Mitt Romney and Consumer Protection Regulation

Sep. 1, 2012 -- The people who brought you the Great Economic Meltdown of 2008 have a new idea for you --- although if they get their way, you'll never hear about it. In fact, one of the most striking things about the new push to undo the consumer-friendly financial reforms that followed the crash is the open contempt its backers show for American democracy.

Since this week's Republican National Convention will present their carefully orchestrated vision of a perfect unregulated, untaxed world, this might be a good time to revisit America's recent nightmare on Elm Street.

In the waning months of the George W. Bush administration, as American voters were about to choose between Barack Obama and John McCain, the U.S. economy hit a reef the size of Manhattan --- or, more precisely, Wall Street. In the wake of that disaster, two questions were repeated over and over, from coast to coast: How did this happen? How can we make sure it never happens again?

One of the most notable responses to that second question was the Dodd-Frank Wall Street Reform and Consumer Protection Act, signed into law by President Obama in 2010. Dodd-Frank brought about the most profound changes in U.S. financial regulation since the Depression-era reforms of the Roosevelt administration. And the comparison is apt --- because without this and other strong corrective measures taken in response to the crisis, the damage to the American economy could have been far worse than it was.

Nevertheless, Dodd-Frank came under heavy attack from the beginning, with some arguing that it goes too far and others insisting that it doesn't go far enough. Dodd-Frank was enacted despite those objections, and with good reason: without it, the foxes on Wall Street were guarding the henhouse --- and the rest of America was getting eaten alive.

But now the regulation-be-damned camp --- represented by the Romney campaign --- has come up with a "fix" that avoids the messiness of political discussion and debate by sidestepping the democratic process entirely. Never mind the inconvenient fact that Dodd-Frank is the law of the land, and that it is the constitutional duty of the executive branch --- to which Republican candidate Mitt Romney aspires --- to put it into practice.

Under the would-be president's plan, agencies would have to eliminate existing regulations in order to implement new ones. Specifically, agencies issuing new regulations would be required to balance the costs of new regulations by identifying offsetting cost reductions in existing regulations. In addition, Congress would have new powers to block regulations that are proposed by the agencies. As Governor Romney's economic plan affirms, "President Romney will issue an executive order instructing all agencies that they must invite Congress to vote up or down on their major regulations and forbidding them from putting those regulations into effect without congressional approval."

Sizing up the probable outcome of such a move, American Banker said: "Even if the courts eventually struck down Romney's proposals --- the policies would likely spark legal challenges --- they could force delays at agencies such as the Federal Reserve Board, the Federal Deposit Insurance Corp. and the Consumer Financial Protection Bureau."

Now, the Consumer Financial Protection Bureau, or CFPB, has been a particular target of the deregulation mafia. The CFPB, a watchdog agency created as part of the Dodd-Frank financial reform, has set out to create a protective buffer against the wave of frauds and abuses inflicted by scammers on struggling homeowners and other consumers --- whether those scammers be fly-by-night con artists or Fortune 500 bankers. Its mandate is to stand up for homeowners and for the elderly, for the middle class and the working poor --- in short, for all those Americans who were being shredded in the post-crash meat-grinder while the Wall Street vultures were lining their own pockets.

You might wonder how this could be even slightly controversial. Curbing fraud, promoting financial literacy, stopping predatory lenders, protecting seniors from financial abuse, and keeping hard-working families from being thrown out of their homes --- the mandate of the CFPB sounds like a no-brainer for any democratic society with a commitment to fairness, free markets, and the rule of law.

Then again, if your success depends on back-room deals, insider trading, rigging markets, skirting the law, and flouting the will of the American people, I can see how you might have a problem with it.

And that's where the proposals embedded in Governor Romney's economic plan come in. The Wall Street grave dancers couldn't win fair and square, so they're doing what they do so well: protecting their profits by gaming the system --- then trying to pass off their slash-and-burn practices and over-the-top greed as "conservative."

This is, in reality, nothing but an end-run around democracy --- winning by cheap and probably illegal tactics what was lost in the realm of American political institutions. In my opinion, it shows blatant disdain for the Constitution and spits in the face of the American people.

[Related Article: CFPB Head Faces Tough Questions From Congress]

Romney's economic plan sees it differently: "While not a panacea for the problem of over-regulation, implementation of this conservative principle would go some distance toward halting the relentless growth of the regulatory state."

It's true that "the regulatory state" is not something that Wall Street has ever really warmed up to. Indeed, the ideologues who profited most from the unfettered excesses that led to the crash --- many of whom continue to profit from its aftermath --- have done their best to go on as though nothing had happened. If something did happen, they expect us to believe that it happened on President Obama's watch, probably as a result of his "job-killing" policies. They maintain today --- as they always have and apparently always will --- that the solution to this and every other economic problem is to abandon regulation, screw scrutiny, and give "market forces" (i.e., them) free rein.

In other words, they think we're idiots. They expect us to forget that we were nearly eight years into the George W. Bush presidency when catastrophe hit the U.S. economy. They expect us to forget that Bear Stearns, Lehman Brothers, Merrill Lynch, Fannie Mae, Freddie Mac, Washington Mutual, Wachovia, Citigroup, and AIG either failed, were acquired under duress, or were taken over by the government --- all before President Bush left office. They expect us to trust them when they tell us that the cure for the economic crisis that hit us like a freight train in 2008 is --- wait for it --- to return to the same laissez-faire insanity that got us into this mess in the first place.

The truth is that for the past twenty years, under the negligent stewardship of both Republican and Democratic leadership, the American economy, and the investment and credit markets in particular, were heading at top speed into uncharted territory with no one at the wheel. While ideologues of various stripes now repeat ad infinitum that "government is the problem," the truth is that huge firms were making massively risky moves --- with other people's money --- that no one but the insiders knew anything about. "Pay no attention to the man behind the curtain," they told us. What could go wrong?

Wall Street was at the wheel, with politicians and regulators riding shotgun and the American economy riding blithely in the back. It was one hell of a ride. But when you drive at full speed with your eyes closed, you're going to hit something eventually. We did, and we're living with the consequences.

Of course, when I say "we," I don't mean everyone. Some people wound up with very big bonus checks, not pink slips, in the wake of the 2008 crash. In fact, for the most part, Wall Street and the big banks --- the authors and architects of the crisis --- stepped out of the wreckage without a scratch.

The rest of the country didn't fare so well. Hard-working Americans lost their jobs, their homes, their savings, their health coverage, their retirement funds. Their kids put off going to college, or abandoned the idea entirely. Many of those people --- the lucky ones --- are just beginning to put their lives and their credit back together; others are still looking for that fresh start. These are the people that Wall Street and the big banks sold out once. Now they want to do it again --- and once again, they want to do it in secret, behind our backs.

The open hostility of these people to the idea of a government "of the people, by the people, and for the people" really comes down to one thing: utter contempt for "you people." It's shameful. It's intolerable. It must be stopped.

Adam Levin is chairman and cofounder of Credit.com and Identity Theft 911. His experience as former director of the New Jersey Division of Consumer Affairs gives him unique insight into consumer privacy, legislation and financial advocacy. He is a nationally recognized expert on identity theft and credit.