Tuesday, October 26, 2010
Dodging Fence Posts and Whacking Moles
Earlier this year, Bill Maher invited Elizabeth Warren, the new Chair of the Consumer Financial protection Bureau (much to the dismay of Republicans), to appear on his HBO show “Real Time” to talk about recent legislation regarding financial practices by banks and credit card companies. An interesting and funny exchange took place between the two. Speaking of the Dodd-Frank bill, which was being debated at the time, Warren said:
“I really thought . . . that we were on the brink of real financial reform, that we were going to change the system, that we were going to have a consumer agency to make sure that we rolled back the crazy abuses and the tricks and the traps.” Maher looked puzzled and interrupted her,
“You thought that? Boy, what do you smoke before the show?”
Warren, unamused, continued:
“I also thought that we would change the rules on things like derivatives and that we were going to change the rules on resolution authority, what we do with these big banks, that we were going to get rid of too big to fail. The problems could not be more obvious, and quite frankly, the solutions are just about that obvious but we can’t seem to get the two together.”
That the Dodd-Frank legislation and other attempts at corporate reform do not go near far enough has been well documented on this blog. CNN recently compared the corporate response to these new reforms as a game of “Whac-a-Mole,” that the minute one set of bank fees or practices is banned, a whole new creative set pops up in its place.
Similarly, the Credit CARD Act that went into effect earlier this year established a credit card holder’s Bill of Rights by outlawing 10 egregious practices by credit card companies that padded their bottom lines. However, as Elizabeth Warren pointed out in her interview with Maher, it doesn’t take much to get around these 10 regulations:
“The problem with the approach . . . is that it’s like putting fence posts on an open prairie. You’ve got 10 of them now and if you smack straight into one, you really will get hurt. But if you want to hire just one lawyer, much less an army of lawyers, you could just run a little to the left of it, or a little to the right of it, and it’s business as usual.”
A report by the Center for Responsible Lending confirms that as some credit card abuses are outlawed, new ones inevitably proliferate.
Below is a parody of how commercial banks are responding to the new regulations imposed by the Credit Card Accountability, Responsibility and Disclosure Act that Warren refers to as "fence posts on an open prairie":