Now Dodd is prepared to reward the Fed for the very same conduct he roundly criticized three years ago. We can only assume he has already started serving his post-Congressional constituency.
And as bad a choice as the Treasury was (the former planned place to bury the financial products consumer protection agency), it would be part of the Administration, and hence subject to political pressure. Although the Fed is in the process of getting its wings clipped a tad, has managed the neat trick of playing an increasingly political role (starting with Greenspan, in a break with the practice of past Fed chairman, of weighing in on policy issues) while remaining utterly unaccountable to anyone.
The concerns and realities of ordinary people have simply not registered with the Fed (in fairness, consumer protection has never been part of its charter). But the Fed was negligent in executing duties assigned by Congress on the consumer front. Congress did pass something called HOEPA (Home Ownership and Equity Protection Act) that defined subprime mortgages and called for subprime activity to be reported to the relevant regulators. The Office of the Comptroller of the Currency, which also oversees banks, used HOEPA to monitor subprime lending and rein in extreme behavior. The Fed could have done so, but chose not to. In June 2007, Congress was pressuring a resistant Fed to rein in abusive mortgage practices. And did that have any impact? This update, right before the storm burst, July 2007: