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Embedded in one of the 15 titles and 2,300 pages that comprise the much ballyhooed Dodd-Frank Wall Street Reform and Consumer Protection Act, about to be signed by President Obama, is a newly created Bureau of Consumer Protection aimed primarily at regulating the products and services offered by "all financial institutions."
Benign on its face, the Congress has created an independent agency with extraordinary, unchecked powers that could be used to transform what has been the world's most influential and successful financial services industry into the functional equivalent of a regulated utility.
This new bureau will be run solely by a director appointed by the president (the House version preferred a commission of five) and confirmed by the Senate for a five-year term, and its purpose will be to assure that no "unfair, deceptive or abusive acts or practices" are used in the sale or management of financial services or products.
Of course, the statute leaves the definition of these terms largely up to the director alone to decide, by rule, one of no less than 24 such rules mandated under this title alone (the entire bill mandates 243 of them by 11 different federal agencies). To achieve this goal, the director will be able to exercise powers that are virtually unchecked, either by funding limitations, rulemaking reviews, or litigation supervision.
Annual funding for the bureau will come not through congressional appropriations, as is usually the case, for example, with traditional consumer enforcement agencies such as the Federal Trade Commission (FTC).
Instead, the bureau's funding is automatic and continuing, starting in 2011 with a statutory funding allotment equal to 10% of the Federal Reserve Board's 2009 operating expenses (escalating to 12% by 2013), or $340 million, a figure 14% higher than the FY 2010 appropriation designated for the FTC, which employs 1,167 people.
And if the statutory set-aside is not enough, the statute authorizes an additional appropriation of $200 million per year through 2014.
When it comes to issuing rules to regulate financial services and products, the director has virtual carte blanche. There is no effective means to review or modify rules proposed by the director before they are submitted to the public for comment.
The only possibility is the remote prospect of a vote of two-thirds of the Financial Stability Oversight Council, set up by the bill for a range of reasons and constituted by other financial regulators. That vote would have to find that the proposed rules either put the "safety and soundness of the ... banking system" or the "stability of the financial system at risk."
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Posted By: Serfdumb(2555) on 7/17/2010 | 12:22 AM ET
More power to the banking cartel at the federal reserve, who (along with Dodd & Frank) created this recession. For the first time, the whitehouse will make appointments to the FED without congressional approval. Bill allows control of all financial institutions thru 'forced action', going well beyond regulation (limiting action). Watch video "G Edward Griffin Creature From Jekyll Island Second Look at the Federal Reserve" & see why Wall St. always gets its way. Revolving doors concentrate power.
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