It’s obvious from the fight that’s going on in Congress over whether to even form a Consumer Protection Agency and where to put it that American consumers have a major problem: Namely, that collectively they don’t have even one pocket deep enough for Congress to fit in.

This is in stark contrast to the banking industry’s pockets, which in their depth rival the fabled Mindanao Deep in the Pacific Ocean.  Now those are pockets, buddy. Pockets that are certainly large enough and deep enough to accommodate any number of senators and representatives, not to mention candidates for those revered offices.

You would think from the so-called debate that is going on that consumers all over this country were not the ones who were grievously injured by banks run amok during the lead-up to the cataclysm now known as the Great Recession.  That these same consumers weren’t taken to the cleaners by mortgage bankers.  That they didn’t have their clocks cleaned by predatory credit card practices that show how truly innovative banks can be.  That they weren’t harmed—and are still not being harmed—by the lack of credit availability from banks that are getting funds supplied by the Fed at next to no cost, but are using those same funds to trade for their own advantage.

And even more ironic, within the context of the wholesale amnesia that has seemingly taken hold of Congress since the events of September 2008, it is now the banks that are making the case that they need protection from being over-regulated!

So, what is one “compromise” shaping up to protect consumers?  It is to put an agency with that responsibility within the precincts of the Federal Reserve Board. 

Yes, the Fed, that same agency whose myopia during the buildup of the housing bubble rivaled Mr. Magoo’s.  Yes, the Fed, which back in those days of high-flying financial recklessness seemed to have no clue about what kind of exotics those banks it was supposed to be regulating were using—and just how awfully much they were on the hook for.

As a consumer myself I find the idea of expecting the Fed to take my side against the banks more than faintly ludicrous.

So what’s going on here? Is it that since they did such a bad job the last time around we owe them one more shot to get it right?

I’m with Barney Frank, chairman of the House Financial Services Committee, who has nothing but scorn for the idea.  He told Politico recently, “It’s almost a bad joke.”

Unfortunately it wouldn’t be the first time that a bad joke ended up as law.  Think of the Bush tax legislation that let the estate tax disappear for the year 2010 only to be resurrected at 2001 rates in 2011.  Or think about the Medicare prescription drug bill with its notorious doughnut hole.  I could go on, but you get the point.

So, the bottom line as I see it is that no matter what Sen. Richard Shelby, the banking industry’s white knight, thinks, it is consumers who need protection and they need an independent agency to make sure it happens.  No joke.

I was originally going to headline this piece “Run, Sarah, Run.”  But then I realized what a joke it was—and a one-liner at that—so I had to turn to something else to fill the space.

And then I thought: How about the American Council of Life Insurance’s February 3 statement regarding life settlement securitizations, which uses the now-familiar Palin-esque technique of making unfounded allegations to make noise and get noticed.

The ACLI’s comment drew quick and scornful responses from life settlement industry participants.  And rightfully so.

For years now the ACLI has been engaged in a very deliberate campaign to conflate legitimate life settlements with stranger-originated life insurance transactions. 

In the early days this succeeded, largely because both settlements and STOLI were relatively new and unfamiliar and people had difficulty sorting out the two.  But people wised up as the gulf between the two widened.

Part of ACLI’s campaign has been to imply that the life settlement business as a whole is in favor of STOLI and as a whole is behind these transactions.

This of course is not true.  The Life Insurance Settlement Association has fought to have STOLI transactions banished in the various states with as much fervor as the ACLI. 

The life settlement business realized long ago that STOLI was a poison that would choke off the growth of legitimate business if it were not prohibited and thus controlled.

Might there be some “bad apples” in the settlement business who would try to promote STOLI transactions nonetheless?  I’m sure there are.

But this leads me to a dirty little secret that ACLI has been loath to even acknowledge; this is that STOLI transactions have to be done through life insurance companies.  Who else writes life insurance policies?

It is hard to believe that life insurers, whose underwriting is truly sophisticated, (and let’s face it, underwriting is involved in any policy large enough to be worthy of settlement) cannot identify an application that is made for STOLI purposes and the agents who consistently bring in these types of apps.

For years there’s been scuttlebutt that certain companies—hungry for business—had little compunction about accepting apps that had STOLI written all over them.

So, I’d like to know more about what type of self-policing the ACLI has encouraged among its members.  I’d like to hear more from companies about what actions they’ve taken against any agent who is involved in promoting STOLI.

It’s hard for me to believe that some evil STOLI promoters in the life settlement business are consistently pulling the wool over the eyes of life insurers—especially to the degree the ACLI would have you believe.

ACLI, in its comments, makes some legitimate points about securitization.  But it so seriously undercuts its case with these STOLI allegations that its credibility is damaged.

There is always going to be tension between the life insurers and the life settlement business.  Just wishing, on ACLI’s part, is not going to make settlements go away—they have, after all, proved their value to consumers.  But scurrilous allegations directed toward the entire life settlement community are not going to work either—one would think that would be obvious to the ACLI by now.

But then again, Sarah’s still at it.

Here we are in November already, well past the first-year anniversary of the Panic of 2008, and any heat, not to mention action, on financial reform has been reduced to a slow sauté from a flame more suited to stir-fry.  The debate on whether some companies are too big to fail has just kind of gone poof.

This should surprise no one for a number of reasons.  For one, who do you think owns the Representatives and Senators that would have to craft legislation to rein in these trillion-dollar monsters?  Sorry, ladies and gentlemen of Capitol Hill, but we just don’t feel like putting on the bridle today or any time soon.

For another, the financial meltdown had its 15 minutes of fame. In the entertainment world that is the U.S. in 2009, it’s time to move on.  There’s Kate and Jon, Jen and John, Brangelina, etc., etc. to compete for the limited attention span of most people.

Sure, Goldman releases blowout earnings for the third quarter and outrage bubbles for a moment. But then like bubbles do, the outrage bursts.  And we’re back to Kate and Jon…

I have very little faith in the ability of Congress to summon up the courage to do what is necessary in the case of those companies whose collapse might endanger the financial system; in other words, companies too big to fail.

Some enterprising capitalists might want to think about starting a business called ‘Cojones For Rent’ and seeing what kind of business they could drum up from our legislators.

Or, we could take a page from the book being written by European regulators who don’t seem to be shy about cracking the whip when necessary.

The European Commission indeed did just that last week when it forced ING to divide itself in half.  ING is a worldwide banking and insurance giant.  Its properties are well-known and in the U.S. at least, its insurance units are well-respected.

The problem is that ING sank a ton of funds into investments that went south, including bad mortgages, and had to go to the Dutch government for a 10 billion euro bailout and guarantees for toxic mortgage assets that were in the range of 20 billion euros.  This year that particular bird came home to roost, with the EU demanding that ING get smaller and divest itself of some operations in order to repay the loan.

The plan that ING announced is that it will sell its U.S. insurance operations and its online banking company, thus raising some of the money to start repaying the government. 

The rationale behind the EU’s demand was that the company had to reduce its exposure to risk.  There was also the feeling that the Dutch government had perhaps treated ING too lightly and thus gave it a competitive advantage over troubled companies whose governments did not treat them quite so well.

Contrast that with the kid-glove treatment that has been accorded Goldman, Sachs and JPMorgan Chase, among others.  They repaid the TARP funds to the U.S. government and now it’s back to business as usual.  In fact, business is better than ever since everybody now knows the government won’t let these companies go down.

I know we hate to think that Europe has anything to offer us or can do anything better than we can. But considering what they’ve done in regard to ING, I think it’s worth inquiring whether the EU has some cojones for rent.