Friday
Jul242009
Geithner Makes Case For New Consumer Protection Agency
Friday, July 24, 2009 at 2:39PM
By Sam Wechsler - Talk Radio News Service
Secretary of the Treasury Timothy Geithner expressed support for the newly proposed Consumer Financial Protection Agency (CFPA) Friday at a hearing before the House Financial Services Committee. If established, the new agency would both regulate and enforce rules geared towards protecting consumers from risky financial products.
Geithner stated that “rules written by those not responsible for enforcing them are likely to be poorly designed, with insufficient feel for the needs of consumers and for the realities of the market. Rule-writing authority without enforcement authority would risk creating an agency that is too weak, dominated by those with enforcement authority.”
Oversight of the CFPA would extend to both banks and non-banking financial institutions such as mortgage brokers.
Geithner said that consumer protection failed in the years leading up to the current financial crisis in part because all federal financial regulators had higher priorities than consumer protection. Creation of the new agency would strip the Federal Reserve of consumer protection authority, and would require the Fed to receive written authority from the Secretary of the Treasury in order to exercise emergency lending authority.
Geithner stressed his desire to see innovation maintained in the financial product industry, and called for a system that produces less risk for damage. “Many of the practices of consumer lending that led to this crisis gave innovation a bad name. What [lenders] claim was innovation was often just predation,” he said.
In addition to the new CFPA, Geithner discussed a Financial Services Oversight Council that would be comprised of the heads of all major financial regulatory agencies, including the Fed and the Securities and Exchange Commission. The council would have the power to gather information from any firm or market to help identify risk, and would be responsible for recommending changes in laws and regulation that would safeguard against future crises.
Geithner hopes that Congress will pass financial reform by the end of the year. “Despite this crisis, the United States remains in many ways the most productive, the most innovative, the most resilient economy in the world. To preserve this, though, we need a more stable, more resilient system, and this requires fundamental reform,” he said.
Secretary of the Treasury Timothy Geithner expressed support for the newly proposed Consumer Financial Protection Agency (CFPA) Friday at a hearing before the House Financial Services Committee. If established, the new agency would both regulate and enforce rules geared towards protecting consumers from risky financial products.
Geithner stated that “rules written by those not responsible for enforcing them are likely to be poorly designed, with insufficient feel for the needs of consumers and for the realities of the market. Rule-writing authority without enforcement authority would risk creating an agency that is too weak, dominated by those with enforcement authority.”
Oversight of the CFPA would extend to both banks and non-banking financial institutions such as mortgage brokers.
Geithner said that consumer protection failed in the years leading up to the current financial crisis in part because all federal financial regulators had higher priorities than consumer protection. Creation of the new agency would strip the Federal Reserve of consumer protection authority, and would require the Fed to receive written authority from the Secretary of the Treasury in order to exercise emergency lending authority.
Geithner stressed his desire to see innovation maintained in the financial product industry, and called for a system that produces less risk for damage. “Many of the practices of consumer lending that led to this crisis gave innovation a bad name. What [lenders] claim was innovation was often just predation,” he said.
In addition to the new CFPA, Geithner discussed a Financial Services Oversight Council that would be comprised of the heads of all major financial regulatory agencies, including the Fed and the Securities and Exchange Commission. The council would have the power to gather information from any firm or market to help identify risk, and would be responsible for recommending changes in laws and regulation that would safeguard against future crises.
Geithner hopes that Congress will pass financial reform by the end of the year. “Despite this crisis, the United States remains in many ways the most productive, the most innovative, the most resilient economy in the world. To preserve this, though, we need a more stable, more resilient system, and this requires fundamental reform,” he said.
Senate Democrats Tout Major Provisions Within Wall Street Reform
Talk Radio News Service
A collection of Democrats along with small business advocates said Wednesday that the Wall Street reform bill is the only way to save the U.S. economy, and emphasized that the proposed Consumer Financial Protection Agency is central to reform.
Frank Knapp, President and CEO of the South Carolina Small Business Chamber of Commerce, said that without Wall Street reform, "'Too Big To Fail' banks will be back to the old greedy, irresponsible, even fraudulent ways, and it'll fail us all once again."
Sen. Michael Bennet (D-Colo.), on the other hand, pointed out that the Consumer Financial Protection Agency in the bill will ensure fair competition in the market.
"[It is] common sense regulation to make sure that all businesses in this country are able to compete against each other fairly," he said.
Senate Majority Whip Dick Durbin (D-IL) claimed that "the strongest consumer financial protection in the history of the United States" will expose hidden risks within the financial sector, and will "guarantee that mortgages won't explode!"
Sen. Jack Reed (D-R.I.) added that he is hopeful the bill will make its way to the Senate floor by Monday.