The people have spoken and they WANT Elizabeth Warren as the head of the Consumer Financial Protection Bureau.  Sorry Geitner, you LOSE!   Listening to CSPAN this morning you would think that we have a single political party in this country.  When C-SPAN posed the question of  “should Elizabeth Warren run the Consumer Financial Protection Agency [Bureau]” something like 99 percent of all the callers, Democrats, Republicans, Independents, and Libertarians, from all over the country voiced their enthusiastic support for Elizabeth Warren to lead the new bureau.  As a long time listener to Washington Journal this was a first!  It was fantastic to hear that people see the greatness in this woman that I have been preaching for the last eighteen months.  Warren is a lifetime advocate for the consumer and is the only person who can be trusted with shaping this new agency in the spirit of its genesis.

This is also very important to the American people being that the Bureau’s focus will be consumer protection.  This is the Wall Street police and Elizabeth Warren is the only CREDIBLE person who can walk the beat.  The President should know that for people to think he is serious he must choose the right person for this job.  This is Elizabeth Warren’s brainchild and for her not to be the first person to lead it and set the tone would be a travesty to her as a loyal supporter of this administration and a travesty to the consuming public.  The only folks who are alleged to have a problem with Warren are Geitner (because he wants his asst treasury secretary for the position and Warren calls him on his BS), Wall Street (who wants a competent cop with integrity), and the GOP (Wall Street enabler).

Main Street or Wall Street?  Elizabeth Warren has proven that she is most definitely Main street.  If the President’s goal is to look out for Main Street neither of the other two candidates in contention  will do it as well as Warren. Warren is a trustworthy, independent, common sense voice who has the backs of the American people.  We will know how serious the President is about consumer protection and this Bureau when he makes this pick.

We trust Elizabeth Warren similar to the way we trust you Mr. President.  Please don’t let us down.

Attorney barred in the District of Columbia and California currently looking for opportunities in the private and government sectors.  Specializes in ediscovery/litigation efficiency project management but can do straight litigation or litigation management.  Feel free to contact me with opportunities at progress@progresspolitics.com

Financial regulatory reform bill, a comparison of both the House and Senate versions.

OVERSIGHT

–Senate: Creates a nine-member Financial Services Oversight Council made up of the treasury secretary, Federal Reserve chairman, a presidential appointee with insurance expertise, heads of regulatory agencies and a new consumer protection bureau that would monitor financial markets and watch for threats.

–House: Creates an 11-member council with similar duties.

CONSUMER PROTECTION

–Senate: Creates a Consumer Financial Protection Bureau within the Federal Reserve to police lending, taking powers now exercised by various bank regulators. Those regulators could appeal bureau regulations to the oversight council, which could veto the regulations with a two-thirds vote. Federal regulators could override state consumer laws on a case-by-case basis. Currently states have a more difficult time applying their laws to national banks. Excludes from oversight any small business that does not engage in financial services.

–House: Creates a stand-alone Consumer Financial Protection Agency to police lending. There’s no process to veto agency regulations. State law provision is similar to Senate’s. Specifically excludes from agency oversight real estate brokers and agents, accountants and tax preparers and auto dealers.

FEDERAL RESERVE

–Senate: The Federal Reserve would retain supervision over bank-holding companies and state-charted banks. It also would police large, interconnected nonbank institutions that the oversight council determines could pose a threat to the economy. With council approval, the Fed could break up large, complex companies that pose a grave threat to the financial system. The Government Accountability Office, Congress’ investigative arm, would conduct a one-time examination of the Fed’s emergency lending to financial institutions in the months surrounding the 2008 financial crisis.

–House: The Federal Reserve would lose consumer protection regulation authority and ability to unilaterally inject money into financial institutions. The GAO would be given broader power to conduct audits of the Fed.

CAPITAL STANDARDS

Senate: Banks with more than $250 billion in assets would have to meet capital standards at least as strict as those that apply to smaller banks. Banks would not be able to include as top tier capital certain securities that are tax deductible subordinated debt.

