Power Grope

Chairman Mao's Frank's mid-June meltdown continues to ooze hot stuff that seeps through the cracks of the floorboards of Congress and drips, like Chinese water torture, onto the heads of the Federal Reserve Board (paid subscription required).

A month after House Financial Services Committee Chairman Barney Frank told the Federal Reserve Board to use or lose its power to ban unfair and deceptive banking practices, the Massachusetts Democrat said he wants to hand that power to two other agencies.

At a hearing Wednesday, Rep. Frank said the Federal Trade Commission Act should be amended to give not just the Fed but also the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. the power to police lending practices.

The Office of Thrift Supervision has similar authority, he said, but for reasons for which "no rational explanation is even conceivable, much less likely," lawmakers have denied the OCC and the FDIC the same right.

"My strong view now is that something should be done legislatively to correct that," Rep. Frank said.

Last month, he threatened to give the OTS "The Powah." Now, he's decided that the Lilliputians already "got them some," so he's edging closer to his secret love, Sheila Bair. Did I mention previously that Sheila Bair won the 1989 American Natural Bodybuilding Conference Women's Championship? I did? Not the same Sheila Bair? Well,then, never mind.

A talking head from the land of bankers tried to misdirect Chairman Frank, but he was having none of it. NONE OF IT, I SAID!

Testifying on behalf of the American Bankers Association, Arthur Johnson, the chairman and chief executive of United Bank of Michigan in Grand Rapids, said he would support such a move, but only if the agencies issued uniform rules.

"It would be anomalous — and harmful — for the five federal agencies … to adopt different standards of what is an unfair or deceptive act or practice," Mr. Johnson said.

But Rep. Frank said lawmakers learned from their experience with the Fair and Accurate Credit Transactions Act of 2003 that giving seven regulators the shared task of writing rules proved to be a disaster. The law is still not fully in effect, because regulators have not finalized the implementing rules.

That many regulators are "incapable of action," he said. "So that one doesn't work to me."

Unfortunately, instead of merely beating down the Fed and pumping up Ms. Bair's biceps, Barney Rubble had to smack down our favorite tool of capitalist oppression and imperialist power-projection: federal preemption.

Barney's got a point. While waiting for the final FACTA regulations to be issued, I plan to sell the last of my carbon offsets to Al Gore and board a starship to the Shoulder of Orion immediately prior to (1) the Northern Hemisphere being lashed (FINALLY!!!) by those hurricanes Jesus has been telling Pat Robertson for years will ("This year, Pat, I swear on the heads of the Father and the Holy Spirit") batter the Sodom and Gomorrah known as "America," and (2) the Southern Hemisphere freezing into the gigantic rink so long yearned for by those of us eager to ice skate in Hell. [Editors side note: as a devout Roman Catholic, I always get a kick out of the way the Lord wools Pat around every year about the upcoming hurricane season. Then again, in Pat's eyes, inasmuch as I am a devout Roman Catholic, the Big Guy's coming back to vaporize me, the rabbi next door, every crank and crack dealer, and "all those gays on Broadway."]

Rep. Frank tried to bolster his argument for reform by saying the current federal regulatory regime does not protect consumers adequately, because preemption has undercut state laws.

"The current set of tools and resources that the federal banking regulators have were configured in an era where the assumption was there was a lot of state consumer regulation going on," he said. "There is now, for national banks, virtually no state consumer regulation, certainly none that is specific to banks."

The preemption issue "is not going away," he said.

Rep. Frank said he is still weighing how best to use state supervisors and attorneys general to enforce rules and laws against unfair and deceptive practices.

I understand that after the hearing, he told reporters "off the record," that he'd like to dress some of the state supervisors and attorneys general up in tuxedo shirts and surfer jammies, and take them clubbing. How that addresses federal preemption is beyond me, but it sure does sound like a whole bushel and a peck of fun, doesn't it?

Frank's Republican counterpart on the Committee weighed in on the issue as only a member of that out-of-power party can.

The committee's ranking Republican, Rep. Spencer Bachus of Alabama, missed the hearing...

That might have been a tad unfair, since he had someone else read a written statement at the hearing, but as I recall, it only addressed wool tariffs in Botswana.

Consumer advocates also had their say, which would be expected at any hearing chaired by Barney.

Travis Plunkett, the legislative director for the Consumer Federation of America, who testified on behalf of six consumer organizations, said banking regulators have enough power to stop unfair practices but have chosen not to use it. He said the FTC should be able to take enforcement actions against depository institutions and to ban specific bank practices.

"The key to addressing these root problems is to make the regulatory process more independent of the financial institutions that are regulated," he said.

Yeah, make sure the regulators aren't familiar with financial institutions, so that they have little idea how their enforcement actions, policies and regulations affect them. Someone like: Travis Plunkett.

There was more "blah, blah, blah," but we've hit the highlights, or at least those we've been able to hit before our lithium kicked in.