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September 24, 2009
White House Pares Its Financial Reform Plan
Timothy "Rawhide" Geithner
By STEPHEN LABATON
WASHINGTON — As a senior House Democrat announced an ambitious schedule to complete legislation overhauling the nation’s financial system, the Obama administration on Wednesday abandoned a symbolically significant provision in the face of widespread political and industry opposition.
At a hearing before the House Financial Services Committee, Treasury Secretary Timothy F. Geithner announced that the administration had dropped one provision in its plan for a consumer financial protection agency — a requirement for banks and other financial services companies to offer “plain vanilla” products, like 30-year fixed mortgages and low-interest, low-fee credit cards.
Mr. Geithner’s decision followed a wave of criticism by Democrats and Republicans, some with close ties to the industry, that the plan was the first step toward a new regulatory regime in which the administration would be handing new powers to government bureaucrats approving and disapproving a wide array of financial products. Republicans in particular had embraced that line of attack and said it is similar to the flaws in the administration’s health care program of giving government too much power.
Among those who had said the provision stood no chance of passage was the committee chairman, Representative Barney Frank, a Massachusetts Democrat, who announced on Tuesday evening that it would not be part of the legislation.
“There has been a lot of concern that if you invest the government with the ability to decide what’s appropriate here and there, that will lead to less competition and choice,” Mr. Geithner said. “The chairman’s proposals, which I’ve had a chance to quickly read, provides a better balance of choice and protection.”
Consumer groups offered a measured response to the changes, expressing some relief that a stand-alone consumer-protection agency had not been scrapped altogether.
“I don’t think anything here is intended to weaken or eviscerate this in any way,” said Ed Mierzwinski, consumer program director at the United States Public Interest Research Group. “The agency will still have a primary role of protecting consumers, and it will still have authorities.” Mr. Frank said he intended to draft the legislation with the committee in the coming weeks in the hope of getting it to the floor of the House as early as November.
“Media reports that it is dead for the year are inaccurate,” Mr. Frank said. “This will be a very busy schedule.”
In the Senate, the chairman of the banking committee, Christopher J. Dodd, Democrat of Connecticut, has also said he intends to introduce comprehensive legislation soon after further consultations with committee members.
Hoping to move the legislation along, Mr. Frank disclosed important limits on the administration’s proposal intended to remove the political obstacles that had stalled that plan. Mr. Frank’s version restricts the scope of the proposed agency, but still leaves it significantly more powerful than the banking industry would like. Since the administration proposed the creation of the agency last June, the industry has mounted a major lobbying campaign to kill it.
Mr. Frank announced that the legislation he was drafting would exempt a variety of businesses — merchants, retailers and providers of retirement plans, among others — from oversight by the new consumer financial protection agency. The agency was proposed by the administration to protect consumers from deceptive or abusive credit cards, mortgages and other kinds of loans.
Mr. Frank said the legislation would provide for a way to resolve disagreements between regulators at the new agency and those at the other agencies that examine banks.
The proposal by Mr. Frank was an effort to address the widespread criticism of the new agency by banks, while trying to assure that the new agency has some regulatory teeth. While narrowing the agency’s authority, the Frank plan would give the agency both the authority to write and enforce regulations.
Both Mr. Frank and Mr. Geithner emphasized that the legislation would be designed to limit the “too big to fail” policy of bailing out the nation’s largest institutions. That policy, which has provoked widespread voter anger, was central to the bailouts of Bear Stearns and American International Group and led to big loans to the largest banks in the nation.
“We will be putting a package of legislation together that will substantially diminish that problem,” Mr. Frank said. “We will be providing for mechanisms for putting financial institutions out of their misery. There will be death panels enacted by this Congress but they will be for large institutions that are seen as too big to die. We are talking here about dissolution, not resolution. We are talking about making it unpleasant for these institutions to die.”
Mr. Geithner said those institutions whose problems could shake the financial system will face far greater regulatory scrutiny and higher capital standards. But under questioning from Representative Spencer Bachus of Alabama, the ranking Republican on the committee, he refused to rule out the possibility of future bailouts of big companies.
