"Federal Reserve Still Running Interference for Mega-Banks"

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The Federal Reserve makes out pretty well in the new financial reform bill, retaining most of their power and even acquiring some more. Thousands of community banks can choose the Fed as their regulator, and they have a seat on the systemic risk council. Even the Consumer Financial Protection Agency is likely to be housed at the Fed. Sure, they’ll suffer a one-time audit, and maybe that will lead to a more accountable organization, but not a more chastened one. They will do just fine.

But they cannot help but run interference for the mega-banks, an ominous sign given the power over the industry they will continue to hold. In the latest case, the Fed sent a report on small business lending that basically adopts the rhetoric of the big banks:

The Federal Reserve warned Congress in a recent report that protecting small businesses from the kind of “harmful” credit card practices it prohibits from being used on consumers would lead to a reduction of credit and higher borrowing costs for businesses — a similar argument advanced by the banks the Fed regulates [...]

Because loans and lines of credit have been so hard to get, many small businesses have had to resort to using credit cards to help finance their operations [...] A little over a third of small businesses used business credit cards in 1998, according to the Fed. That rate now stands at about 64 percent.

The increased use of credit cards by small businesses has elicited calls that they, too, should fall under similar protections currently enjoyed by consumers.

But the Fed doesn’t think that TILA (Truth In Lending Act) should apply to small business credit cards, even though it admits the law would protect them from “harmful” practices and compel better disclosure.

“Applying many of TILA’s substantive credit card protections to small business credit cards would protect small businesses from practices that the Congress and the Board have found to be harmful in the context of consumer credit cards,” the Fed noted in its report [...] “Based on this review, it is not apparent…that the potential benefits of applying substantive restrictions similar to those in TILA to small business cards outweigh the potential risk of increased cost and reduced credit card availability for small businesses,” the Fed said in its report.

We have kind of a vicious circle here. If you accept that small business lending has dried up, then credit card financing is among the only outlets for them. But they are subject to unscrupulous practices from the same banks who do the lending. The Fed argues this must remain in place, because otherwise… there would be a decrease in small business lending, which is what has led to the explosion of credit card financing in the first place.

more here - http://news.firedoglake.com/2010/06/02/federal-reserve-still-running-interference-for-mega-banks/

The job rotation continues - no transparency - no oversight...

One giant slush fund? Access to money, printing press without oversight?