WASHINGTON - Top law enforcement officers of four states called on the Senate to take the side of the people not the predatory banks by approving a House-passed bill to create a strong Consumer Financial Protection Agency.
Speaking at a telephone news conference, Feb. 9, the attorneys general of Connecticut, Illinois, Iowa and Ohio general debunked bank lobbyists' claims that existing federal agencies are enough to protect consumers.
Iowa Attorney General Tom Miller told reporters, "The senators have to ask themselves: What side are you on? The side of the public? Or the side of the big banks?"
Oversight and enforcement requires a new federal consumer protection agency, Miller said. "It must be an independent agency to work." It was a failure at the federal level that led to the subprime mortgage crisis with millions of foreclosures that triggered the worst financial crisis in 75 years, he charged.
Consumer protection was treated as a "stepchild" by the Securities and Exchange Commission and the Federal Reserve, Miller charged. They were so intent on protecting the banks that they ignored the predatory lenders rather than protect the people, he said.
Illinois Attorney General Lisa Madigan declared, "Predatory lending was at the heart of the financial crisis." State attorneys general in several states uncovered and pursued predatory lenders like Household Finance, Countrywide and Wells Fargo, she said, but the federal government "did nothing to protect homeowners and credit-card holders."
The federal government in the past nine years brought only 11 enforcement actions against predatory lenders while state prosecutors brought 8,000 enforcement actions in that same time period, Madigan said.
"The need for an independent consumer protection agency has never been so clear," she said. "Yet the banks are spending millions of dollars to kill the Consumer Financial Protection Agency."
Connecticut Attorney General Richard Blumenthal debunked the arguments of Republicans that an independent federal agency will be costly and discourage entrepreneurship and innovation. "The cost of this new agency will be minimal considering how this agency is needed to protect the people and restore trust in our financial system," he said. "The cost of failing to establish a consumer protection agency will be much greater. Putting this in the hands of an existing agency is the death knell to the vigorous enforcement we need."
He added that "reckless risk-taking brought our economy to the brink of collapse. This financial meltdown was foreseeable."
Blumenthal noted that he, himself, had sounded a warning that derivatives, hedge funds and other murky Wall Street "products" were a "financial black hole" that threatened the entire financial system. Federal regulators under the Bush administration ignored those warnings or, worse, "aided and abetted" the shell game, he charged.
The only innovation a new consumer protection agency will "stifle" is deceptive and predatory practices that should be stifled, Blumenthal said. "The banks are furiously lobbying to kill or cripple this bill. Now is the time to stand against Wall Street and with the people to repair the trust and make sure that this kind of crisis is never repeated."
Ohio Attorney General Richard Cordray said his state was among the hardest hit with 250,000 foreclosed mortgages in the last three years. He blamed "predatory lending practices that were allowed to run amuck" with no oversight or enforcement.
Cordray pointed out that long ago the federal government established consumer product protection to shield families from lead paint and toxic toys that poison children. "There is no question that families have suffered by a lack of a financial watchdog," he said. He charged that banks, lending agencies and credit card companies were permitted to "run wild," sowing financial ruin for millions.
Madigan stressed that a powerful grassroots demand for Senate passage of the bill without weakening amendments is required. "This crisis nearly destroyed our economy," she said. "We need to put in place common sense controls. The American people need to get involved. This is a democracy. People have to let their elected officials know where they stand."
Miller urged the Senate leadership to call the Republicans on their filibuster threats. "Let these senators be seen by the people, where they stand. Why are they against this common sense bill? The only way we are going to win is if the people rise up."