House: Any large bank holding company identified as posing a potential risk to the economy would be required to put up additional capital — more money and assets on hand. In computing capital requirements, regulators would include a bank’s off-balance sheet activities, such as trusts held for clients. These companies also would face a leverage cap of 15-1 debt-to-net capital ratio.

DERIVATIVES

–Senate: Trades of derivatives, the complicated financial instruments blamed for accelerating the Wall Street crisis, would have to take place in regulated exchanges. Banks would have to spin off all their derivatives business into subsidiaries.

–House: Also regulates derivatives, but contains more exceptions for corporations that use derivatives as a hedge against price fluctuations, not as a speculative investment. The House does not require banks to spin off their derivatives business.

BANK RESTRICTIONS

–Senate: Regulators would devise rules to prohibit bank holding companies with commercial bank operations from speculative trading with their own accounts. Large, interconnected companies would have to put more money in reserve.

–House: The oversight council may prohibit any activity, including speculative trading by commercial banks with their own accounts, if it finds that the activity could threaten the stability of the financial system. Large, interconnected companies would have to put more money in their reserves.

EXECUTIVE PAY

–Senate: Shareholders would have the right to cast nonbinding votes on executive pay packages. The Fed would set standards on excessive compensation that would be deemed an unsafe and unsound practice for the bank.

–House: Shareholders would have the same right. Regulators would have a say on compensation practices, not on pay itself.

RATINGS AGENCIES

–Senate: An independent board would select ratings agencies to assess the risks of new financial products, replacing a long-standing practice where banks select and pay ratings agencies to rate their new offerings. The bill would also require a wholesale re-evaluation on how the government uses ratings agencies to assess risk. Ratings agencies are blamed for giving too high ratings to bad mortgage-related securities.

–House: Ratings agencies would have to register with the Securities and Exchange Commission and would face increased liability standards.

MORTGAGE LOANS

Senate: Lenders would be required to obtain proof from borrowers that they can pay for their mortgages. The would have to provide evidence of their income, either though tax returns, payroll receipts or bank documents. That provision seeks to eliminate so-called stated-income loans where borrowers offered no proof of their ability to make mortgage payments.

Attorney barred in the District of Columbia and California currently looking for opportunities in the private and government sectors.  Specializes in ediscovery/litigation efficiency project management but can do straight litigation or litigation management.  Feel free to contact me with opportunities at progress@progresspolitics.com.

In case there was any doubt that citizens of this nation want Wall Street to be held accountable and the rights of consumers more vigorously enforced, the Consumer Federation of America polling shows that the financial regulatory reform bill needs to be toughened up in terms of consumer protection.

The poll found that 62% of Americans support the creation of a “new federal agency to protect consumers who purchase banking and other financial services.” Only 34% opposed such a plan.

Additionally, CFA found that a whopping 85% believe “consumers need more effective protections against unfair and deceptive practices by banks and other financial institutions.”

The Chamber of Commerce has spent $3 million dollars to fight the creation of the CFPA and elisted Repub;ican leader Mitch McConnell to do its bidding on the Senate floor.  It appears the GOP strategy for November is to side with Wall Street and protect it at all costs.

In 2006 the American Bankers Association argued vociferously in favor of separating consumer protection function from the “safety and soundness of banks” function.  However, now that it is about to happen the banks have had a change of heart in light of the fact that separating the two would no longer allow them to fleece consumers for profit.  TARP watchdog, and my hero, Elizabeth Warren recently penned an op-edabout the necessity for a Consumer Financial Protection Agency and calling the ABA on its hypocrisy.

ABA lobbyists now aggressively insist that separating consumer protection and safety and soundness functions would unravel bank stability. Yet just a few years ago, they heatedly argued the opposite — that the functions should be distinct.

In 2006, the ABA claimedto act on principle as it railed against an interagency guidance designed to exercise some modest control over subprime mortgages. It criticized the proposal for “combin[ing] safety and soundness guidance with consumer protection guidance, creating confusion that is best addressed by separating them.”

The ABA went on to argue that the “marriage of inconvenience between supervision and consumer protection appears to blur long-established jurisdictional lines.” And then: “ABA recommends that the safety and soundness provisions relating to underwriting and portfolio management be separated from the consumer protection provisions.”

