The Senate Banking Committee has done some silly things. But passing a financial regulation bill that would subject dealer-assisted retail financing to oversight by a new consumer protection office is one of the goofiest in recent memory.
The bill, which would create a Consumer Financial Protection Bureau inside the Federal Reserve, now goes to the Senate floor for a vote.
It is supposed to guard against the kind of financial irresponsibility and ruinous risk-taking that led to the financial meltdown of 2008 and triggered the current recession. That ought to mean saving the economy from the abuses of big financial institutions, not creating another level of bureaucracy for the nation's automobile dealers.
It makes sense to centralize federal oversight of financial products for consumers, such as subprime mortgages, financial derivatives, even credit and debit cards. But not dealerships.
Dealerships are not banks. Neither car dealers nor car loans had anything to do with the financial meltdown, although dealers, consumers and the entire auto industry suffered from the ensuing credit crisis. Some social activists want to treat dealers as if they caused the problem, citing consumer complaints as proof that dealers deserve to be included in the bill. There have been some distasteful practices sometimes in dealer-arranged retail loans. But there are agencies to deal with them, including the Federal Trade Commission and state agencies.
Dealerships should not be part of the consumer protection bill. Nobody ever went broke financing an automobile because the banks and finance companies that make the loans have the vehicles as collateral. The car dealer is just a middleman.
There is still time for senators to come to their senses. The National Automobile Dealers Association is talking with several senators about sponsoring an amendment to the bill that would exempt dealerships. NADA then would drum up grass-roots support for the amendment.
The association successfully used the same strategy to win an exemption for dealers in the bill passed by the House in December. The House bill, which differs from the Senate's, would create an independent consumer protection agency rather than tuck it inside the Fed. If the Senate bill passes, a conference committee will hammer out the differences.
Whatever version of the bill ultimately is signed by President Barack Obama, it must protect our economy. Lumping dealers in with the financial abusers on Wall Street won't accomplish a thing.