Today, the OCC’s deputy comptroller for public affairs Robert Garsson jumped off the train of government officials suggesting that protecting consumers’ rights would be bad for the economy. Acknowledging that the OCC had played a role in the blocking the president’s plan to create a consumer protection agency independent of other government agencies, Garsson acknowledged the stupidity of the idea that an informed, protected consumer base was bad for an economy made up of those consumers.

“It’s unlikely there will be any meaningful conflicts between safety and soundness and consumer protection,” Garsson said. “The potential for conflicts is very rare.”

That’s right, a government official finally acknowledged that protecting consumers from predatory companies or deliberately non-transparent contracts and relationships might be good for the soundness of an economy still recovering from a tailspin caused by fraud, a lack of consumer understanding, non-transparent markets and financial instruments so complex that even traders didn’t understand them.

Garsson continued.

“It’s hard to say in the abstract what sort of conflicts could arise, though I don’t think there will actually be many instances in which there is a genuine conflict,” he wrote.”But where a conflict does arise, I don’t think that a consumer protection regulator should be allowed to prescribe a standard that reduces the safety and soundness of an institution. And I’m not talking about consumer protection provisions that simply reduce a bank’s profitability — that’s not something I would characterize as conflicting with safety and soundness, and a statutory provision could say so.”

That’s right, someone in the government acknowledged that a bank’s profitability wasn’t the sole standard for safety and soundness of the economy! That is some change to believe in.

Before the Fed stepped in — and only because Congress was talking about legislating the practice out of existence — banks were treating debit card transactions differently from checks when an account was overdrawn. Instead of declining the transaction if the account was empty, which is what most people expected would happen, the bank would approve the debit and then charge customers about $35 for each overdraft debit transaction. Sketchier yet, they would often order transactions largest to smallest at the end of a business day to enable them to charge multiple overdrafts: If a customer had $20 in an account and, over the course of the day, used a debit card for $10, $10 and then $25 (expecting only the last charge to be an overdraft), the bank would reorder the transactions to $25, $10 and $10 and then charge the customer $105 in overdraft fees.

Banks made $20 billion off those practices last year alone — covering checks or automatic payments that would otherwise normally bounce, even when a customer doesn’t have overdraft protection, only netted then $12 billion. So the banks are now spending a great deal of time trying to convince their customers to opt into the per-transaction fees.

As Martin and Lieber note (and this author personally experienced), one Chase opt-in notification is designed to scare customers into believing that even their normal overdraft protections will be ended, and that their ATM and debit cards will no longer work properly if they don’t “opt in” to the new overdraft protection.

But in recent weeks, Chase has been fanning special letters out to consumers with an offer that it urges them not to refuse.“Your debit card may not work the same way anymore, even if you just made a deposit. Unless we hear from you,” the message, emblazoned in large red type, warns. “If you don’t contact us, your everyday debit card transactions that overdraw your account will not be authorized after August 15, 2010 — even in an emergency,” with “even in an emergency” underlined for emphasis.

Martin and Lieber describe other hard-sell tactics, like consumers being told that holds on their cards will leave them without any access to money. The banks don’t plan on stopping at one mailing: Consumers who fail to opt into the banks’ new version of overdraft protection — a per-transaction fee of around $35, not that banks will ever call it that — can expect more hyperbolic mailings, personal phone calls and emails. After all, there is $20 billion in customers’ hard-earned money at stake for the banks.

We need a chairman focused on a strong dollar and low inflation. The current chairman has been behind the scenes with a policy of easy money, inflating our way out of a stock market bubble to a housing bubble. Now we face the inevitable result, and it seems like we’re in a situation to repeat the mistakes of the past with the kind of hyperinflation we had in ’79 and ’80.

Bernanke’s first term expires at the end of January.

Over the weekend, Bernanke won the endorsement of Sens. Chris Dodd (D-Conn.), who chairs the Banking Committee, and Judd Gregg (N.H.), senior Republican on the Budget Committee. That was on top of Senate Majority Leader Harry Reid’s (D-Nev.) approval announced a few days earlier. And this morning, Sen. Max Baucus (D-Mont.), who heads the Finance Committee, added his name to the list of supporters, arguing that, faced with the greatest economic turmoil in generations, Bernanke’s decision-making “brought us back from the brink of economic disaster.”

I have full faith he will continue to use his post as Chairman of the Federal Reserve to create jobs, help middle class families and continue to get our economy back on track.  These past two years have revealed flaws in our regulatory system that must be addressed with strong and comprehensive regulatory reform.   It is clear that we face many serious challenges moving forward which is why I will vote to confirm Chairman Bernanke for another term.

Bernanke’s term expires at the end of the month.

