subprime mortgage lending industry and urging Congress to protect consumers from the worst aspects of this market. We testified before Congress and federal agencies, and brought victims of and participants in the subprime mortgage market with us. We proved over and over again that the market was having a disproportionate negative impact on borrowers of color.

Despite our warnings, Congress did nothing to rein in the lending abuses rife in the subprime market. The subprime mortgage market flourished, and even migrated into other parts of the mortgage market, producing default and foreclosure rates the likes of which we have not seen since the Great Depression.

The urgent calls for reform and regulation made by a myriad of academics, consumer law practitioners, consumers and consumer protection organizations went unheeded. The sky is falling, we cried. But our elected officials did not answer the call for protection – until now.

Now, finally, after almost a year of careful work, Congress has produced the Dodd-Frank Wall Street Reform and Consumer Protection Act. This legislation answers the call.

This bill will finally give consumers, investors and markets the protection and transparency that were so desperately needed and so obviously absent for so many years. For example, the legislation establishes a new, independent consumer financial protection bureau to be housed in the Federal Reserve. Market participants will finally be held accountable for lending and investment decisions with self-serving, short-term gain and long-term consequences for consumers, investors and the financial markets.

Most important, consumers will finally be assured that, just as the government’s Consumer Product Safety Commission protects them from exploding toasters, the government will now also protect them from dangerous financial products.

It’s a shame Grassley has decided to pull his support for this bill. It is even sadder that he gave a disingenuous reason for not voting for the legislation – that Wall Street was in support of it, so it must not be a change for Wall Street or good for Iowans. In fact, the bill is a sea change in how we monitor and regulate financial markets and products. This is the protection Iowans deserve.