Why shouldn't financial products be subject to scrutiny? The FDA inspects food and drugs. Why not inspect loans and credit card contracts? Why wouldn't banks want such legislation? --miguelito
Elizabeth Warren is a professor at Harvard Law and currently serves as chair of the Congressional Oversight Panel.
May 4, 2010 at 6:47 pm
There are a lot of reasons to like the idea of a consumer financial protection agency. My colleagues Barbara Kiviat and Michael Grunwald have made the more substantive ones here, here and here. But I think I have stumbled across possibly the most telling data point yet on why the CFPA is likely a good idea: Jamie Dimon is scared of debating Elizabeth Warren on the topic. It's not because Dimon is not passionate about the topic. Privately, Dimon and other JP Morgan exeuctives have been strongly making their case in Washington against starting a new agency, even one housed at the Fed, to monitor consumer protection in the banking business.
But when White House Chief of Staff Rahm Emanuel called a top J.P. Morgan executive to ask for the bank's support in creating a new consumer-protection agency, the executive—former Commerce Secretary William Daley—said no, according to people familiar with the conversation. His boss believed that sufficient consumer safeguards were already on the books.
Nonetheless, I have put some phone calls in and Dimon is unwilling to take Warren on in person and debate the topic. Dimon is a smart guy. So the fact that he is scared to debate Warren on the topic means that he knows he can't win. Here's why:
First a recap. Elizabeth Warren is a Harvard law professor that also heads up the Congressional Oversight Panel, which has monitored the TARP program with hearings and studies. A few years ago, after studying a number of abusive lending practices regularly engaged in by the nation's largest banks, she came up with the idea of launching a Consumer Financial Protection Agency. In Warren's vision, it would be federally funded and separate from other regulators. It's only job would be to assess whether the loans and other products sold by banks are fair and safe for consumers. Much like the FDA does for drugs. Obama loves the idea. And so it has been batted around as part of the reform effort, and is included, in a weaker form, in Dodd's reform bill. Here's what FDIC chief Sheila Bair had to say about Warren and her proposal in the TIME 100 this week:
Elizabeth is at her best when she deploys that razor-sharp eloquence in defense of the American consumer. Some of her ideas are controversial, but we always listen because her powerful intellect and plainspoken articulation prove to be an irresistible combination. Of all the victims of the damage done in the past two years by the financial meltdown and the ensuing economic downturn, consumers have suffered the most. But that may soon come to an end if Elizabeth has her way and Congress establishes a new and independent consumer watchdog for financial products. I say high time.
This is also the woman that makes Jamie Dimon, the head of the largest bank in America, shake with fear at night. How do I know this? Because I called and asked. I tried to set up a debate on the topic between Elizabeth Warren and Jamie Dimon. My pitch was if you feel strongly about the topic just defend it in the pages of TIME magazine, and your side of the argument will be better for it. My proposal was that Jamie Dimon and Elizabeth Warren should go on a foreclosure bus tour together. Take a look at the damage that has been done by option ARM loans and 2/28 hybrids and then make the case why the proposed Consumer Financial Protection Agency would or would not have stopped the problems that led to the financial crisis.
Warren said yes. Dimon said no. To be fair to Dimon, I can't find anyone of any stature (Bank CEO or otherwise) willing to debate Warren on the issue. Ed Yingling of the American Bankers Association won't stand up for the banks on the topic. Even Chamber of Commerce's Tom Donohue, whose organization runs a website dedicated to trying to stop the CFPA, is too much of wimp to debate Warren in person. What's more, I realize that the setting of a foreclosure bus tour (where you look at houses that have been lost to banks by borrowers) might put him on the defensive, but I said I and Warren were flexible with the location. He could name his home court. Even so, Dimon said no. The PR person who was the go between said Dimon and his team decided arguing against consumer protection in the banking industry would make the CEO look bad. So I should understand why he would have to say no.
Yes, I totally understand. There's no good argument against Warren's proposed CFPA, so no one can make it. Mortgages and credit cards are confusing stuff and easy to be gamed by the bankers. Consumers need a watchdog. Our economy needs a watchdog. The financial crisis has shown that. So Dimon's people are right, arguing against the CFPA in person would make Dimon look foolish, or more foolish than he already does. But not being willing to debate Warren only proves Warren's point: the CFPA is something we need badly.
Read more: http://curiouscapitalist.blogs.time.com/2010/05/04/why-jamie-dimon-is-afraid-of-elizabeth-warren/#ixzz0nJ2zj0Kh