In late October, the federal bank regulatory agencies convened stakeholders in Kansas City for their regularly scheduled efficiency review of regulations as required under the Economic Growth and Regulatory Paperwork Reduction Act, or EGRPRA. While greater efficiency is always welcome, this year's review felt unusually high-stakes when considering the elephant in the room: this administration's
At Woodstock Institute, a Chicago-based nonprofit dedicated to consumer financial protection and community reinvestment, we regularly engage a range of stakeholders in the financial industry. Although numerous interviews with advocacy organizations and Community Reinvestment Act, or CRA, covered financial entities alike found that there is nothing so substantively broken or redundant in the CRA regulation to warrant any action under EGRPRA, those same conversations identified a more systemic concern regarding regulatory reform efforts currently underway. Across the board, stakeholders are longing for stability.
In addition to "war-torn" Chicago being the home of deep-dish pizza and a fanatical fixation on keeping ketchup off hot dogs, it is also a sports town. Indulge us as we use a sports metaphor to describe the current state of our nation's consumer financial protection infrastructure.
Imagine the Federal Financial Institutions Examination Council, or FFIEC, as a team. When the team performs well, communities, consumers, small businesses and small farms win through the protection the agencies provide by enforcing a suite of consumer financial protection and anti-discrimination laws. Those laws exist due to past and present harms resulting from recurring lapses in ethical behavior by various segments of the financial industry in pursuit of profit over the financial well-being of the country.
Currently, the team has a new owner. The guiding regulatory principle of the new ownership varies from a
The Consumer Financial Protection Bureau's acting Director Russell Vought has an obligation to request funding for the agency, five former Federal Reserve officials said. Plus, three nonprofits sue Vought and the CFPB.
As with most ownership changes, coaches are moving around, leaving, being fired or are new to the team. Such is the case in each agency that comprises the FFIEC. Some are given so many jobs that it's likely they'll do each poorly. Some agencies are under attack even though they have a winning record. Many regulatory staff members (or whole departments) have been fired without replacements. Their relationship with the new owner varies headline-by-headline, and the principles of the new owner often conflict with the laws their agencies are meant to enforce, creating a choice between pleasing ownership or complying with the law.
Then you have the players on the field who have been decimated to the point where they know they can't compete. Specialists are gone, veteran staff fled for the relative comfort of retirement, and in many cases, the few players that remain are being directed to stop playing the game they've trained for and instead take a backhoe to the field to destroy it.
In the best of times, consumers and communities come in at a distant third as it relates to their relative importance to the financial industry. At the top, shareholder profit expectations rule the day. A close second are regulators since nobody wants to end up in jail when they go too far in pursuit of profit. Trailing in the rear are consumers whose livelihoods and futures depend on accessing responsible and affordable financial products and services.
As of this moment, consumers and communities got bumped down to fourth. Now at the top is the Federal administration's mandate that the financial industry perform its function within a narrow band of acceptable and often conflicting political behavior. It's unclear whether the financial regulatory agencies are even supposed to continue their basic oversight functions, and they're stumbling over their statutory duties in the confusion. The uncertainty that this environment has created for the financial industry will manifest itself in economic underperformance and greater wealth disparities as financial predators are emboldened in this new deregulatory regime; new products are released into the financial ecosystem without safeguards; and bank compliance officers struggling to keep up with constantly shifting regulatory changes may not see their regulator for almost seven years.
In this environment, our request is to respectfully ask the agencies to stop breaking things. Prioritizing stability is the only sensible path forward right now. Recently enacted regulatory changes have hindered the industry's ability to support small businesses, finance affordable housing or to assist those who have been historically excluded. At this rate, the harm done will take a generation to undo. While much of the consumer advocacy industry should be thankful for ensuring our prolonged existence by giving us so much to fix, I am certain that we would celebrate the day when we are no longer needed because consumer financial protection works, discrimination in lending is a thing of the past and communities come first.
