Chat Circle in MoneyWork
The White House has ask us to share our thoughts and questions on consumer and family financial protection reform. With that in mind, we thought it would be helpful to post the President's remarks on the topic last week:
Remarks of President Barack Obama
As Prepared For Delivery
Friday, October 9, 2009
Good afternoon. For the last several months, this administration has been working with Congress to reform an outdated system of financial regulations and lax oversight that helped lead to last year’s crisis. And I want to thank Chairman Chris Dodd, Chairman Barney Frank, and Senator Richard Shelby for the leadership and enthusiasm they’ve shown throughout this process.
Part of our reform effort involves putting in place new safeguards that would help prevent the irresponsibility and recklessness of a few from wreaking havoc on our entire financial system. We want to close gaps in regulation, eliminate overlap, and set rules of the road for Wall Street that make fair dealing and honest competition the only way for financial firms to win and prosper.
But a central part of our reform effort is also aimed at protecting Americans who buy financial products and services every day – from mortgages to credit cards. It’s true that the crisis we faced was caused in part by people who took on too much debt and took out loans they couldn’t afford. But my concern are the millions of Americans who behaved responsibly and yet still found themselves in jeopardy because of the predatory practices of some in the financial industry. These are folks who signed contracts they didn’t always understand offered by lenders who didn’t always tell the truth. They were lured in by promises of low payments, and never made aware of the fine print and hidden fees.
Secretary Geithner and I just finished meeting with some of these Americans who’ve joined us here today. You already heard from Patricia, who was forced to pay thousands of dollars in interest on a $550 payday loan. We also heard from Susan Chapman, who had excellent payment history until she was contacted by a broker who told her that she could lower the monthly payments on her mortgage. Instead, the loan they sold her ended up increasing her debt, and her principal has now gone up $20,000.
We talked with Karen Cappuccio [cap-PU-chee-o], who is still fending off foreclosure because her mortgage company duped her into taking out two expensive loans when they had originally promised her one low, fixed rate mortgage. We talked with Maxine Given, whose bank hit her with four separate overdraft charges because of one mortgage check that they ended up rejecting the very next day. And we talked with Andrew Giordano, whose bank made a mistake that cost him over $800 in overdraft fees. And when he caught their mistake, the bank only refunded part of the fees.
As we’ve seen over the last year, abuses like these don’t just jeopardize the financial well-being of individual Americans – they can threaten the stability of the entire economy. And yet, the patchwork system of regulations we have now has failed to prevent these abuses. With seven different federal agencies each having a role, there is too little accountability, too many loopholes, and no single agency whose sole job it is to stand up for people like Patricia, Susan, Maxine, Andrew and Karen – no one whose chief responsibility it is stand up for the American consumer and for responsible banks and financial institutions.
Under the reforms we’ve proposed, that will change. The new Consumer Financial Protection Agency that I have asked Congress to create will have just one mission: to look out for the financial interests of ordinary Americans. It will be charged with setting clear rules of the road for consumers and banks, and it will be able to enforce these rules across the board.
This agency will have the power to make certain that consumers get information that is clear and concise – in plain language – so they can compare products and know exactly what they’re getting into. It will ensure that banks and other firms cannot hide behind those ridiculously confusing contracts – pages of fine print that no one can figure out. It will have the ability to enforce and build on the credit card reforms we passed earlier this year, so that consumers aren’t hit with unfair rate hikes, penalties, or hidden charges. It will require brokers to look out for the interests of families if they give advice about mortgages. And it will ensure transparency and fair-dealing for other financial products, like bank overdraft services and payday loans.
In a financial system that has never been more complicated, it has never been more important to have a watchdog function like the one we’ve proposed. And yet, predictably, a lot of the banks and big financial firms don’t like the idea of a consumer agency very much. In fact, the U.S. Chamber of Commerce is spending millions on an ad campaign to kill it. You might have seen some of these ads – the ones that claim local butchers and other small businesses will somehow be harmed by this agency. This, of course, is completely false – and we’ve made clear that only businesses that offer financial services would be affected by this agency.
Contrary to what some have argued, this agency would not restrict consumer choice and innovation. Nothing could be further from the truth. In the past, a lack of clear rules led to innovation of the wrong kind: the firms that did best were the ones that did the best job of hiding the real costs to consumers. By contrast, the consumer agency we’re proposing would set ground rules so that firms don’t have to compete to confuse families, but to give them better choices. This will also help small business entrepreneurs who often rely on credit cards and home equity loans to finance their start-ups.