Read that again: The ABA in 2006 said that policymakers should separate safety-and-soundness and consumer protection — exactly the opposite of its position today.

This 2006 memo illustrates the ABA’s real consistency — consistent opposition to meaningful reform.

If there is a smoking gun in the battle over financial regulatory reform, the 2006 ABA memo is it….

In the weeks ahead, the Senate does not need to decide between safety and soundness and consumer protection.

But the ABA is right about one thing: The Senate does need to decide between banks and families.

Attorney barred in the District of Columbia and California currently looking for opportunities in the private and government sectors.  Specializes in ediscovery/litigation efficiency project management but can do straight litigation or litigation management.  Feel free to contact me with opportunities at progress@progresspolitics.com

Below is a list of the benefits and drawbacks of the plans for a Consumer Financial Protection Agency/Bureau proposed by the White House, the Senate, and the House as compiled by ThinkProgress.  According to CFPA guru Elizabeth Warren there are four prongs for an effective Consumer Financial Protection Agency:   1) an independent director appointed by the President and confirmed by the Senate; 2) independent budget authority so it is not prone to the whims of the appropriation process; 3) independent rule-making authority; and 4) independent enforcement powers.  What is troubling is the fact that the Senate version does not give the CFPA full rulemaking  authority.  Not sure who would make up this “council of bank regulators” who would have veto power over rulemaking.   We assume it will be folks from the Federal Reserve, FDIC, etc..  Yea that worked so well the last time such regulators were responsible for consumer protection.   This agency would also be housed in the Federal Reserve….also troubling given that proximity can easily lead to co-option.

We should also say that Warren issued a statement today regarding Dodd’s version of the bill that sounded more like a journalist description of an accident then any type endorsement. 

WARREN:  Since bringing our economy to the brink of collapse, Wall Street has spent more than a year and hundreds of millions of dollars in an all-out effort to block financial reform. Despite the banks’ ferocious lobbying for business as usual, Chairman Dodd took an important step today by advancing new laws to prevent the next crisis. We’re now heading toward a series of votes in which the choice will be clear: families or banks.

Send us an email and let us know what you think.  progress@progresspolitics.com

Sen. Chris Dodd (D) broke off negotiations with Sen. Bob Corker(R) yesterday because we would like to think that he came to his senses when seeing Corker’s deal breakers, received a refreshed memory stemming from the HCR fiasco, and due to an outcry from folks like the readers of this website.  Corker was intent on excluding nonbank lenders like finance companies, payday lenders and pawnbrokers from the legislation’s reach.  Not to mention quashing the idea of an independent and stand alone Consumer Financial Protection Agency.  In other words, Corker wanted reform in name only excluding from such regulations all his pet special interests and flipping the bird to the American people.  For a second it looked as if Dodd was going along with it until progressives found out about it and stormed his offices, telephone lines, and email.   He ultimately dropped the negotiations in a statement he made yesterday.  Having said and done all that Sen. Dodd’s statement yesterday is troubling to say the least:

“The proposal that I’ll offer on Monday does reflect a lot of the ideas that Bob Corker and others have brought to the table. It was important to put a proposal on the table, short of a proposal that reflects some broad bipartisan agreement.”

“None of this is a matter of demanding perfection[.]” “The advocates are just demanding some meaningful, sensible, and desperately needed changes and aren’t interested in letting politicians build false confidence and have big press conferences while ignoring the central issues.”

Such comments hint of a watered down, lax, and ineffective proposal instead of REAL financial regulatory reform.. Call Sen. Dodd and demand REAL financial regulatory reform with a standalone and independent Consumer Financial Protection Agency.

U.S. Senator Chris Dodd
448 Russell Building  Washington D.C., 20510
Tel: (202) 224-2823 or email him here

Why is Sen. Chris Dodd, Democrat, allowing  Sen. Bob Corker, Republican,  to run the ship of financial regulatory reform???

