Consumer Financial Protection Bureau

A big part of the reason behind the financial crash was a lack of sensible practice within the industry. Here's a rundown on the consumer protection provisions in the new financial reform bill. You can read more in this New York Times article. Yahoo News has a good synopsis here.

A new Consumer Financial Protection Bureau will be created, housed in the Federal Reserve. It will consolidate the functions of numerous existing bodies, and its sole responsibility will be to safeguard the interests of consumers. This was a key element championed by consumer groups such as AARP and consumer advocate Elizabeth Warren, Congressional watchdog over TARP funds.

Financial institutions and instruments such as banks, mortgage lenders, credit card and private student loan companies, payday lenders, community banks and credit unions will be subject to new rules and transparency requirements. People can get a copy of their credit report annually by going to AnnualCreditReport.com. Lenders will have to actually check people's income and assets. There can be no prepayment penalties for adjustable rate mortgages and no bonuses can be paid to salespeople based on the interest rate the customer gets. Origination fees will be capped at 3%.

Banks will have to keep a stake in the loans they make. They will not just be able to sell them all off once made, thus giving them an incentive to make sure they are extending good loans to credit worthy customers. Trading in such exotic instruments as derivatives will not be banned, but banks will be able to commit no more than 3% of their assets to them and at least they will all have to be conducted openly will full public disclosure. If banks fail the industry itself will pay the costs rather than a federal bailout fund. (Depositors' money will still be guranteed by the FDIC.)

In addition to the significant credit card reforms already enacted last year sellers will be able to offer customers discounts for paying cash but will not be able to offer discounts for using one credit card over another.

There were setbacks for consumer protection in the agreement. For one thing, auto dealers were excluded. For another, annuities escaped some of the strong scrutiny other instruments will face. But in total, these developments represent a gain for consumers and a bit of a brake for some of the recklessness that led to the latest meltdown.

It is an achievement that never would have happened under the other party and that Obama and the Democrats will tout as the midterms approach.

Politicians Must Be Penalized for Lies

There are a number of things wrong with journalism these days. For one thing, too many media outlets, particularly talk radio and cable news, are stridently and obviously one-sided. The oldline networks try to be impartial, but as they cut and cut their news gathering services they have fewer resources to dig up really good stuff. Then there is print, still the best at ferreting out a story, but also losing that edge through remorseless paring of personnel. It's a vicious cycle of cutting to save money, producing a watered-down product, thus losing readership which forces still more staff reductions.

Then there is the problem of courage, the courage go beyond simply reporting charges and counter charges and actually give an analysis of issues, to let the reader know who is telling the truth. I saw an example of this today in an item in the Nation and World section of the Fresno Bee titled "GOP Leader Accused of Lying." You can read it here. Provided by Kevin G. Hall of McClatchey News Services, it told the story of Senate Banking Committee Chairman Chris Dodd who took Senate floor and, "delivered a blistering 20-minute speech that included the revelation of a political talking points memo from a Republican strategist that was virtually verbatim to the criticism voiced Tuesday by Senate Minority Leader Mitch McConnell, R-Ky."

The problem with the article is primarily the headline. The article itself does a good job showing McConnell's remarks were full of several outright lies, but the headline is misleading because it makes the "accusations" the story. In so doing it downplays the significance of what happened. A story about politicians making charges against each other is a yawner that most readers will skip over. A good, honest headline that had said, "McConnell Caught in Lies About Bank Bill" would be sure to command a lot of attention.

Dodd's speech refers to a memo prepared by Republican pollster and strategist Frank Luntz. It tells Republicans to characterize Dodd's committee's financial regulatory bill as a "bailout for the banks." It tells that even after President Obama had legislative leadership to the White House to clarify the bill's contents, "and shortly afterward-as if to underscore Dodd's points-an aide to House Republican leader John Boehner of Ohio sent an email to reporters that mischaracterized what Dodd's bill would do."

As long as politicians can distort and lie with impunity they will do so. It is the press's job to call them on it remorselessly when they do so. That is the only way we will ever get them to level with the public. The functioning of a democracy depends on the Fourth Estate doing its job,.