Geithner Makes Case For New Consumer Protection Agency

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.

TARP Has Made Progress Says Treasury Official

By Mariko Lamb, Talk Radio News Service

Assistant Treasury Secretary for Financial Stability Herbert Allison, Jr. said that the Troubled Asset Relief Program (TARP) has been “key to stabilizing the financial system and preventing greater deterioration in the availability of credit,” in his testimony to the House Oversight and Investigations Subcommittee Wednesday.

“There’s also signs that the economy is beginning to mend,” he said. Indications of economic stabilization include an increase in the issuance of corporate debt, increase in consumer confidence, and higher housing starts.

Despite these improvements, “Our financial system and our economy remain vulnerable,” he said, as unemployment and home foreclosures remain high and strains in the commercial real estate market continue to build. “This is why Treasury must remain vigilant and press ahead with our financial stabilization efforts,” he said.

Allison attempted to assure members of the subcommittee that taxpayers can put their trust in the Treasury, and that the agency is dedicated to high standards of transparency.

“We feel a great obligation as responsible stewards of their money,” he said, assuring those at the hearing that the Treasury is committing every effort to ensuring an ample return for taxpayers.

“I will regularly update Congress on our progress. We have productive, working relationships with our four oversight bodies--Special Inspector General of the TARP, Government Accountability Office, Congressional Oversight Panel, and Financial Stability Oversight Board,” he said.

Information on lending activities of Treasury-invested banks can be found at www.financialstability.gov.

Congress Seeks An Answer For Executive Bonuses

By Aaron Richardson-Talk Radio News Service

The House Financial Services Committee inquired today as to why, with the economy in recession, CEO's are still receiving millions of dollars in bonuses. 

"What have you discovered about the $5 billion in bonuses given to Merill Lynch?" Rep. Maxine Waters (D-Calif.) asked the panel of witnesses, which included Brian Breheny, the SEC's Deputy Director of Corporate Finance; Scott Alvarez, Federal Reserve System General Counsel and  Gene Sperling, the Counselor to the Secretary of Treasury.

Sperling ,who answered the majority of the questions, could not answer, and only replied, " I would have to go back, and would be happy to do so, and get what our administrations best understanding of that dispute is."

Rep. Gene Green (D-Texas) brought the Committee’s attention over to what was at stake for the citizens in his district if fiscally irresponsible behavior, including exorbitant salaries for the executives of flailing companies, continues.

"What they are losing is their money for education, money to pay their house notes and money to sustain themselves. I find it quite disenchanting to know that there are those who want them to receive cuts and not want us to look at the compensation these executives are receiving,” said Green.

Has the Eye of the Economic Storm Passed?

By Courtney Ann Jackson-Talk Radio News Service

“The force of the economic storm is weakening a bit,” said U.S. Treasury Secretary Timothy Geithner yesterday. Geithner discussed proposed Fiscal Year 2010 budget for the Treasury Department and the Internal Revenue Service with members of the Senate Appropriations subcommittee.

“We’re working to repair and reform our financial system so that it works for, not against, recovery. We’re working to restore growth and meet our fiscal goals by redesigning our tax code, bolstering enforcement,” said Geithner. “We’re working to advance our interest globally, working with other countries to promote economic recovery and financial repair and to ensure more open markets for U.S. businesses.”

Geithner and the Treasury Department are seeking increases in multiple areas including an increase that will bolster the staffs of the U.S. domestic finance and tax policy offices. Other increases will contribute to community development institutions and IRS enforcement efforts. Geithner also said the increase in the budget proposal will allow the U.S. to “meet international obligations and to help us craft a global response to the crisis in this more integrated global economic system we live in today.”

Tearing into TARP

A number of Congressmen have expressed ire with the Treasury Department’s management of the Troubled Asset Relief Program (TARP), citing a lack of oversight, a failure to mitigate the housing crisis and credit market, and an overall sense of deception over Paulson’s last minute decision to help successful financial institutions rather than failing ones.

“If there’s one thing I regret, I regret attempting to be cooperative in providing to treasury the flexibility to deal with out economic crisis,” said Rep. Maxine Waters (D-Calif.) during a House Financial Services Committee on “Oversight Concerns Regarding Treasury Department Conduct of the Troubled Assets Relief Program”.

“We don’t have any systematic way to help homeowners modify these loans, the treasury has refused to use the dollars to buy up the non performing assets, and the money has basically gone as equity investments in banks who are not putting the money back out so that our consumers can have access to credit,” the Congresswoman said.

Acting Comptroller General Gene Dodaro of the Government Accountability Office recounted recommendations from a recently issued report, including the need for the Treasury Department to limit executive compensation and confirming that the use of funds complies with the legislation “To date, Treasury hadn’t finalized their strategy for monitoring these very important initiatives.”

Neel Kashkari, the Interim Assistant Secretary of the Treasury for Financial Stability, appeared before the committee and defended many of the Treasury Departments decisions.

Essentially dismissing the allegations of a inadequate oversight, Kashkari discussed the formation of the Oversight Board the, the law required the first [Oversight] board meeting to take place within fourteen days. We moved very quickly, and the Oversight Board met within four days...The law requires the Board to meet once a month, but it has already met five times in the just two months since the law was signed.”

Kashkari also defended the choice to offer financial aid to healthy banks, “if we have a dollar, and we give this one dollar to a healthy bank or gave that same dollar to a failing bank, the healthy bank is in a much better position to turn around and make new loans...they’re the ones who are in the best position in this time of economic disruption to step up and make new loans.”

The Assistant Secretary said that this choice would help restore confidence overtime.