• Corker cannot support a standalone Consumer Financial Protection Agency
• Corker unwilling to back mandatory limits on size of banks
• Corker against out-of-court resolution process for banks
• Corker bragging about exempting payday loans from the reform bill by pushing to remove provision that cracks down on payday lenders…a significant contributor to Sen. Corker’s campaign.  You know…the loan sharks who charge low income client as much as 300 percent interest on short term loans.  Did we mention that Corker received a significant amount of his campaign contributions this year from payday lenders?

Seriously Sen. Dodd why are you allowing the banks and payday lender controlled Corker to weaken the financial regulatory reform bill to the point of complete ineffectiveness?  We already know the Republican party is not negotiating in good faith it is simply trying to water down the bill.   What is really crazy is that you are actually considering putting the Consumer Financial Protection Agency under the Federal Reserve?  The Fed controlled consumer protection when the financial crisis happened and protection of the consumer fell by the wayside when it came to the health and safety of the banking industry.  Consumer protection law enforcement toward the banking industry has always been under the jurisdiction of the Federal Reserve and it is REDICULOUS that there is actually a discussion taking place about leaving it there given the circumstances prompting financial regulatory reform in the first place.

Elizabeth Warren, TARP watchdog,  gives a few words of wisdom regarding the Consumer Financial Protection Agency so-called “compromise” currently being discussed in the Senate.  In an recent interview Warren said the following: “[m]y first choice is a strong consumer agency,” the Harvard Law professor and federal bailout watchdog said “[m]y second choice is no agency at all and plenty of blood and teeth left on the floor…….’[m]y 99th choice is some mouthful of mush that doesn’t get the job done,” Warren said.

Warren listed the four things that the Consumer Finance Protection Agency MUST have to be effective:

• A chief appointed by the president, confirmed by the Senate;  
• Independent budget authority, so it won’t be subject to the whims of Congress or an anti-consumer administration;  
• Independent rule-making authority, without interference by bank regulators or others who may focus on bank profitability before focusing on consumers;  
• And independent enforcement powers, so the agency’s investigators can go after abusive lenders. 

“Those are the basic elements of an independent agency,” Warren said. “It’s not as if there’s some fifth thing that was left off that list — that is the list.”  Warren also spoke about the CFPA that was included in the financial regulatory bill passed by the House last December:  “It’s a muscular agency, and that’s what really matters,” Warren said.  ”It’s not perfect — there’s no excuse for excluding used car dealers — but it’s strong,” she said. “The agency that passed the House will get the job done.”

The TARP watchdog believes that it does not matter where the new agency is located but that it has real independence.  Some have disagreed with Warren and argued that housing such an agency in somewhere like the Treasury Department or the Federal Reserve would make a difference in terms of its effectiveness.  We agree.  There is a reason that the bank lobbyists are pushing for a CFPA room rental instead of a house of its own…..proximity matters.

Take a look at the other argument being made by the banks and Sens. Bob Corker (R) and Richard Shelby(R) and a response to it by Rep. Brad Miller (D-NC):

The banks and Dodd’s chief negotiating partners, Sens. Richard Shelby (R-Ala.) and Bob Corker (R-Tenn.) argue that banking regulators must have veto power over consumer protections, because restricting some bank activities could harm the institutions and put at risk their “safety and soundness.”

But Rep. Brad Miller (D-N.C.) wondered aloud how banks could argue that preventing them from ripping off consumers puts them in jeopardy.

“It would be one thing if they were saying, ‘They’re making us do things that will cause us to lose money.’ But they’re saying, ‘If you don’t let us do these things because they’re abusive to consumers, we won’t make enough money to survive,’” Miller said.

“The legislation doesn’t require the banks to offer anything. It would prohibit certain practices. So their argument is, they have to be able to cheat consumers to stay solvent. I’m not sure I’m persuaded by that argument, or that a bank that has to cheat consumers to stay solvent is one we should keep afloat. Maybe it’s time to send in the FDIC.”

