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What Did Geithner Say To Bernanke?

My esteemed colleague Noam Scheiber cites today’s report from the Wall Street Journal about Secretary of the Treasury Tim Geithner blowing his top at the heads of the various financial agencies, including the Federal Reserve, for quarreling over who will have jurisdiction for regulating different financial services.  Interestingly, Geithner is reported to have chastised the FDIC’s Sheila Bair and SEC chairwoman Mary Schapiro for objecting to the administration’s plan to vest most regulatory functions in the Federal Reserve.  Geithner is not reported to have bawled out Fed chairman Ben Bernanke for publicly campaigning around the country to kill the administration’s proposal for a new Financial Protection Agency.  Bernanke wants responsibility for regulating credit card and mortgage practices to remain in the Fed.

If anyone thinks that the Fed did a good job regulating mortgage loans and credit cards, they are living on a different planet than I am. But maybe Bernanke does come from Mars or Jupiter. Here he is in Kansas City last month bragging about the great job the Fed did with credit cards:

And many people don't know, we also do consumer protection. So if you look at your credit card bill, you'll see the periodic statement. The structure, the lines, and the way that's organized was determined by the Federal Reserve and the Federal Reserve sets a lot of the rules associated with how credit cards can be charged, the kinds of the penalties, fees and so on.

OK, so go look at your credit card statement, and then listen to what Harvard Law professor Elizabeth Warren, the chairman of the Congressional Oversight Committee and the chief proponent of the new agency, has to say about credit card statements. (It’s at about the one minute mark of this video.) They are completely incomprehensible and have allowed the credit card companies  to do all kinds of shenanigans. If Obama and Geithner want to get this financial protection agency through Congress, the first thing they should do is tell Bernanke that if he persists in knocking the plan, he can forget about being reappointed. That’ll get his attention a lot better than Geithner banging his fist on the table.

--John B. Judis

update: spelling corrected!