• The Heritage Network
    • Resize:
    • A
    • A
    • A
  • Donate
  • Obama Confirms Fears About New Financial Regulator

    The newly created Consumer Financial Protection Bureau (CFPB) took a step forward today to getting its first director, as the Senate Banking Committee voted 12–10 to confirm Richard Cordray in the post. Even before the vote, however, President Obama raised the stakes.

    Referring to Bank of America’s decision to impose a $5 debit card fees, he declared that “this is exactly why we need somebody whose sole job it is to prevent this kind of stuff from happening.”

    The White House later tried to back off the President’s threat of regulation, claiming that the President may not have said what he in fact did say. White House press secretary Jay Carney then tried to minimize the President’s statement, saying “He can, or anybody can, express an opinion that they think it’s excessive or unfair.”

    But the President did more than simply express an opinion and (perhaps inadvertently) provided a glimpse of how the new regulatory bureaucracy created by the Dodd–Frank financial bill could very well operate.

    The new Bank of America fee was itself a response to another Dodd–Frank provision: federal price controls on what banks can charge retailers when consumers use debit cards. Critics predicted that the controls would backfire and result in new fees on consumers. And that’s exactly what has now happened. But rather than rethink the price controls that caused the fees, the President’s immediate reaction was to double down on regulation and task the CFBP with stopping the fee.

    In so doing, the President confirmed fears that the new agency would be a free-ranging political tool pursuing populist ideological goals. Even other financial regulators have been wary of its open-ended power, concerned that it will undercut their efforts to ensure economic stability. The President’s call to action should add to their concerns.

    CFPB critics in the Senate have been pushing for substantial reforms of the agency. Among their ideas: Make it a multi-member board rather than resting all power in a single director, and require it to seek appropriations from Congress to fund its work. Currently, it receives money directly from the Fed free of any constraint.

    The proposed changes are good steps, but even more is needed. Ideally, the new agency should be scrapped. At the very least, its authority should be more sharply defined and delineated.

    The President’s stumble should serve as a wake-up call as to the dangers of the CFPB. The Senate, more than ever, should stand firm not let a director take his seat until safeguards are in place.

    Posted in Economics [slideshow_deploy]

    12 Responses to Obama Confirms Fears About New Financial Regulator

    1. Paul says:

      A ruse if I ever did see one. I WISH my biggest bill was a $5 fee from my bank and not getting fleeced every April 15th.

    2. Clearhead says:

      Who was it that said, "I find it very tempting to 'rule' by fiat." ? "Reverend" Wright was incorrect in his selection of words. It's not the CHICKENS that have come home to roost, it is the VULTURES.

    3. Carl says:

      With the nuclear option being imposed yesterday, it appears they are not worried about obumass re-election, the way they are going, we won't make it that long!

    4. Skippy says:

      A friend who is an executive in the credit/debit card industry thinks the protests about the $5 fee are a big laugh since the consumers have been paying that fee in a different form all along. Formerly the fees were paid by the merchants and the cost of those payments were passed along to their customers as higher prices. It was unfair to the cash customers who got hit with the pass through cost of course along with the debit card customers. Now it is paid only by the debit card customers – the cash customers aren't getting soaked anymore. In theory the prices of goods sold should go down a tad accordingly. Ain't accounting 101 fun? And ain't capitalism great – there's no such thing as a free lunch. Who knew?

      • Don DeHoff says:

        True, the costs were passed down to the consumers. Now that the fee is imposed directly, one would expect the bank to lower its cost to the comsumer—–dream on, Skippy. We have the same situation with the corporate income tax which is about 35%. The corportions merely pass that along to the consumer as a cost of doing business That corporate tax should be lowered to at least that which the overseas corporations are paying, somewhere between 5 and 10 percent—but don't hold your breath that our corporations are going to lower their prices for products or services. A few the older good reputable ones like perhaps, the New York Life Insurance Co., USAA, and a few others might, but by and large, most will tack it onto their profit column. There is little wrong with the capitalistic system, except for the greed, power and corruption issues which today is all too prevalent.

      • RightOfLeftCenter says:

        I don't think we'll see price decreases because the fees are being passed onto consumers via monthly fees. So, I think customers are right to be upset given they'll be hit twice by continually inflated prices and the monthly fee. Plus cash customers are still going to be hit by prices as they're not going to drop.

        Also, as far as I'm aware (please correct me if I'm wrong), the new regulation only applies to debit transactions, not credit transactions. So don't expect retailers to lower prices anytime soon.

        • Bobbie says:

          I hope we agree the bottom line to these increase regulations and higher costs is government intrusion using their abuse of authority? Had government not stepped in where they don't belong, we wouldn't have this to deal with.

    5. Bobbie says:

      nice one, Paul.

      We have little in our savings account (lots more before this administration) but we're penalized $4 dollars a month for not having sufficient funds. My husband is counting on anything… We don't blame the banks. It's the expense of the conduct of government overreach TAKING MORE FROM MY HUSBANDS EARNINGS, leaving us with much less. Less GOVERNMENT, LESS COST of government, more of what is earned stays with US!!

    6. Dean says:

      Obama opens his mouth and spins and lies come out and then Carney has to pacify the press. Why is Carney still the press secretary or whatever his title is? He is totallt worthless.

    7. Paul Duncan says:

      Everyone must bow down before dictator Obama and his million czars or be arrested. Lets try him and Holder for treason now and get a real President.

    8. SusieD says:

      The markets will respond. We will move back to a cash society.
      I must say, though, that we used to pay pretty heft fees for operating a checking account…unless, of course, you had big bucks to avoid them.

    9. Edward says:

      I can't believe all the anger aimed at Pres. Obama over this issue, and no anger aimed at the banks. We–the American people–bailed out these bumbling, greedy bankers in a financial rescue plan begun by Pres. Bush(LET's NOT FORGET)and continued by Pres. Obama because, allegedly, we'd sink into a Depression is we didn't.

      And now these bankers are slipping their grimy hands into all our pockets for measely five dollar bills. Yet all you folks can do is fume about the Pres. Give it a rest! Wake up–don't you see that it's the banks, Wall St., and those of wealth who are destroying Main St., where the lion's share of us spend our money and have our jobs!

    Comments are subject to approval and moderation. We remind everyone that The Heritage Foundation promotes a civil society where ideas and debate flourish. Please be respectful of each other and the subjects of any criticism. While we may not always agree on policy, we should all agree that being appropriately informed is everyone's intention visiting this site. Profanity, lewdness, personal attacks, and other forms of incivility will not be tolerated. Please keep your thoughts brief and avoid ALL CAPS. While we respect your first amendment rights, we are obligated to our readers to maintain these standards. Thanks for joining the conversation.

    Big Government Is NOT the Answer

    Your tax dollars are being spent on programs that we really don't need.

    I Agree I Disagree ×

    Get Heritage In Your Inbox — FREE!

    Heritage Foundation e-mails keep you updated on the ongoing policy battles in Washington and around the country.