Take a look at some other specs:

How do the banks fend off needed reform? Follow the money. A recent report by Paul Blumenthal of the Sunlight Foundation shows that the 27 members of the House Financial Services Committee have received over one-fourth of their contributions from the FIRE (Finance, insurance and real estate sector). Ranking Republican Spencer Baucus from Alabama opposes the CFPA, arguing that we don’t need “more regulation,” we just need “smart regulation.” He received a staggering 71% of his contributions from the finance sector over the first six months of this year (and 45% of his total contributions over his career). Democrat Melissa Bean who leads the effort to gut state regulatory authority over the banks has received fully 42% of her contributions for the first six months from the banking sector. Not surprisingly, the champions of reform like Rep. Alan Grayson, Maxine Waters, Keith Ellison, Adam Putman, and Carolyn McCarthy all pull in the lowest percentage from the sector.

Attorney barred in the District of Columbia and California currently looking for opportunities in the private and government sectors.  Specializes in ediscovery/litigation efficiency project management but can do straight litigation or litigation management.  Feel free to contact me with opportunities at progress@progresspolitics.com.

A remorseful John S. Reed, former Chairman and CEO of CitiCorp, appeared before the Senate Banking Committee yesterday as he called for full financial regulatory reform including a dedicated consumer-focused financial protection agency.  ”There seems to have been a key failure that none of us anticipated,” Reed said in a prepared statement at a Senate Banking Committee hearing, “namely, individual institutions which are thought to take steps and exercise judgments to insure their self-preservation turned out ‘not to have’ or been incapable of so doing.

The former Chairman and CEO went further:

In response to a question from Senator Bob Corker (R-Tenn.), who called Reed’s testimony “fascinating” given that he presided over Citigroup at a time when it was expanding in all these areas, Reed said it was exactly that experience that informs his view now.
“I learned a lot,” Reed said, joking that this may be the first time he has ever agreed with former Federal Reserve chairman Paul Volcker on anything. “There’s no question that when we put Travelers and Citi together we created a monster.”

“My honest belief having experienced it…is that the system would be stronger if we could provide for some separation where major depositories are not major actors in the capital markets,” Reed said.

“This clearly means that in designing a robust system, we cannot count on that capacity.”  Mr. Reed decribed what the essential elements of financial regulatory reform must be below.

The capital held by financial firms to protect against potential losses “should be significantly increased, maybe doubled.” He added that he thinks the concept of “risk adjusted capital,” a complex system used by regulators to judge whether a bank has adequate cash, “is flawed.”

The industry should be “compartmentalized” to limit the spread of failures and to preserve “cultural boundaries.”

Traded products (to the extent possible) should flow through exchanges. Much of the derivatives market is currently in the dark, traded over the phone rather than through a centralized exchange where regulators could know what’s going on.  

A consumer-focused financial protection agency with a “clear and separate mandate” should be created.

Are you listening Sen. Dodd???

The consumer cannot invoke the laws of the Consumer Financial Protection Agency through a civil right of action if a credit card company violates the rules????  The consumer must wait for the overworked Attorney Generals and the state’s (probably captured) Banking Commission  to bring a criminal complaint against the credit card company??  Seriously???  Thousands of consumer are protesting at the American Bankers Association in Chicago due to the arbitrary raising of interest rates and continued gouging of the consumer that the banking industry continues to engage in during this period preceding the full enactment of the Credit Cardholders Bill of Rights.  Call your Congressman and tell them that you want the right to sue credit card companies for deceptive or unscrupulous business practices.

Apparently Congress has not been to Chicago lately.  It appears that corporate america has once again captured our legislative branch.  When asked why consumers do not have a private right of action in the bill Rep. Barney Frank responded that the Obama Administration didn’t ask for a private right of action.  A private right of action would definitely keeep the credit card industyry on its toes.  We will do more research on this and let you know the pluses and minuses to a private right of action for the consumer.  It is this writer’s opinion that Congress believes that we are paying so much attention to the health care rebate that we forgot about the huge blunder that put us in this recession in the first place.  So it has decided to try and pass “reform” in the way of a gutted consumer protection agency that has no real power or authority.

Not to mention that fact that according to the bill federal law can preempt stronger state banking laws if it can be shown to seriously interfere with national banking, i.e. not uniform. What???

