- The Washington Times - Tuesday, June 30, 2009

The Obama administration sent Congress legislation Tuesday to create a new federal oversight agency designed to protect consumers and investors from unscrupulous deals a plan praised by Democrats but that met with skepticism on Wall Street.

The 152-page draft bill would establish the Consumer Financial Protection Agency, which administration officials say 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 egregious practices by financial institutions will be banned, such as “those ridiculous contracts with pages of fine print that no one can figure out.”

“Those things will be a thing of the past,” he said.

The agency, if approved by Congress, would consolidate many of the regulatory duties that are spread over several agencies, including the Federal Reserve and the Securities and Exchange Commission.

“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 industry groups argue that tighter controls and tougher regulations could stifle credit and innovation, and possibly slow down the flow of capital through the markets, leading to a repeat of last year’s Wall Street credit meltdown.

The new 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 some of the country’s largest banks and financial services firms.

But Senate Banking Committee Chairman Christopher J. Dodd, pushed back at those on Wall Street resistant for more oversight, calling the administration’s bill a “bold and aggressive plan” to defend against future financial crises.

“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?”

Congressional Democrats are expected to introduce the proposal in the coming weeks.

The new independent agency would be part of the most sweeping overhaul of federal financial regulation since the 1930s. The administration also is pushing to give the Federal Reserve new powers to regulate companies deemed too big or interconnected to fail, such as giant insurer American International Group Inc., the recipient of $182.5 billion so far in taxpayer bailout funds.

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