“Consumer groups ready for fight”-Politico

Consumer groups ready for fight
By: Victoria McGrane
July 15, 2009 04:38 AM EST

 As Congress works toward rewriting the nation’s financial rules, one of the biggest battles is over the administration’s proposal to create a new agency dedicated to protecting consumers from shoddy financial products and practices.And consumer groups, labor unions and civil rights organizations that back the proposal say they’re ready for the fight.“We’re serious,” said Ed Mierzwinski, federal consumer program director for U.S. PIRG. “We have never been so organized as we are now, because we recognize if we’re going to have an impact here, we have to speak louder, through a bigger megaphone both inside and outside the Beltway.”

That’s because the financial industry, which opposes the new consumer protection agency, is “bloodied, but they’re not out of the game,” Mierzwinski said.

About 200 consumer, labor and civil rights groups have joined together to form a coalition they’re calling Americans for Financial Reform.

It’s the first time the group of allies, which has worked together on other consumer financial issues such as credit card reform, has formalized its alliance, said Mierzwinski. The coalition has several paid staff members and plans to spend about $5 million on its campaign to support the new agency and other pro-consumer regulatory changes.

Of course, that’s nothing compared with the big bucks its adversaries have at their disposal. The financial sector is one of the top campaign contributors and lobbying spenders on the Hill. Financial and insurance firms spent a total of $373 million on lobbying last year, according to the Center for Responsive Politics.

But the consumer coalition says public opinion is on its side, and it’s doing what it can to stoke it in hopes that it will blunt the industry’s financial advantage.

“We’re going to do what we can to disrupt business as usual on Capitol Hill — which is that money and influence-peddling rules over the public interest,” said Mierzwinski.

On Tuesday, the coalition held more than a dozen protests at banks and local chambers of commerce across the country to show support for the proposed Consumer Financial Protection Agency and to publicly scold the firms and the U.S. Chamber of Commerce for waging their own public relations and lobbying campaign against the proposal.

“For too long, the rules have been written and enforced for Wall Street, by Wall Street. Now, groups funded by [American International Group] and others are spending billions of dollars on a massive public relations and media campaign to keep things exactly the way they are,” Heather Booth, campaign director for the Americans for Financial Reform coalition, said in a statement.

Attacking Wall Street for lobbying against an agency dedicated to consumer protection is a major theme of the consumer campaign, and it could be an effective tactic if it succeeds in tapping into public distaste for lobbyists — so effectively used by Barack Obama during the presidential campaign — and combines that with popular anger at Wall Street’s role in the financial crisis.

“It’s the height of gall that the American taxpayer would bail out these institutions in the amount of trillions of dollars and that they would turn around and use money to actually prevent consumers, taxpayers from being protected,” said John Taylor, president and CEO of the National Community Reinvestment Coalition, another member of the coalition.

 

Beyond President Obama, supporters of the consumer agency also have key lawmakers on their side, including Senate banking committee Chairman Chris Dodd (D-Conn.) and House Financial Services Committee Chairman Barney Frank (D-Mass.).

Stronger consumer protection could have prevented the current crisis, Dodd said at a Tuesday hearing on the proposed agency.

“For 14 years, despite a clear directive from the United States Congress, the Federal Reserve Board took no action to ban abusive home mortgages … [and] allowed mortgage brokers and bankers to make and sell predatory loans to Wall Street that turned into toxic securities that brought our economy to its knees,” Dodd said, asserting that the lack of action by existing regulators to protect consumers underscored the need for a separate, independent consumer agency.

Assistant Treasury Secretary for Financial Institutions Michael Barr made a forceful case for the new consumer agency at the hearing, calling the current system for consumer protection “broken” and “structurally flawed,” with the only solution being the creation of a separate agency.

“The present system of consumer protection is not designed to be independent or accountable, effective or balanced. It is designed to fail. It is simply incapable of earning and keeping the trust of the American people,” he said.

Barr dismissed industry pushback as a typical knee-jerk fear of change; industry officials also are concerned about the loss of benefits, he said, citing their ability to shop around for the least-restrictive regulator and to continue “financial practices that were lucrative for a time but that ultimately proved so damaging to households and our economy.”

The financial industry and other business opponents say the consumer protection agency would add a clunky, additional regulatory burden that will hurt consumers rather than protect them.

“This proposal will chill efforts to innovate and respond to consumer demand for beneficial products and services,” American Bankers Association President Ed Yingling testified Tuesday.

The agency’s supporters take the industry’s opposition seriously; they know that even the support of powerful legislation writers doesn’t ensure success.

“I’m always worried,” said Rep. Brad Miller (D-N.C.), a strong ally of consumer groups on the House Financial Services Committee. “The power of the industry, despite how discredited they are in the eyes of the American people, is not something I underestimate.”

“Lots of money is always real,” said NCRC’s Taylor.

The industry doesn’t have to block the creation of the new agency altogether in order to win this fight, consumer advocates said. In fact, some industry lobbyists concede that the creation of some sort of consumer agency is inevitable. Rather, their goal is to make sure the new agency is the least bad option for their clients.

The consumer coalition, for instance, sees potential problems in industry suggestions that the new agency have the power to write rules but not enforce them, or a proposal to put it under the Federal Reserve.

“The ability to have what sound like harmless modifications that destroy the effectiveness of the bill worries me greatly,” said Miller. “I know the American people want us to come down hard on the kind of financial practices we’ve seen in the last few years, but it is very possible to fuzz it up so that the American people aren’t going to be able to tell who’s really been on their side and who’s not.”