Major financial institutions have been particularly concerned that the CFPA would create a floor, rather than a ceiling, for financial consumer protection standards, which potentially could subject them to fifty different regulatory schemes.  Representatives Mel Watt (D-NC) and Moore offered an amendment to grant preemptive effect to federal law if a state law would have a discriminatory effect on national banks.

Further, there are too many exemptions for certain industries that result in huge limitations on the CFPA powers.  Take a look at the list below:

1. The first amendment offered, by Representative Joe Donnelly (D-IN), exempted manufacturers of modular homes.
2. Representative Brad Miller’s (D-NC) amendment to exempt banks whose assets under management are less than $10 billion and credit unions whose assets are under $1.5 billion from significant parts of CFPA coverage.
3. Chairman Frank’s amendment to clarify that stores that offer store credit will not fall under the CFPA’s purview;
4. Representative Tom Price’s (R-GA) amendment to exempt employee pension benefit plans;
   Representative John Campbell (D-CA) and Bill Posey’s (R-FL) amendment to exempt automobile dealers, including those that finance automobile purchases by non-retail customers;
5. Representative Dennis Moore (D-KS) and Erik Paulsen’s (R-MN) amendment to exempt forms of insurance, including auto, life, and homeowners;
6. Representative Donnelly’s amendment to exempt manufacturers of modular homes.

CONGRESS we NEED REAL REFORM!

The Consumer Financial Protection Agency moved through the House Financial Services Committee yesterday and will soon be on its way to the House floor.  Though the CFPA is a bit weaker it is still moving.  The Agency will be solely devoted to protection of consumers against the unscrupulous practices of financial institutions.  Republicans fought tooth an nail against passing the Act through the committee.  One of the GOP’s main arguments is that Te Federal Reserve already has the power to protect consumers and they are ready to use it now.  Well despite the fact that the Federal Reserve’s first priority is the health and success of the banks thus creating a huge conflict of interest for the regulatory agency.  But Democrats also argued the following:

“What did the prudential regulators do to protect consumers? Nothing. Zero. Zilch. They didn’t do a thing,” Rep. Luis Gutierrez (D-Ill.) said, noting that the Fed has already had consumer protection powers since 1994 but that they went unused for 12 years. “I think enough has been said here in this committee about the markets. The markets. Always concerned about the markets. Well, you know what? Those markets caused trillions of dollars in losses to men and women who live on Main Street across this country.”

The paying out of huge bonuses in the last couple of days helped to move this along a bit more quickly.  Elizabeth Warren, the person who originated this idea a few years ago, has been a stalwart advocate and has been very instrumental in bringing the CFPA to fruition.

The President is giving a speech today on the progress that has been made with respect to overhauling our financial regulatory system.  The credit card and the rest of the financial industry has unleashed its lobbyists on Capitol Hill to the tune of millions of dollars in an effort to thwart the administration’s efforts to overhaul the financial regulatory system.  More specifically preventing the creation of the Consumer Financial Protection Agency is the industry’s highest objective. 

Mr. President we desperately need this agency and cannot afford to continue spreading the responsibility for protecting consumers within the financial markets among ten different agencies that have other much higher priorities.  The agencies currently delegated with this task failed miserably as was demonstrated by the near financial collapse.  Further, and as noted by your chair of the Congressional Oversight Panel, Elizabeth Warren, “[c]onsumer financial products were the front end of the destabilization of the American economic system.”  Obviously all ten regulatory agencies currently charged with consumer protection responsibilities were distracted with other priorities prior to and during the financial meltdown and therefore would not give this aspect of regulatory reform the attention it needs.  We need an agency whose sole mission, purpose, and focus is protecting consumers. In addition, there appears to be a conflict of interest with bank regulators like the Federal Reserve taking on the consumer protection aspect of financial regulatory reform.  A bank regulator’s primary goal is the “safety and soundness” of banks and a bank’s profitability even if its at the expense of exploiting consumers.  Therefore, consumer protection cannot be a high priority at the same time as the profitability and soundness of banks being a priority.  Bank regulating agencies will be less inclined to enforce consumer protection laws if a bank is failing because the regulators main job is to help prevent the bank from failing and the risk of the manipulation or unfair practices perpetrated against the consumer is secondary.  Also, because companies can choose which agency regulates them by how it decides to form as a corporation (e.g. charter, bank, etc.), bank regulators are incentivized to regulate without bite or not be tough on banks because such a reputation will result in banks choosing one of the other nine agencies to regulate it by choosing a different corporate form to operate under.

