Ted Simons: A consumer financial protection bureau is a key part of financial reform legislation making its way through congress. Here to tell us what it's all about is Andrei Cherny, a former White House advisor who's been credited with helping to develop the idea. We should also note that Mr. Cherny is running unopposed in the democratic primary for state treasurer. Thanks for joining us.
Andrei Cherny: Appreciate it.
Ted Simons: The consumer financial protection bureau. What is it?
Andrei Cherny: it actually adds up to a lot. It makes a big difference. It’s really the centerpiece of the big Wall Street reform that's going through congress and looks like it is going to get passed in the next few days and it's a response to what's happening in the country the last few years, the meltdown in the financial sector and all the ramifications that had on main street all over the country. This idea of a consumer financial protection bureau is something a think tank I used to run and help start called democracy developed about four years ago, before all of this happened. The idea was we a consumer products safety commission in the country that says there are certain toasters or microwaves that are so inherently dangerous we're going to keep them off the market the because they'll burn down your house if you buy them. The same is true for credit cards, for mortgages for payday lenders, for some of these other things that are out there that have a big impact on people’s lives.
Ted Simons: Okay this is an independent agency but housed with the fed, how independent can it be?
Andrei Cherny: Well that was part of the big fight that went on in congress and you know there's the line about people watching sausage-making. I think people have had a front row seat at the Jimmy dean factory over the past few months watching this go through, but the compromise is this is a non-agency bureau, this is going to be housed in the federal reserve but have an independent budget and a director appointed by the president, not the people involved in the federal --
Ted Simons: And approved by the senate?
Andrei Cherny: And approved by the senate.
Ted Simons: So you basically write and enforce rules for -- what? -- banks, credit card companies?
Andrei Cherny: Mortgages and all of those things that have a big impact or consumers and their financial history.
Ted Simons: What about the small lenders? There's a concern they could get trampled underfoot.
Andrei Cherny: One of the compromises that went through was limiting it to banks with over $10 billion in assets to make sure small businesses wouldn’t get hurt in the same way. There's a provision that has small businesses take a first look at what's going through so they can have input there. So people have been working to make sure that small businesses are helped by this. In terms of credit card fees and all of the things they're dealing with and not hurt.
Ted Simons: I noticed auto loans weren't included. Why not?
Andrei Cherny: It’s one of these fights that went on there of course where people look at sometimes auto dealers and think there's a bad reputation there, but also they're a big part of a lot of communities around the country. Certainly, here in Arizona. And you've had a lot of lobbyists go through congress on this. I think we’ve had 34 different lobbying firms working on this. A 35th lobbying firm hired just to coordinate their efforts, and they’ve been spending over a million dollars a day in terms of lobbying, it's been a big fight and it's not a perfect bill by any strech but it's a step forward in the right direction.
Ted Simons: And again, we’re talking oversight over previously unregulated instruments.
Andrei Cherny: Well, exactly. Think about all of these aspects of our lives. If you have a Toyota that has a stuck accelerator, we count on the department of transportation to say we need that off the street and if there's Shrek glasses that have a toxic chemical, we have the consumer product safety commission to say McDonald's can't sell them – or with drugs, we have the FDA that says look, this drug causes cancer and birth defects, that has to be off the market. Here's this big area of people's lives. Credit card bills, mortgages lots of, pages and pages of fine print and misleading terms and hidden fees and things like that. This new consumer financial protection bureau is going to look at those and say there's some things so inherently unfair, they shouldn't be allowed on the market.
Ted Simons: You've got regulation here. That's the number one thing. Oversight and regulation. But can there be reform without reforming the regulators? After all, regulators are supposed to be doing their job before and apparently didn't do their job.
Andrei Cherny: We’ve seen a lot of people asleep at the switch over the past decade plus. That's part of price we pay in a democracy. Elections have consequences and If you have somebody elected who is going to appoint someone from a protection agency that's going to have that person be too close to industry or asleep at the switch, that's part of the price we pay. But that doesn't mean we shouldn't have a consumer product safety commission or environmental protection agency, and it doesn’t mean we shouldn’t have this new bureau looking over this area and saying here's an area where we haven't had any regulation. Just people able to do whatever they want and, of course, a lot of people, especially here in Arizona, have been paying a big price.
Ted Simons: I would imagine the regulators will be trained differently and hope, you know, trained to the extent where they don't make the mistakes they did before.
Andrei Cherny: Absolutely, By the very nature of this new bureau that's going to be acting as a watchdog, their mission is to protect the consumers. Not make sure the banks are doing well, not to make sure the credit card bureaus are doing well. We have other regulatory bodies to do that. This whole mission of this bureau is to say what can we do to make sure that consumers are being treated right, that they are not being taken advantage of.
Ted Simons: Folks on the right are saying it's government overreach. Too much bureaucracy. On the left, not tough enough. It's toothless as far as the bureau is concerned. Address both.
Andrei Cherny: Well, you know, on the one side, people are saying it's paternalism and again, nobody really says that when you say anybody should be allowed to buy a toaster. If there's a toaster that's going to burn your house, no one says well if you sign enough fine print and waivers we're going to allow it to be sold. There are certain things like that that make the market work well. That give consumers the confidence to say, I’m going to pick up this toaster or this car seat or this prescription from CVS and I know to a pretty good extent it's not going to cause me harm. On the other side, there's people who wish we went further and everything is a compromise, especially when looking at congress and this is a big step in the right direction. The most far-reaching reform we've had since the great depression. I think there is a lot that we can build on how this works Hopefully we can come back and fix it one way or the other as things go along and reform the reforms but to not do anything after everything that's happened in terms of the sub-prime crisis, in terms of people losing they are homes and forced into bankruptcy at record rates would be a travesty.
Ted Simons: Thanks for joining us.
Andrei Cherny: Thanks for having me.