But all this hasn’t stopped the big financial firms and their lobbyists from mobilizing against change. They’re doing what they always do – descending on Congress and using every bit of influence they have to maintain a status quo that has maximized their profits at the expense of American consumers. And since they’re worried they may not be able to kill this agency, they’re trying their hardest to weaken it – by asking for exemptions from this agency’s rules and enforcement; by fighting to keep open every gap and loophole they can find. And they’re very good at this, because that’s how business has been done in Washington for a very long time. In fact, over the last ten years, the Chamber of Commerce alone spent nearly half a billion dollars on lobbying – half a billion dollars.
Well the stories we heard today remind us that the American people cannot afford business-as-usual any longer. These Americans cannot afford high-priced lobbyists to argue their case. They are counting on us to be their advocate; to be their voice; to restore a sense of responsibility from Wall Street to Washington. That’s why we need a Consumer Financial Protection Agency that will stand up not for big banks and financial firms, but for hardworking Americans. That’s why we need regulatory reform that will reward innovation and competition instead of short-cuts and abuse. And that’s why we cannot let the special interests win this fight.
We have already seen and lived the consequences of what happens when there is too little accountability on Wall Street and too little protection for Main Street, and I will not allow this country to go back there. It is time to move forward. It is time for real change. And I am confident we will get it done. Thank you.
Comments:
" Education is power.
My biggest recommendation is that all members of congress, and all American High School students obtain an education about supply and demand, using capital to start a business, interest and loans, balancing a checkbook, and making a budget for buying a big ticket item in the future.
"Those greedy wall-street guys" can't take advantage of us if we're educated. And if we don't let them over-leverage, many of the systematic risks decrease.
Secondly, regulations and new organizations often have unintended consequences. Take the FDIC. What it means to most of us is "If I put my money in this bank, even if the bank fails, I can get my money back again."
What it means to the bankers is, "I can get a low-interest or no-interest loan from thousands of consumers that other companies just can't get." Deposit insurance encourages banks to over-leverage, spending that money we've loaned them foolishly on high-risk high-reward investments, because they don't have to pay as much interest as another company that has to issue bonds to consumers and promise to pay those bonds back at 4, 5, even 7% interest.
Don't get me wrong, I don't want to get rid of the FDIC, but I think we should look at the unintended consequences of "protecting consumers" on the other side. For starters, I think FDIC insurance premiums should be based not only on the dollar amount insured, but on a bank's mark-to-market leverage ratio. That's a change I can stand behind.
Making a whole new national institution to protect consumers -- I don't think so. I think there will be too many unintended consequences. Educate consumers. Don't protect them in this way.
There will always be greed. There will always be unscrupulous people working in industry. If someone wants to mug me and steal my purse, no regulatory body in the world will stop them. Only their mother's voice inside their head can stop them. The little voice that says, "It's wrong. Don't do it. I know it's hard. Do the right thing because I believe in you."
The government can only teach, "Don't get caught."
Educate. Support morals. Support mothers.
Thank you,
--Beth " by BethLeonard
" Here are my questions.
1. What effect will the proposed Consumer Financial Protection Agency (CFPA) have on current regulatory agencies? Will regulators and rules be consolidated under this new umbrella? Which agencies in particular will be moved? How long will it take to streamline the process? How will overlapping regulations or loopholes be closed if contradictions exist?
2. Which, if any, provisions will be put in place under this new agency to protect those Americans who practice fiscal responsibility? In other words, which specific provisions will be put in place to make it more lucrative for financial institutions to conduct honest business with financially responsible clients rather than what they can stand to gain by exploiting those who are in desperate financial situations?
Amie Adams lives in Springfield, VA. She is a married mom of three boys. Both Amie and her husband Greg work full-time as consultants in the DC area. They have been saving for their sons' education since each was born and yet are still concerned about how they will pay for three sets of college expenses after the latest problems in the market. Amie blogs about parenthood, politics and her creative ventures at Mamma Loves... (http://mammaloves.blogspot.com) " by MammaLoves
Add some tag words (words separated by commas)
CancelAdd Tags