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Score One for the Banks

cardgas.jpgThis is the most depressing paragraph I've read today:

At a hearing before the House Financial Services Committee, Treasury Secretary Timothy F. Geithner announced that the administration had dropped one provision in its plan for a consumer financial protection agency — a requirement for banks and other financial services companies to offer “plain vanilla” products, like 30-year fixed mortgages and low-interest, low-fee credit cards.

That "plain vanilla" provision was among my favorite bits of the bill. It was an elegant effort to help people navigate an industry that preys on ignorance and uncertainty. "There’s no good reason for this capitulation," comments Felix Salmon, "except for the financial lobby has so effectively captured Congress that no reform would be able to get through with such a common-sense provision in place."

Salmon's post is titled "The Beginning of the End of Meaningful Regulatory Reform." No and yes. The "plain vanilla" provision was never likely to do that much. The fact that a bank had to offer a basic card didn't mean they had to advertise it, or steer you toward it. But the politics of the "plain vanilla" provision were great, and the presence of such products could matter. More to the point, this is a signal that the banks have tremendous power to eradicate anything they don't like in this bill. First they came for the "plain vanilla" products...

Photo credit: Bloomberg News.

By Ezra Klein  |  September 24, 2009; 3:10 PM ET
 
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Comments

Wow, there's a shock.

Posted by: AZProgressive | September 24, 2009 3:27 PM | Report abuse

Fence eating the field...

It is our own Rep. Barney Frank who is responsible for dropping it.

This Congress and this Administration keep getting opportunities to distance away from Wall Street and every time both of them drop the ball.

Sen. Durbin is right - DC is the place practically owned by Bankers.

Even at G20 as Simon Johnson and Krugman say, they will NOT be talking any worthwhile financial industry regulations; but rather will be talking 'alternative currency' and 'balanced growth'. There again those guys will be able to avoid 'taking on banking industry'.

Posted by: umesh409 | September 24, 2009 4:02 PM | Report abuse

Par for the course...Durbin was right. Congress is a wholly owned subsidiary of the banking industry.

Put back glass stegall(sp)--no
shrink banks so they are not too big to fail--no
require plain english in contracts--no
curb ridiculous salaries and bonuses--no
regulate derivatives trading--no
curb unregulated exotic financial products--no
set us up for another govt bailout--YES!!!

Posted by: srw3 | September 24, 2009 4:29 PM | Report abuse

Clearly, after health care, a crucial project should be dramatically increasing public campaign financing and/or other campaign finance reform. Weakening corporate and other special interests could lead to so much good in so many areas.

Of course, there's a lot of strategy in when and how to make the push for this and how much political capital to commit, but the costs of special interests to this country have grown so enormous, I hope Obama has seriously planned for action on this some time in the future.

Posted by: RichardHSerlin | September 24, 2009 5:21 PM | Report abuse

The Obama Administration: new heights in imitating the organ grinder's monkey.

Does every last financial figure or regulator in Barak's Goldman Sach branch have a pre-signed contract for the WS gravy train after his one-term Presidency is over? Even pro-sports is prohibited from recruiting elementary school students for post-college employment.

Posted by: JimPortlandOR | September 24, 2009 5:22 PM | Report abuse

What do people expect in a society where it is perfectly legal to hock the AB Cirle PRO and the Thighmaster. US business may not be entirely about making and selling absolute crap but a large part of it is, and keeping the door open for snake oil salesman in a big priority for the boys on K Street.

Posted by: bcbulger | September 24, 2009 5:43 PM | Report abuse

Those information asymmetries need to be sustained to keep the banks profitable!! We should be worrying about their profits not about our well-being!! (irony)

Posted by: michaelterra | September 24, 2009 6:00 PM | Report abuse

--"First they came for the "plain vanilla" products..."--

Does anyone here see what a perversion of that famous quotation Klein has wrought?

What a disgrace. What a flipping disgrace.

Posted by: msoja | September 24, 2009 7:38 PM | Report abuse

In a post titled "Two Perversions" at kayak2u dot com slash blog I wrote of Klein's disgrace:

"It is the government that is coming for the banks, and Ezra Klein is there at the tracks, helping to herd the objects of his picayune ignorance and hatred into the cattle cars."

Posted by: msoja | September 24, 2009 9:19 PM | Report abuse

AZProgressive - LOL

umesh409 - yes I agree that no one is confronting Wall Street, but look at how the knowledge of this situation has risen to the surface - it never had this exposure before.

I think we underestimate how much energy it takes to change an existing situation's momentum or inertia. A situation becomes apparent and we think Obama or Congress should immediately change it.

But I think the appearance of the situation is something we take for granted, when really it's the first of several steps.

Posted by: rosshunter | September 24, 2009 10:18 PM | Report abuse

horray! Let's get more people in mortgages they can't afford!! Here's to the second housing crisis in 2015!!

Posted by: visionbrkr | September 25, 2009 7:41 AM | Report abuse

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