“I have a lot of respect for Federal Reserve Chairman Ben Bernanke. When the financial crisis hit in late 2008, he took some important steps to prevent what many economists believe could have been an even greater economic catastrophe,” said Boxer.

“However, it is time for a change — it is time for Main Street to have a champion at the Fed. Dr. Bernanke played a lead role in crafting the Bush administration’s economic policies, which led to the current economic crisis. Our next Federal Reserve Chairman must represent a clean break from the failed policies of the past.”

Yet, according to Reuters, that’s precisely what has happened.

Geithner, Reuters says, “has expressed some skepticism behind closed doors about the broad bank limits proposed on Thursday by his boss, President Barack Obama, according to financial industry sources.”

The sources, speaking anonymously because Geithner has not spoken publicly about his reservations, said the Treasury chief is concerned the proposed limits on big banks’ trading and size could impact U.S. firms’ global competitiveness.

Some economists are already doubting the effectiveness of the proposed reforms to prevent the types of lending that led to the economic collapse. That failure is all but guaranteed if even the administration’s own finance officials aren’t on board.

]]> http://washingtonindependent.com/74537/report-geithner-already-grumbling-about-obamas-proposed-bank-reforms/feed 5 http://washingtonindependent.com/74529/feingold-to-oppose-bernanke http://washingtonindependent.com/74529/feingold-to-oppose-bernanke#comments Fri, 22 Jan 2010 15:31:32 +0000 Mike Lillis http://washingtonindependent.com/?p=74529 Here’s the statement just released by Sen. Russ Feingold (D-Wis.), explaining why he intends to oppose Federal Reserve Chairman Ben Bernanke’s bid for a second term:

A chief responsibility of the Chairman of the Federal Reserve is to ensure a sound financial system. Under the watch of Ben

More...

Among the issues you should be prepared to address are the following:

• The Federal intervention at AIG, including your role in that intervention.
• The decision to compensate AIG’s credit default counterparties at par.
• The role of the New York Federal Reserve Bank and other Federal agencies in AIG’s failure to disclose to the public the counterparty payments.

There are, of course, other questions to ask. Like why the New York Fed is now lying about its role in trying to shield the payments from the public. And why the lawyer chosen to steer the AIG bailout was plucked from the team representing JPMorgan Chase.

Towns’ letter takes all the wind out of the argument, floated yesterday by Rep. Barney Frank (D-Mass.), that targeting Geithner — but not the Bush-era Treasury officials also involved – amounts to a Republican-driven witch hunt against the Obama administration.

The oversight hearing is scheduled for Jan. 27.

“The Federal Reserve has directed us not to provide you with the documents that it has provided to us, and that it will instead respond to your request directly,” Barofsky wrote in the Jan. 12 letter. “While we regret the Federal Reserve’s position in this matter, production of the requested documents absent the consent of the Federal Reserve in these circumstances could severely limit our ability to receive documentation from the Federal Reserve and other agencies in the future.”

The Fed’s relationship with AIG has been under a microscope since last week, when Bloomberg News reported that more than $60 billion in federal bailout funds intended for the beleaguered AIG were diverted instead to other Wall Street giants. The revelation that Fed officials then urged AIG not to disclose those payments has caused a storm on Capitol Hill, where a number of lawmakers — including Issa, the senior Republican on the House Oversight and Government Reform Committee — want an explanation for the Fed’s shielding of those “backdoor bailouts.”

Barofsky’s recent letter indicates that lawmakers might not get all the information they’re after — but probably also explains why Rep. Edolphus Towns (D-N.Y.), chairman of the oversight panel, subpoenaed the Fed for those documents yesterday. Towns plans to hold a hearing on the AIG scandal next week.

I intend to vote to support your nomination in this Committee and on the floor of the United States Senate, because I believe that you are the right leader for this moment in our nation’s economic history and I believe your reappointment sends the right signal to the markets.

Bernanke has been under fire for his insistence that the Fed’s bailout spending remain unknown even to Congress, leading Sen. Bernie Sanders (I-Vt.) yesterday to place a hold on his nomination for a second term.

The rest of Dodd’s statement after the jump.

While I congratulate you for these efforts, I remain very concerned about the weaknesses in the overall financial regulatory system that allowed the financial collapse to occur in the first place.

You and I agree that the Federal Reserve should be strong, and very independent, and able to perform its core functions…  I worry that over the years loading up the Federal Reserve with too many piecemeal responsibilities has left important duties without proper attention and exposed the Fed to dangerous politicization that threatens the very independence of this institution.

It has been proposed that the Fed assume yet another role in controlling threats to overall financial stability.  But I fear these additional responsibilities would further distract from the Fed’s core mission and leave it open to dangerous politicization, undermining its critical independence.