Regulation

The Divided States Of Public Opinion On FinServ Regulation

That financial regulation is divisive among legislators is not exactly a big revelation. Any quick survey of the comments from House or Senate members after a meeting about the CFPB or the financial regulatory structure in general will likely tell a story of two dueling realities.

Ask Texas Republican U.S. Rep. Jeb Hensarling about the CFPB — for example — and he’ll likely tell the story of an unaccountable federal agency run amok and far afield of its original purpose.

“Someone has to protect consumers not just from Wall Street, but protect them from Washington as well. And the Consumer Financial Protection Bureau has hurt consumers. Free checking at banks has been cut in half. Banking fees have gone up. Working people are finding it more difficult to get mortgages. It is unaccountable to the president. It is unaccountable to Congress. It is unaccountable to the courts. They create their own funding stream. They can designate their own salaries. In all the time I’ve been in government, I’ve never seen an agency that’s had more accusations of racial discrimination. I don’t know why anybody would defend this bureau.”

And yet the bureau has many defenders on Capitol Hill on the other side of the aisle — those like Ohio Democrat Sherrod Brown, who, if asked the same question, would doubtlessly tell the story of how the CFPB maintains the thin red line that separates consumers from the wild depredations of the financial industry.

“The CFPB’s structure works — just look at the critical role CFPB played in holding Wells Fargo accountable for customer abuses. Despite the industry’s claims, the CFPB is subject to extensive oversight, and it is one of the most accountable financial agencies. The CFPB will continue its tireless work advocating on consumers’ behalf, and today’s decision underscores the importance of having a White House and Congress that supports its mission of strengthening consumer protections, rather than seeking to weaken and undermine oversight.”

The legislative — and largely partisan — divide on the CFPB, Dodd-Frank and the financial regulatory structure is long entrenched, though apparently shifting slightly in tenor. The push of the last eight years — with a Democratic presidency and intermittently Democratic-controlled Congress — has been strongly pro-regulatory — and pro-penalty.

As we reported last week, in the nine years since the financial crisis, the world’s biggest banks have paid out a collective $321 billion in fines since 2008. That is a global tally — but reports indicated last week that the bulk of those fees and fines have come care of U.S. regulators, according to the Boston Consulting Group.

Those numbers are expected to increase as more Asian and European regulators are becoming increasingly active. The number of rule changes that banks must track on a daily basis has tripled since 2011, to an average of 200 revisions a day, according to the BCG report.

“Regulation must be considered a permanent rise in sea level — not just a flowing tide that will ebb or even a cresting tsunami that will recede,” the authors of the report wrote. “We expect this theme to hold despite recent political developments in the U.S.”

But about those political development in the United States: The political seas have not so much changed as nearly completely flipped entirely, and in the era of wholesale Republican control of the federal and state governments, the era of deregulation is widely expected to commence shortly.

In fact, in his first address to both houses of Congress last week, President Donald Trump reiterated his promise to cut two regulations for every one new one passed. The president, Speaker of the House and Senate Majority Leader have all been long critics of the Dodd-Frank financial regulations, and it is widely expected the federal government under new management will attempt to dismantle — or at least notably scale back — the law.

Democrats have naturally promised to oppose these changes with every breath remaining in their bodies; it will all make for some very entertaining C-SPAN.

And while the range of legislative opinions at this point is well known to anyone who even casually follows financial regulation, the opinions of the people those legislators represent is somewhat less well known. Or at least is had been — but the good people at Pew decided to take the public temperature on financial regulation.

The big take-away: the divided Washington climate reflects divided public opinion. Overall, 49 percent of Americans believe “the government has not gone far enough in regulating financial institutions and markets, leaving the country at risk of another financial crisis,” while 42 percent say the government has gone too far, “making it harder for the economy to grow.” The remaining 9 percent are satisfied with the current amount of financial regulation.

At least one piece of data stands out when it comes to who likes — and doesn’t like — financial regulation.

Public Opinion by the Numbers

As one might expect, citizen opinion on financial regulation trackers pretty clearly aligns with political affiliation. By roughly two-to-one, Republicans and Republican-leaning independents favor the belief that regulations have gone too far — 63 percent — to the 31 percent that believe more regulation is necessary.

The trend snaps the opposite direction among Democrats and Democratic-leaning independents — 62 percent favor more regulation as opposed to 29 percent that think it has gone too far.

That partisan gap is a fairly consistent feature of this data set, and has held more or less since Pew first started surveying the question in 2013.

Age also played an important part in the view. Among Americans younger than 30, only a third say the government has gone too far in regulating financial institutions, while about 52 percent feel that more regulation is needed. Among older Americans, the divide is closer: 40 percent of those older than 65 believe government oversight has been insufficient, and 46 percent believe regulators have gone too far.

“As Donald Trump and congressional Republicans take steps to roll back Obama-era financial regulations, the public remains divided over whether regulations of financial institutions have gone too far or not gone far enough,” Samantha Smith, a Pew research assistant noted of the results.

A country divided — though there’s one area where the division is particularly stark and notable.

Education Level Makes a Difference

The more educated one is, the more likely one is to believe in additional financial regulation. Among those with at least a four-year degree, 56 percent want more regulation, while just 34 percent say regulation has gone too far.

By comparison, among those with no more than a high school diploma, 41 percent report thinking that there has not been enough regulation of the financial sector, while 51 percent say the government has gone too far regulating these institutions.

That figure should jump out a little bit, because consumers with a high school degree — as opposed to a four-year degree or higher — are also among the groups of citizens that are A) most likely to be underbanked and B) most likely to use alternative financial services like payday loans. High school graduates outnumber college graduates when it comes to seeking payday loans each year.

Which means this is a case where perhaps having more education might mean one knows less about a topic — like how financial regulations can make life harder. It seems at least worth noting that 51 percent of the population most likely to be affected by regulations (which are often explicitly sold as a form of protection for undereducated consumers) would like there to be less of them.

What, if any, difference public opinion will make on this issue — given the rather staggeringly stacked emotions on both sides in the federal legislature — remains to be seen. But it seems something needs fixing, since at present only nine percent of the country thinks it is being competently financially regulated.

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