Exactly. The Fed hasn't had any pro-consumer DNA in its system since the early 1990s. It's really not in that realm at all. And so, to house such an agency inside the Fed, which was pushing for relaxing capital requirements at the banks, would be absurd. The Fed did nothing to prevent many billions of dollars worth of these toxic mortgages from being made and dispensed -- too much money was being made from them by the banks to whom the Fed was loyal. So in light of that, it would be quite foolish to expect the Fed to suddenly develop some overarching concern for consumer financial protection or to be very sympathetic to, or tolerant of, any agency within its ranks that did have such a concern.
Here's what a handmaiden to the Fed, the U.S. Chamber of Commerce, had to say about the idea of a Consumer Financial Protection Agency (CFPA):
"Americans are losing sleep over this economy. Especially small business owners, worrying about payroll and mounting bills. Now Washington wants to make it worse, with the CFPA, a massive new federal agency that will create more layers of regulation and bureaucracy. The CFPA will make it harder for small businesses to access credit. Small businesses work too hard to suffer further. Urge congress to stop the CFPA. Go to www.StopTheCFPA.com."
There is a major problem for small businesses right now: They can't get money from the banks, who will not lend to them. And small businesses provide most of America's new employment. But they could not possibly be beleaguered because of a consumer protection finance agency! They are beleaguered because the banks took too many risks and are now withdrawing from the market and will not lend to them. So, what the Chamber of Commerce is saying is pure sophistry, cynical in the extreme. To tell the poor beleaguered small business owner that a consumer finance protection agency is going to add to their burden, is simply ridiculous. But at least it acknowledges a very real problem in this country, which is that small businesses far too often cannot get loans from the banks.
And why can't they?