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Financial Planning > Tax Planning

No Joke

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It’s obvious from the fight that’s going on in Congress over whether to even form a Consumer Protection Agency and where to put it that American consumers have a major problem: Namely, that collectively they don’t have even one pocket deep enough for Congress to fit in.

This is in stark contrast to the banking industry’s pockets, which in their depth rival the fabled Mindanao Deep in the Pacific Ocean.  Now those are pockets, buddy. Pockets that are certainly large enough and deep enough to accommodate any number of senators and representatives, not to mention candidates for those revered offices.

You would think from the so-called debate that is going on that consumers all over this country were not the ones who were grievously injured by banks run amok during the lead-up to the cataclysm now known as the Great Recession.  That these same consumers weren’t taken to the cleaners by mortgage bankers.  That they didn’t have their clocks cleaned by predatory credit card practices that show how truly innovative banks can be.  That they weren’t harmed—and are still not being harmed—by the lack of credit availability from banks that are getting funds supplied by the Fed at next to no cost, but are using those same funds to trade for their own advantage.

And even more ironic, within the context of the wholesale amnesia that has seemingly taken hold of Congress since the events of September 2008, it is now the banks that are making the case that they need protection from being over-regulated!

So, what is one “compromise” shaping up to protect consumers?  It is to put an agency with that responsibility within the precincts of the Federal Reserve Board. 

Yes, the Fed, that same agency whose myopia during the buildup of the housing bubble rivaled Mr. Magoo’s.  Yes, the Fed, which back in those days of high-flying financial recklessness seemed to have no clue about what kind of exotics those banks it was supposed to be regulating were using—and just how awfully much they were on the hook for.

As a consumer myself I find the idea of expecting the Fed to take my side against the banks more than faintly ludicrous.

So what’s going on here? Is it that since they did such a bad job the last time around we owe them one more shot to get it right?

I’m with Barney Frank, chairman of the House Financial Services Committee, who has nothing but scorn for the idea.  He told Politico recently, “It’s almost a bad joke.”

Unfortunately it wouldn’t be the first time that a bad joke ended up as law.  Think of the Bush tax legislation that let the estate tax disappear for the year 2010 only to be resurrected at 2001 rates in 2011.  Or think about the Medicare prescription drug bill with its notorious doughnut hole.  I could go on, but you get the point.

So, the bottom line as I see it is that no matter what Sen. Richard Shelby, the banking industry’s white knight, thinks, it is consumers who need protection and they need an independent agency to make sure it happens.  No joke.


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