Reply #61: Yes, I get it, Geithner gave a nice little presentation in front of the Financial Services Committee

[girl gone mad]

However, behind closed doors, Geithner and Frank crafted an amendment to weaken the reform, as reported by Reuters.

At a hearing before the House Financial Services Committee, Treasury Secretary Timothy F. Geithner announced that the administration had dropped one provision in its plan for a consumer financial protection agency — a requirement for banks and other financial services companies to offer “plain vanilla” products, like 30-year fixed mortgages and low-interest, low-fee credit cards.

There’s no good reason for this capitulation, except for the financial lobby has so effectively captured Congress that no reform would be able to get through with such a common-sense provision in place. This has nothing to do with the government “approving and disapproving a wide array of financial products”, it just says that anybody who wants to call themselves a bank should provide simple, basic banking products which aren’t prone to hidden fees and lucrative opacity. I fear that by the time Congress is done, the Consumer Financial Protection Agency won’t be able to protect consumers at all — and that’s assuming it’ll even exist.

As I've tried to explain to you numerous times, all the press releases and flowery speeches in the world cannot change the facts of this reform, and the facts are that it is full of loopholes and amendments that will severely limit its impact.

DeLong is wrong. The plain fact is that Geithner did interfere to weaken the bill.

It's even right there in the very article that you posted:

The debate over the Administration’s proposed new agency to protect consumers from predatory lending continues to heat up.

Rep. Barney Frank (D-Mass) who is working on the bill that would create the agency in his role as the head of the House Financial Services Committee, has sent a memo to other Democrats on his committee proposing changes that would weaken the agency somewhat from what the Administration proposed originally.

Among the changes, he would drop the requirement that all financial services providers offer a simple, “plain-vanilla” product offering in whatever category they operate in; for mortgage brokers, for example, that means anyone offering a mortgage would be required to have a simple 30 year fixed mortgage in their product line up.

He would also drop language requiring providers to adhere to a “reasonableness” standard in offering products; in other words, financial institutions would have been required to asses whether there products were clearly understandable to consumers. That language was seen as too vague and would leave providers open to legal challenges.

The Administration is willing to go along. In an appearance Sept. 23 before Frank’s committee, Treasury Secretary Timothy Geithner acknowledged some of the criticism of the Administration’s proposals and called Frank’s proposed changes, “a pragmatic helpful way to make sure you have the choice for protection.”