Restoring American Financial Stability Act of 2010--Continued

Floor Speech

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Mr. SCHUMER. First, Madam President, I wish to join my friend from Connecticut in praising Senator Bennet, who has had an amazing effect and a steady hand in bringing this bill to the floor. I also thank my colleague from Virginia, Senator Warner. The new Members have had a tremendous effect on this bill. This reflects the way the Senate works these days, and I think it is all for the better. Having their input and experience has been vital.

But, Mr. Chairman, I would also say that you are full of fresh ideas and vim and vigor. Just because you have been around here a long time does not mean that----

Mr. DODD. Thank you.

Mr. SCHUMER. In fact, you have had the wisdom to encourage some of our new Members to actively participate, and confidence to do that as well.

I also do not want to fail to note my colleague from New York, Senator Gillibrand, the Presiding Officer, who has done a fabulous job, too, particularly on the agriculture portion of the bill on the committee on which she sits.

AMENDMENT NO. 3826

Madam President, I come to the floor today and rise against the consumer amendment posed by Senator Shelby that is before us. I come to the floor to speak about the need for a strong independent consumer watchdog. I am here to talk about the proposal put forward by some of my Republican colleagues to place a new consumer protection division within the FDIC and significantly reduce the ability of that division to carry out its mission.

The amendment before us greatly weakens the bill in terms of consumer protections. In fact, it is not just a step backward from the bill before us, it is a step backward from the status quo. If we were to pass the amendment on the floor, consumer protections, weak as they are today, would be even weaker. This amendment would leave the consumer naked and unprotected. This amendment strips the bill of some of its strongest protections. Not every financial institution preys on consumers, but those that do would be given too free a hand if this amendment were to pass. I urge strong opposition to it.

Let me explain. One of the roots of this financial crisis was, undoubtedly, that total failure of our consumer protection regime. Americans were sold products they did not understand and could not afford by mortgage originators eager for a fee and happy to sell those loans off into the great securitization machine which was given a virtual carte blanche by the credit rating agencies.

After the events of the last several years, no one can argue that fundamental reform of our consumer protection regime is not necessary. No one can argue the status quo is the way to go. The status quo simply will not do. There is no accountability in the current system. Consumer protection is split among seven different regulatory agencies. For that reason, I was an early supporter of efforts to create a truly independent consumer protection agency, and I am still working with many of my colleagues, including Senator Jack Reed and Senator Durbin, to strengthen the provisions of the bill proposed by Chairman Dodd.

One of the key authorities of any new consumer protection division or agency is that it must be able to adopt rules to protect consumers without being overruled by banking regulators who would rather allow banks to pad their bottom lines by fleecing consumers with hidden fees.

Some argue that you cannot split consumer protection from safety and soundness. But historically, in the present setup, every time there is a conflict, the consumer loses. Consumers deserve an accountable regulator with oversight of consumer financial products as its primary objective, not as an afterthought.

The Republican proposal being discussed is totally inadequate. It would allow the same bank regulators, who have stood in the way of meaningful consumer protections for years, to veto consumer protection rules proposed by the head of the new division.

For example, the Comptroller of the Currency, who publicly opposed the Fed's new credit card rules, would, under the Shelby amendment, get to vote on future credit card rules. So the regulators who do not really care--some of them--about consumer protection would be given veto power.

The division would have no examination or enforcement power over any bank of any size or any of its affiliates. Some of the worst actors in the subprime mess were bank affiliates or subsidiaries. Even worse, it could only do examinations of nonbank consumer finance companies if they ``demonstrate a pattern or practice of violations'' of consumer law--in other words, only after consumers have been harmed repeatedly. That is what one could call too little, too late. Even the Fed recently deleted this requirement from rules governing subprime mortgages because it hampered enforceability of those rules so severely.

Even the banks want the new consumer division to be able to enforce its rules at nonbanks. This is amazing. Some of the most rapacious institutions that prey on consumers are not banks. They operate outside the scope of the Federal regulatory authorities. They are often responsible for many of the most egregious abuses and predatory lending practices. Many of the products provided to consumers by these nonbanks played a direct role in the financial crisis. And many of these businesses--payday lenders, rent-to-own companies--currently operate below the radar screen to prey on vulnerable communities. How can we exempt some of these payday lenders and rent-to-own companies? I have seen them prey on poor people in my State. How can we exempt them from regulation when they often are worse than many of the financial institutions?

The Republican amendment would also prohibit the consumer division from issuing any rules ``that affect any underwriting standards'' of deposit institutions and their affiliates. After the crisis we just went through, which was in large part created by bad mortgage underwriting standards, I cannot believe anyone can propose this with a straight face because--let me repeat what it does. The consumer division cannot issue rules ``that affect any underwriting standards'' of deposit institutions. It is saying: Let's repeat the mortgage crisis. It makes no sense.

If this consumer division were in place in 2008--the one proposed by my colleagues here--it would not have had the power to write the mortgage rules establishing the minimum ability to pay standards the Fed issued. As we know, the Fed was not an extreme watchdog in any sense.

I have worked long and hard in the area of consumer protection. I have worked with these regulators. I have seen how slowly they work. It took more than 10 years to get them to go along with the so-called Schumer box, where credit card interest rates were made clear and visible to prospective credit card purchasers. It worked. But why did it take so long? Then, when the banks came with new ways of getting around the rules, again, it took me forever to get the Fed to move because the Fed, frankly--and Chairman Bernanke to his credit admitted this--did not make consumer protection a high enough priority.

So we need, in my judgment, an independent agency. That would be the best solution. Second best would be an agency, even if it is within the Fed, that is largely independent in both the rules it can promulgate and its enforcement. We need strong, forward-looking financial reform. I have always said I want the reform to be constructive, not punitive. But if we go through all this and fail to leave consumers better protected than they were before this crisis, we will have totally failed in our mission to serve the American people.

I strongly urge that this amendment be rejected by a large and hopefully bipartisan majority.

I yield the floor.

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