Lori Swanson: Bush vs. the American citizen

Last week the Bush administration prescribed a bad dose of medicine: the creation of new federal agencies that would diminish the ability of state governments to protect their citizens.

What ails the federal government, however, is not the lack of regulatory authority but the lack of will to use it.

Over the past 50 years, deregulation at the federal level has no doubt improved efficiency in some industries. But federal regulatory indifference has ill-served the public in many others: the Food and Drug Administration's aversion to oversight of pharmaceuticals; the Justice Department's reluctance to enforce the antitrust laws; the Department of Labor's hesitance to regulate federally governed health plans; the Federal Communication Commission's unwillingness to rein in media concentration; and the Environmental Protection Agency's failure to address invasive species in the Great Lakes or carbon, mercury and ozone emissions. The list goes on and on. This week it was the FAA and airline safety. With this kind of performance record in Washington, now is not the time for the state government to forfeit consumer protection to the feds.

The Bush administration proposes a new federal Mortgage Origination Commission. There are gaps in the states' regulation of mortgage originators, to be sure. But why should we believe that a new federal commission will do any better than the OCC or SEC? These agencies already have substantial authority to address financial fraud, including fraud in the secondary mortgage market. But they have not shown the will to use it.

The administration also wants to allow insurance companies to be regulated exclusively by the federal government. This not only would undermine the ability of states to protect policyholders from unfair insurance practices, it probably would raise insurance rates in states like Minnesota. Midwestern states often have lower property- and casualty-insurance rates because they don't have the same hazards -- hurricanes, outdated building code enforcement, urban fires, etc. -- that result in higher rates on the two coasts and in the South. A federal insurance-rate regulation system would likely gloss over geographical differences, causing Minnesota's insurance premiums to go up.

State government has shown that it can be more responsive to the needs of the ordinary citizen. For example, in 2006, while the states were pursuing Ameriquest Mortgage for $325 million over its predatory lending practices, the White House was busy appointing the company's CEO to be ambassador to the Netherlands.

When he first ran for the presidency, George W. Bush said he favored "state's rights" and a smaller federal government. But now his administration wants to expand the federal government at the expense of the "state's right" to protect citizens. What caused the change in policy? Could it be that, when it comes to consumer protection, the administration knows who has the real power in Washington?

When Franklin D. Roosevelt was president, there were about a dozen lobbyists in Washington, D.C. When President Reagan took office, there were fewer than 1,000 lobbyists. Today, there are more than 36,000. Guess how many represent ordinary consumers? Not many. One study shows that since 1999, the mortgage industry spent over $200 million to lobby elected officials. Guess how much ordinary homeowners spent? Not much. And now we have a mortgage meltdown that has spilled over into virtually every aspect of the economy.

The administration's proposals are an inappropriate federal power grab with a hidden anticonsumer agenda. They should be given about as much attention as the administration has paid to consumer protection over the last eight years.

Lori Swanson is attorney general of Minnesota.