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.
Reid: Financial Reform Could Hit Senate Floor By Next Week
Senate Majority Leader Harry Reid (D-Nev.) told reporters Thursday that he is pushing to get a full financial reform bill onto the Senate floor as early as next week.
Reid, along with Senate Majority Whip Dick Durbin (D-IL), Sen. Patty Murray (D-WA) and Sen. Charles Schumer (D-NY) stressed that reform of the nation's financial system would not only protect the taxpayers, but make sure that institutions would not become “too big too fail”.
“[Republicans] seem clearly focused on protecting these big banks,” said Reid “It’s as simple as this: if you want a financial system that allows banks to become too big to fail, puts your retirement security in jeopardy and leaves consumers vulnerable to excessive risk, then you should support the Republican plan.”
The legislation would put in place a better regulatory oversight program to prevent the financial system from triggering another recession.
“Everyone agrees that our regulatory [system] is broken down,” said Schumer.
Schumer added that Republican warnings that the reform plan fails to act as a safeguard against future bailouts is unfounded. According to the New York Senator, the money that would go for any future bailout of a large institution would have to come from the institution itself, and not the taxpayers.