In short Mr. President, we need the Consumer Financial Protection Agency more than ever because banks have already begun re-engaging in the same irresponsible risk-taking behavior that caused the current recession and the credit card industry is already engaging in deceptive practices as a work around to recently passed consumer protection laws.  As for the financial industry, it is engaging in excessive risk-taking again because no significant changes have been made to the financial regulatory system.  Unfortunately turf-protecting regulators, lobbyists, and Congress have slowed the overhaul process down considerably but we cannot afford to continue at this snail’s pace.  Because banks are again taking risks far greater than the CYA capital they have on hand our financial system is again in jeopardy.  The banking industry continues to operate under the assumption that they are “too big to fail” and that is not healthy for consumers.

Therefore Mr. President, please continue to press hard and fast with regulatory reform including creating the vitally important Consumer Financial Protection Agency.  We will not reiterate the stakes as we are sure that you are very much aware.

Being touted as the biggest regulatory overhaul since the Great Depression, President Obama will announce specifics today of his “new foundation” for the financial industry.   The five primary elements of the administration’s plan for regulatory reform are: 

1. Promote Robust Supervision and Regulation of Financial Firms: Tougher oversight of financial institutions through expansion of the role and increasing the powers of the Federal Reserve by giving it greater oversight over financial institutions such as banks and insurance companies.  
2. Establish Comprehensive Regulation of Financial Markets: Increased focus on market infrastructure by regulating previously less regulated  products such as over-the-counter derivatives.  For example, the administration will propose regulations requiring originators of new securities to have “skin in the game” by requiring that such originators hold a continued equity stake in the securities even after the securities are largely sold off. 
3. Protect Consumers and Investors from Financial Abuse: Creating the Consumer Financial Protection Agency (CFPA) which will be a regulatory agency responsible for protecting consumers who have credit cards, mortgages, or other financial products and will serve as a consumer watchdog.  According to a senior administration official, the new agency will establish “a very clear line of accountability around products that they deem abusive of consumers, or misleading.”  The new Agency will also have the authority to “reform our mortgage laws.”  One such law will require that “consumers receive a single, simple, integrated federal mortgage disclosure.” 
4. Provide the Government with Tools it needs to Manage Financial Crisis:  Giving the administration greater power to dismantle financial firms falling into financial difficulties so as to preempt the kind of systemic problems suffered in the current economic meltdown. 
5. Raise International Regulatory Standards and Improve International Cooperation:  Coordination of financial regulation with governments around the globe so as to synchronize global oversight of financial markets.

“The goal is to integrate the system, make sure that there are not any gaps, and to make sure that we have a updating of the regulatory system that worked back in the 1930s, but doesn’t work with the kinds of financial instruments and the kinds of global capital markets that exist today…..and we’re confident that we’ve struck the right balance.”   -President Obama, Bloomberg Television. 

See the full and official 85-page white paper of regulatory plan here.

UPDATE:  The President’s remarks

12:53 P.M. EDT

THE PRESIDENT: Thank you very much.

Since taking office, my administration has mounted what I think has to be acknowledged as an extraordinary response to a historic economic crisis. But even as we take decisive action to repair the damage to our economy, we’re working hard to build a new foundation for sustained economic growth. This will not be easy. We know that this recession is not the result of one failure, but of many. And many of the toughest challenges we face are the product of a cascade of mistakes and missed opportunities which took place over the course of decades.

That’s why, as part of this new foundation, we’re seeking to build an energy economy that creates new jobs and new businesses to free us from our dependence on foreign oil. We want to foster an education system that instills in each generation the capacity to turn ideas into innovations, and innovations into industries and jobs. And as I discussed on Monday at the American Medical Association, we want to reform our health care system so that we can remain healthy and competitive.  Read the rest of this entry »