WASHINGTON -- Six prominent consumer groups have warned Congress that any regulatory relief for the banking industry would threaten important consumer protections and engender stiff opposition from the public.
In a letter last week to Sen. Donald W. Riegle Jr., D-Mich., chairman of the Senate Banking Committee, the groups attacked the banking industry's effort to roll back burdensome laws, saying such action would "break faith with the American people."
"We urge that you oppose all industry-led efforts to weaken taxpayer, consumer, and community reinvestment protections and that the Trojan horses of |regulatory burdens,' |excessive paperwork,' and |credit crunches' be stopped at the committee gates," the groups wrote.
"It is essential that safety and soundness and consumer protections remain in place," they wrote, "and that the Congress resist the temptation to constantly alter, shift, and diminish regulation in answer to shortsighted industry demands based on little more than paper-thin anecdotal evidence about |regulatory burdens.' "
The letter was signed by Michelle Meier of Consumers Union, Deepak Bhargava of Acorn, Chris Lewis of the Consumer Federation of America, Sussanah Goodman of Public Citizen's Congress Watch, Ruth Susswein of Bankcard Holders of America, and Ed Mierzwinski of U.S. Public Interest Research Group.
"The great majority of the members of Congress don't agree with them," said Ed Yingling, chief lobbyist for the American Bankers Association. Most of the lawmakers have stated their support for some sort of regulatory relief, he added.
The consumer advocates sent the letter in anticipation of the busy congressional season that begins in September. When they return after Labor Day, law makers are expected to consider a number of banking-related proposals. These include small-business securitization, fair credit reporting, and reverse redlining measures.
The proposal most closely watched by banking groups, though, will be the President's community development financial institution package. And some worry that prominent Republicans -- led by the Senate panel's ranking minority member, Alfonse D'Amato of New York -- could hold up the bill, unless regulatory relief provisions are incorporated into it.
"I don't think there's any secret that senators on the committee are talking about putting some regulatory relief measures onto the community development bill," Mr. Yingling said.
But the consumer groups remain hopeful that they can forestall such efforts.
"The industry's well-financed campaign about |regulatory burdens' is an echo of the drum beat of the deregulatory mania of the 1980s that left us with a wrecked savings and loan industry and a weakened banking system," they said in their letter.
"The hundreds of billions of dollars in costs to the insurance funds and the taxpayers are still being totaled," they added. "The American taxpayers are owed the assurance that this will not happen again."