Banks haven't proved that consumers can trust them

Denial, noun: An unconscious defense mechanism characterized by refusal to acknowledge painful realities, thoughts or feelings.

-- The American Heritage Medical Dictionary

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The banking industry wasted no time last week declaring its opposition to President Obama's proposal for a regulatory agency that would protect consumers from rapacious lending practices.

While acknowledging that "regulatory reform is badly needed," Edward Yingling, president of the American Bankers Assn., said the new agency would have "powers to mandate loans and services that go well beyond consumer protection."

The Financial Services Roundtable said it applauded "modernizing regulation of the financial services industry." But it too opposes the new agency "because it will not adequately serve the best interests of consumers and their financial institutions."

The Consumer Bankers Assn. chimed in by saying the proposed agency "would create a maze of regulations suppressing creativity and product innovation."

These guys just don't get it.

The reason Obama wants to create a Consumer Financial Protection Agency isn't that he's hell-bent on imposing his will on banks. It's that banks have consistently proved themselves unworthy of customers' trust.

From runaway credit card interest rates to mortgages that turn into one-way trips to foreclosure, lenders have repeatedly demonstrated their inability to deal with customers fairly and responsibly.

Instead, they place their own interests ahead of all other considerations, and in so doing expose frequently unsophisticated consumers to enormous risk and financial ruin.

The banks have only themselves to blame for why a Consumer Financial Protection Agency is needed.

"They wrecked the system," said Gail Hillebrand, senior attorney with Consumers Union. "What they're saying is that they want to keep doing business as usual. But business as usual has failed us."

In announcing measures to improve oversight of financial markets, Obama said that "a culture of irresponsibility" had taken root on Wall Street and elsewhere.

Acknowledging that many people took out loans they couldn't afford, he said "there were also millions of Americans who signed contracts they didn't always understand offered by lenders who didn't always tell the truth."

The Consumer Financial Protection Agency would be charged with ending deceptive practices and ensuring that information provided by lenders is accurate and easy to understand.