How not to learn from a financial crisis

The banking industry's man in Washington says banks should be protected instead of consumers

Published March 18, 2010 5:47PM (EDT)

John Dugan, Comptroller of the Currency, runs the U.S. agency primarily responsibly for regulating the nation's largest banks. On Wednesday, he made an appearance at an American Banker's Association conference, and took the opportunity to complain about the provisions made for a Consumer Financial Protection Agency in Senator Dodd's newly unveiled financial regulatory reform bill.

From the Financial Times:

"In every case consumer protection has the edge and will trump safety and soundness and I think that is backwards," said John Dugan, the comptroller of the currency, at an American Bankers Association conference.

Mr Dugan, whose office regulates national banks, said a Consumer Financial Protection Bureau proposed in Mr Dodd's financial regulation bill, which was published on Monday and is to be revised next week, was too strong.

The reference to "safety and soundness" signals a regulatory approach that focuses primarily on making sure that banks are well-capitalized and healthy, rather than on whether what they might be doing is bad for consumers.

The FT tells us that Dugan is an "influential regulator." That may be so, but not in any way that serves the interests of the current administration or anyone who believes banks need to be more tightly overseen. Dugan, as amply documented in a terrific profile by Zach Carter in The Nation published last December, "The Master of Disaster," has long been one of the banking industry's most powerful advocates in Washington. In between government stints for both Bush presidencies, he sandwiched an eight-year-stint worked as lobbyist for the financial industry -- the American Banking Association was one of this clients.

Carter reports that a 1991 study overseen by Dugan, "Modernizing the Financial System: Recommendations for Safer, More Competitive Banks," laid the groundwork for a decade of financial system deregulation. Under his tenure, the Office of the Comptroller of the Currency has consistently defended banks against consumer interests or states wishing to crack down on abuses such as predatory lending. .

Dugan's opposition to the Consumer Financial Protection Agency is the default banking industry position. Dugan's term ends in August. Why not ignore him now, and replace him with Elizabeth Warren?

By Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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