“You can’t have a system, how shall I say it, where you abolish the fire station, or lock the doors to the fire station,” Mr. Geithner said. “That’s not a system that works.”
http://www.nytimes.com/2009/09/24/bu...e.html?_r=1&hp
September 24, 2009
Timothy "Rawhide" Geithner
At a hearing before the House Financial Services Committee, Treasury Secretary Timothy F. Geithner announced that the administration had dropped one provision in its plan for a consumer financial protection agency — a requirement for banks and other financial services companies to offer “plain vanilla” products, like 30-year fixed mortgages and low-interest, low-fee credit cards.
Mr. Geithner’s decision followed a wave of criticism by Democrats and Republicans, some with close ties to the industry, that the plan was the first step toward a new regulatory regime in which the administration would be handing new powers to government bureaucrats approving and disapproving a wide array of financial products. Republicans in particular had embraced that line of attack and said it is similar to the flaws in the administration’s health care program of giving government too much power.
Among those who had said the provision stood no chance of passage was the committee chairman, Representative Barney Frank, a Massachusetts Democrat, who announced on Tuesday evening that it would not be part of the legislation.
“There has been a lot of concern that if you invest the government with the ability to decide what’s appropriate here and there, that will lead to less competition and choice,” Mr. Geithner said. “The chairman’s proposals, which I’ve had a chance to quickly read, provides a better balance of choice and protection.”
Consumer groups offered a measured response to the changes, expressing some relief that a stand-alone consumer-protection agency had not been scrapped altogether.
“I don’t think anything here is intended to weaken or eviscerate this in any way,” said Ed Mierzwinski, consumer program director at the United States Public Interest Research Group. “The agency will still have a primary role of protecting consumers, and it will still have authorities.” Mr. Frank said he intended to draft the legislation with the committee in the coming weeks in the hope of getting it to the floor of the House as early as November.
“Media reports that it is dead for the year are inaccurate,” Mr. Frank said. “This will be a very busy schedule.”
In the Senate, the chairman of the banking committee, Christopher J. Dodd, Democrat of Connecticut, has also said he intends to introduce comprehensive legislation soon after further consultations with committee members.
Hoping to move the legislation along, Mr. Frank disclosed important limits on the administration’s proposal intended to remove the political obstacles that had stalled that plan. Mr. Frank’s version restricts the scope of the proposed agency, but still leaves it significantly more powerful than the banking industry would like. Since the administration proposed the creation of the agency last June, the industry has mounted a major lobbying campaign to kill it.
Mr. Frank announced that the legislation he was drafting would exempt a variety of businesses — merchants, retailers and providers of retirement plans, among others — from oversight by the new consumer financial protection agency. The agency was proposed by the administration to protect consumers from deceptive or abusive credit cards, mortgages and other kinds of loans.
Mr. Frank said the legislation would provide for a way to resolve disagreements between regulators at the new agency and those at the other agencies that examine banks.
The proposal by Mr. Frank was an effort to address the widespread criticism of the new agency by banks, while trying to assure that the new agency has some regulatory teeth. While narrowing the agency’s authority, the Frank plan would give the agency both the authority to write and enforce regulations.
Both Mr. Frank and Mr. Geithner emphasized that the legislation would be designed to limit the “too big to fail” policy of bailing out the nation’s largest institutions. That policy, which has provoked widespread voter anger, was central to the bailouts of Bear Stearns and American International Group and led to big loans to the largest banks in the nation.
“We will be putting a package of legislation together that will substantially diminish that problem,” Mr. Frank said. “We will be providing for mechanisms for putting financial institutions out of their misery. There will be death panels enacted by this Congress but they will be for large institutions that are seen as too big to die. We are talking here about dissolution, not resolution. We are talking about making it unpleasant for these institutions to die.”
Mr. Geithner said those institutions whose problems could shake the financial system will face far greater regulatory scrutiny and higher capital standards. But under questioning from Representative Spencer Bachus of Alabama, the ranking Republican on the committee, he refused to rule out the possibility of future bailouts of big companies.
“You can’t have a system, how shall I say it, where you abolish the fire station, or lock the doors to the fire station,” Mr. Geithner said. “That’s not a system that works.”
http://www.nytimes.com/2009/09/24/bu...e.html?_r=1&hp