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What happened to Franken-Doddthe law to protect American consumers?


For those of us who decided to be armchair quarterbacks regarding the brutal shopping games of Black Friday and Saturday, the pepper spray clear-out, the all-out fist-fighting, and the gun-toting stall circling moves were brilliant. Clearly, someone had been practicing their consumer moves.

And where were the black stripes to protect the unwary consumers who thought they only had to fight long lines and grabby hands in order to score big discounts at the cash register goalposts?

They were watching on video cameras that got the bodies moving but missed most of the finer details. They never could tell whether the ball touched the ground first–I mean whether the new electronic device was captured securely in one consumer’s hands or the other before trying to cash out or double down. Sorry, too much pigskin.

So, really, what good were they? Who was protecting the honest shoppers simply running the field looking for deals and long-pass bargains?

Unfortunately, with those particular tuneup days over (the after-Xmas days are scheduled to be worse), we are still asking, “If you want us to spend our hard-earned money and restore public confidence in our own economy, then, dagnabit, where are the enforcers and what can they do for us?”

This scenario brings to mind a little media episode a year ago called the Dodd-Frank Wall Street Reform and Consumer Protection Act, signed into law July 21, 2010, as one of President Obama’s crowning achievements. Called Frank-Dodd by most, and FrankenDodd by the Tea Party and its various nabobs, has it worked? Are we being more protected from credit card ripoffs and banks behaving like drunken Las Vegas gamblers using other folks’ money? Hmm. It sure doesn’t feel like it.

You should remember, the legislation was supposed to give us a new consumer protection chief who would scour the field and root out nefarious financial and banking schemes intended to separate us from our money unfairly and line the pockets of “banksters and hedge clippers.”

Well, Elizabeth Warren built the thing, and gave it some pizzazz and clout, but couldn’t get past the nabobs in the House or Senate to be appointed to the job. So, they hired her assistant, Richard Cordray, who is no slouch in the consumer protection business himself. He is on the job as we speak, just being overwhelmed by the oodles of lobbyist money and insider politics from bank-funded civil service administrators still trying to undermine the law. But, it is a plus that he is there, and that Warren has a solid chance to become U.S. Senator Warren from Massachusetts.

The new law was supposed to be the most sweeping attempt to rein in Wall Street since the 1930s. It would establish a new consumer protection agency, set up a council intended to watch for and prevent another financial meltdown in this country, and toughen real regulation of the complex securities known as derivative swaps, among other things.

A. It would create a new consumer-protection watchdog housed in the Treasury Department to prevent abuse of consumers in mortgage, auto and credit card lending.

B. It would give the government power to wind down large failing financial firms (not banks, which already have the FDIC to do that) like AIG and Lehman Brothers Investment before they take down the American economy, as almost happened recently.

C. It was to set up an administration-appointed council of federal overseers to police the financial landscape for risks to the global economy and take preventive action.

D. It would establish oversight of the vast market in financial instruments known as derivatives and make them transparent. That is, they must be traded on the open market, not in the back rooms of banking institutions away from public scrutiny.

E. It would impose new restrictions on credit rating agencies and give shareholders more of a say in corporate affairs. For example, being able to take a public vote on whether they approve of executive bonuses or not.

F. It would kill the federal subsidy (taxpayer money) that banks get to use to do derivatives trading, and banks would be forced to set up separate financial entities outside of themselves through which to do their derivatives risk-taking. The five largest U.S. banks make more than $30 billion a year using the subsidy of the Federal Reserve’s discounts and the FDIC to back up the banks’ derivatives trading. The approval of this proposal would have cut their profit margins by up to 20 percent.

So, what happened? Did Dodd-Frank actually get any of that done amidst its more than 2,000 pages of text?

Actually, it did–sort of. All six of those major points did survive the cut, and a number of other great consumer protection principles got put into the final legislation too. But therein lies the problem. Most of the new law was written in principles and sweeping, loopy language. The real key was that federal regulators (you know, the same guys who played footsie with the banks and financial entities) were to write the actual operating procedures that would be enforced–the de facto law.

So, behind the scenes, buried in the rubble of discounts, deals, who’s sleeping with Cain and who-cares media, a real war is going on for the very soul of consumer protection in this country. A real battle royale is rumbling that qualifies as America’s most important secret war on the home front. More next week. Stay tuned.

Professor David L. Horne is founder and executive director of PAPPEI, the Pan African Public Policy and Ethical Institute, which is a new 501(c)(3) pending community-based organization or non-governmental organization (NGO). It is the stepparent organization for the California Black Think Tank which still operates and which meets every fourth Friday.

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