- The Washington Times - Wednesday, July 1, 2009

The Obama administration Tuesday proposed legislation for a financial oversight agency designed to protect consumers and investors from unscrupulous deals - a plan praised by Democrats, but met with skepticism on Wall Street.

The proposal also faces a political tussle on Capitol Hill, where pro-business Republicans have opposed past administration attempts at bank reform.

The White House sent Congress a 152-page draft bill to create the Consumer Financial Protection Agency, which it says would offer greater consumer protections for such financial products as mortgages, credit cards and loans by establishing simpler and more transparent rules and regulations.

“This agency will have the power to set standards so that companies compete by offering innovative products that consumers actually want - and actually understand,” said President Obama, whose administration first announced plans for the agency about two weeks ago.

Mr. Obama promised that the most unfair practices by financial institutions would be banned, such as “those ridiculous contracts with pages of fine print that no one can figure out,” adding that “those things will be a thing of the past.”

The agency, if enacted by Congress, would consolidate many of the regulatory duties that are spread over several agencies, such as the Federal Reserve and other regulatory agencies.

“Consumer protection will have an independent seat at the table in our financial regulatory system,” Treasury Secretary Timothy F. Geithner said. “By consolidating accountability in one place, we will reduce gaps in federal supervision and enforcement.”

Financial institutions argue that tighter controls and more regulations would stifle investments and innovation in the financial world and possibly slow down the flow of capital through the markets, a scenario blamed for last year’s Wall Street meltdown.

The “agency would actually harm consumers by increasing the cost of financial products and reducing the availability of credit and consumer choices,” said Steve Bartlett, president and chief executive of the Financial Services Roundtable, a trade group representing the largest U.S. financial services firms.

Rep. Spencer Bachus, the top Republican on the House Financial Services Committee, said American consumers - not a new federal agency - are best positioned to make financial decisions affecting their lives.

The Alabama lawmaker added that the new agency would create a “Good Housekeeping” seal of approval for the financial products that are available, giving consumers a false sense of security that may prevent them from engaging in their own due diligence.

The American Bankers Association said industry supports “effective consumer protection,” but that improving the current regulatory structure is a better solution.

“There is no shortage of laws designed to protect consumers,” said ABA President and Chief Executive Edward L. Yingling.

Senate banking committee Chairman Christopher J. Dodd pushed back at those on Wall Street reluctant at the prospect of more oversight, and called the administration’s bill a “bold and aggressive plan” to defend against a future financial crisis.

“It is unbelievable that some of the same irresponsible actors that helped create the current financial mess would argue that we are doing too much for consumers,” the Connecticut Democrat said. “Don’t they realize that they need a healthy customer base if they want to continue to be successful?”

The bill likely will evolve as it winds through Congress.

House Financial Services Committee Chairman Barney Frank said that while the committee “will exercise its own judgment on the specifics … it is helpful to have the administration’s proposals as well, because I believe there is a great deal of common ground between us.”

The Massachusetts Democrat added that he hopes his panel can pass the bill before the August congressional break.

“I have made the creation of the agency one of our highest priorities,” he said.

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