The Federal Reserve, Elizabeth Warren, and the Demise of the Consumer Financial Protection Agency

The Consumer Financial Protection Agency was originally proposed as an agency to promote consumer protection in contracts with banks.  In a coup of financial proportions, the banks and Federal Reserve have turned this idea into one to maintain their power.  Elizabeth Warren's proposed Consumer Financial Protection Agency has just been placed under the authority of the Federal Reserve rather than stand as its own independent authority.  The status quo will remain while we get to finance a new bureaucracy.  

The misleading language used by the banks was one of the key elements that Elizabeth Warren wanted the Consumer Financial Protection Agency to regulate.  She wanted contracts between banks and consumers to be written in clear, understandable language.  In an article that Warren wrote in the summer of 2007 entitled "Unsafe at Any Rate," Warren described the misleading language used by banks.
How did financial products get so dangerous? Part of the problem is that disclosure has become a way to obfuscate rather than to inform. According to the Wall Street Journal, in the early 1980s, the typical credit card contract was a page long; by the early 2000s, that contract had grown to more than 30 pages of incomprehensible text. The additional terms were not designed to make life easier for the customer. Rather, they were designed in large part to add unexpected–and unreadable–terms that favor the card companies. Mortgage-loan documents, payday-loan papers, car-loan terms, and other lending products are often equally incomprehensible. And this is not the subjective claim of the consumer advocacy movement. In a recent memo aimed at bank executives, the vice president of the business consulting firm Booz Allen Hamilton observed that most bank products are "too complex for the average consumer to understand.
She began her article by saying:
It is impossible to buy a toaster that has a one-in-five chance of bursting into flames and burning down your house. But it is possible to refinance an existing home with a mortgage that has the same one-in-five chance of putting the family out on the street–and the mortgage won’t even carry a disclosure of that fact to the homeowner. Similarly, it’s impossible to change the price on a toaster once it has been purchased. But long after the papers have been signed, it is possible to triple the price of the credit used to finance the purchase of that appliance, even if the customer meets all the credit terms, in full and on time. Why are consumers safe when they purchase tangible consumer products with cash, but when they sign up for routine financial products like mortgages and credit cards they are left at the mercy of their creditors? 
The Wall Street Journal quoted Warren in regards to the confusion of the legal terms in contracts with banks:
"In some ways reform is less complicated than it's portrayed," Ms. Warren said adding that Congressional leaders will use a Byzantine reform structure as cover. "If it's really complex then 'I get to be the expert.' If it's really complex 'we'll decided this behind closed doors.' If it's really complex 'yes, it appeared that everyone in power walked away with the money but that's not what happened.' And so, complexity is a way to give political cover for voting with banks instead of with families"...."We haven't really rehabilitated our banks."
The decision to place the Consumer Financial Protection Agency within the Federal Reserve is a great victory for the status quo.  Hopefully, the House of Representatives can do something to stop this.  Barney Frank, on the left, and Ron Paul, on the right, are both leery of the Federal Reserve.  It's that happy, bought off middle that is all for policies like this.   

Ron Paul has been trying to audit the Federal Reserve for years.  It seems that the House of Representatives is the only branch of government that listens to the American people at the moment. 

One last quote from Ron Paul.
Since its inception, the Federal Reserve has always operated in the shadows, without sufficient scrutiny or oversight of its operations. While the conventional excuse is that this is intended to reduce the Fed’s susceptibility to political pressures, the reality is that the Fed acts as a foil for the government. Whenever you question the Fed about the strength of the dollar, they will refer you to the Treasury, and vice versa. The Federal Reserve has, on the one hand, many of the privileges of government agencies, while retaining benefits of private organizations, such as being insulated from Freedom of Information Act requests.