Posted by
alfredlester on Wednesday, June 24, 2009 10:42:44 AM
WASHINGTON (MarketWatch) -- Consumers need a new financial product safety agency with broad oversight, supporters are telling U.S. House lawmakers Wednesday, while critics say such an agency could hurt banks and their customers.
In the wake of widespread failures of regulatory oversight, consumer advocates are urging the adoption of a new agency that would make sure consumer products such as mortgages and credit cards are safe and easy to understand.
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"It has become clear that a major cause of the most calamitous worldwide recession since the Great Depression was the result of the simple failure of federal regulators to stop abusive lending, particularly unsustainable home mortgage lending," according to testimony from Travis Plunkett, legislative director of the Consumer Federation of America.
The testimony is being delivered at a Wednesday hearing of the House Financial Services Committee. The Obama administration has recently proposed creating a Consumer Financial Protection Agency, which would have the power to ban practices seen as unfair, enforce rules and aim to create understandable products and disclosures. U.S. lawmakers have proposed similar ideas to create such an agency.
Barney Frank, chairman of the House committee, said Wednesday the proposal to create an agency will be marked up in July. Ultimately, creating an agency will be part of one large financial regulation bill, and an agency will be an important piece of the bill.
"The fear that this will be some out-of-control entity ravaging the financial sector is unsupported by anything in American history," Frank said.
Industry representatives have reiterated that creating a new agency, especially while the country remains in recession, could be tough on banks and have unintended consequences for consumers.
"The proposal for a new consumer regulator, rather than rewarding the good banks that had nothing to do with the current problems, will add an extensive layer of new regulation that will take resources that could be devoted to serving consumers and make it more difficult for small community banks to compete," according to testimony from Edward Yingling, president of the American Bankers Association.
Consumers need financial protection, Congress told
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