By Mark Huffman
ConsumerAffairs.com
June 17, 2009
President Barack Obama addressed the nation Wednesday, outlining the largest overhaul of financial regulation since the Great Depression.
Included in the President's proposal is a new watchdog agency to protect consumers in their dealings with financial service provides, including credit card companies.
Under the President's plan, the Federal Reserve would monitor the largest financial firms. That's an effort to centralize accountability so that one agency will take the responsibility for preventing another market crisis.
"We must act now to restore confidence in the integrity of our financial system," Obama said in a speech from the White House. "The lasting economic damage to ordinary families and businesses is a constant reminder of the urgent need to act to reform our financial regulatory system and put out economy on a track to a sustainable recovery."
Obama said the unraveling of various financial institutions led to the massive economic upheaval late last year. He said financial instruments designed to spread risk tended instead to concentrate risks.
"There was far too much debt and not nearly enough capital in the system," Obama said.
To address these problems, Obama proposed closing the Office of Thrift Supervision and creation of new agencies. Among the agencies is one Obama said would have one goal — protection of consumers.
"Consumers will be provided information that is simple, fair and transparent," Obama said.
The new Consumer Financial Protection Agency would have responsibility for regulating mortgages, credit cards and other products. It would have sweeping authority, including the power to ban terms and practices that it deems unfair, and to punish violators with fines and penalties. It will regulate consumer interaction with banks and non bank institutions alike.
Obama said the new agency will no supplant other government agencies with consumer protection responsibility, such as the Federal Trade Commission, but will complement them.
The President's proposal drew some immediate flak from the banking industry, particularly the creation of the Consumer Financial Protection Agency.
"We believe the Administration's proposal is so vast and controversial that it will be extremely difficult to enact and will produce great uncertainty in the financial markets and among financial regulators while it is pending," the American Bankers Association said in a statement. "It needlessly rips apart all the existing regulatory agencies, eliminates charter choices and creates a new agency with powers to mandate loans and services that go well beyond consumer protection."
