Feeding Average Joe to Wall Street

Republicans want to make Americans more responsible for their own economic security while curbing the protections that would help them do it safely. A double win for Wall Street operators. Republicans deliver them a new batch of easy marks -- Average Joes who don't understand the small print -- and then let the financiers do as they please. A few guys make a quick buck milking the unsophisticated, and when the music stops, the taxpayer picks up the debris. It happens every time, and it will happen again if Republicans succeed in emasculating the new Consumer Financial Protection Board.

Here's the pattern: During the Reagan era, the deregulated savings and loans embarked on an orgy of reckless lending. This was a bipartisan disaster: Republicans wanted to free the S&Ls to invest their deposits as they wished, while the Democrats insisted on having the taxpayers guarantee the money with which they gambled up to $100,000 per account. But the Reagan administration also declawed the government watchdogs. The auditing staff of the S&Ls' regulator, the Federal Home Loan Bank Board, was slashed. And starting S&L examiners were paid only $14,000 a year.

The S&Ls collapsed, leaving the taxpayer with a $129 billion bill in 1990 dollars. That sum is not very far from the estimated $169 billion that the Fannie Mae and Freddie Mac bailouts will cost us.

Speaking of which ... the taxpayers' implicit guarantee of Fannie and Freddie mortgages enabled the twins to buy all kinds of risky loans, thus encouraging more speculation in real estate. But the George W. Bush administration fought off all efforts to the tighten rules for lending. It even stopped states from regulating subprime mortgages.

Bush was pushing his "investor society" vision, whereby the assembly line worker would happily exchange Social Security's scheduled payouts for a waltz down Wall Street. Republicans were and still are trying to privatize the program -- that is, have workers invest their contributions. Another variation on this theme is the health savings account, whereby people may invest contributions to their medical care in the stock market.

That was a heck of a time to cut funding for the Securities and Exchange Commission, the agency that polices publicly traded shares, but Republicans did. And they are going after the SEC now, this time under the cover of deficit reduction. (The House has already voted to cut the funding of the Commodity Futures Trading Commission, which regulates derivatives.)

The new Consumer Financial Protection Bureau is to be an independent agency funded through the Federal Reserve. That Republicans couldn't cripple the bureau by starving it gets their goat. According to their rhetoric, there's something subversive about rules requiring that a mortgage contract be written in plain English or banning predatory loans aimed chiefly at the working poor. Not coincidentally, this is also the view of the companies that market toxic financial products to ordinary Americans.

Most Americans, personally burned by the speculative collapses, would probably not object to a few rules of road in consumer finance. So the right wing has moved the spotlight off what the CFPB would do and onto its creator, the much-demonized Elizabeth Warren. President Obama has made it clear that he may name someone else to head the bureau. To prepare for that eventuality, Republican leaders have said they won't approve any nominee, even if it's not Warren.

It should be noted that many financial companies support the CFPB on the belief that a well-regulated market would build consumer confidence in their products. And those who support the "investor society" concept should feel likewise -- unless their real agenda is simply feeding the lambs to Wall Street.
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