Consumer Protections Eyed In Financial Overhaul
Wednesday, June 17, 2009
Photo by Aude Guerrucci-Pool / Getty Images
U.S. President Obama on Wednesday unveiled a multi-pronged plan that aims to protect the U.S. financial system from another meltdown by giving regulators broader involvement across the financial spectrum — from bank holding firms and big companies to individual borrowers.
Joined by Treasury Secretary Tim Geithner and other top financial advisers at the White House, Obama proposed giving the Federal Reserve more authority to regulate bank holding companies and other large firms whose failure could endanger the U.S. economy. He also called for creation of a new agency that would oversee credit and lending practices, protecting borrowers from entering into the types of risky loans that resulted in the nationwide housing crisis.
"Financial institutions have an obligation to themselves and to the public to manage risks carefully. And as president, I have a responsibility to ensure that our financial system works for the economy as a whole," Obama said at a news conference later.
Obama said the financial overhaul is part of his plan to build a new foundation for growth and prosperity that includes changes in the country's education and health care systems, as well as credit card reforms.
In an 88-page document detailing the proposed changes, the White House said the country's post-Depression regulatory system was not sufficient to deal with the abuses and excesses that led to the unraveling of major financial institutions. It notes that the regulatory system was poorly equipped to handle today's complex financial instruments.
One of the key weaknesses of the current system, according to the document, is that agencies and regulators are responsible for overseeing individual companies, while no one has been charged with looking at the stability of the financial system as a whole.
"Regulators were charged with seeing the trees, not the forest," Obama said. "Even then, some firms that posed a so-called systemic risk were not regulated as strongly as others; they behaved like banks but chose to be regulated as insurance companies, or investment firms, or other entities under less scrutiny. As a result, the failure of one large firm threatened the viability of many others."
The president said he consulted lawmakers, business experts and consumer advocates in drafting the changes. He urged Congress to act quickly on his plan, but acknowledged that some will say he is proposing too much new regulation, while others will complain it's not enough.
"We do not want to stifle innovation," Obama said. "But I'm convinced that by setting out clear rules of the road and ensuring transparency and fair dealings, we will actually promote a more vibrant market. This principle is at the heart of the changes we are proposing."
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