Washington, DC – The White House plan to overhaul regulation
of the financial markets includes several prominent elements championed by
Oregon’s Senator Jeff Merkley to strengthen consumer protections and improve
oversight.
“Wall Street executives took ordinary investments and turned
the financial markets into Las Vegas. They bet big, lost, and got
taxpayer money as a parting gift. This system dramatically undermined our
economy, and has cost us hundreds of thousands of jobs, tens of thousands of
family homes, and billions upon billions of dollars,” said Merkley. “It’s
important that we take steps to ensure this reckless behavior won’t bring our
economy down again.”
Last week, Senator Merkley urged the White House to take
three steps to strengthen the market and improve protections for
consumers. In a speech today and the accompanying plan, President Barack
Obama outlined wide-ranging proposals to improve transparency and oversight of
Wall Street. The President’s plan included the following major
points which Senator Merkley called for:
- The creation of an independent Consumer
Financial Protection Agency, which would protect consumers of credit, savings,
payment and other consumer financial products and services. The new
agency would be empowered to ban dangerous products, services, and practices,
as well as draft regulations of such products and services. States would
also be empowered to enforce consumer protection laws. Modeled on the
Consumer Protection Safety Commission, this new agency would guarantee that
financial products receive the same scrutiny as other products and that
consumer protection receives the same attention as other elements of banking
regulation.
- Including the Director of the Federal Housing
Finance Agency (FHFA) on the Financial Services Oversight Council, the new body
created to monitor systemic risk in the financial system. The
inclusion of the FHFA Director will ensure that the new systemic risk council
will have the housing expertise necessary to ensure that our financial
regulators have a clear understanding of that market, which has been the source
of our two most recent financial crises, the savings & loan crisis and the
present sub-prime crisis.
- Implementing new regulations and empowering
regulators to reform lending practices that were clearly implicated in this
crisis, which would include banning yield spread premiums and prepayment
penalties, requiring loan originators to hold a portion of the loans so they
have a stake in preventing too much risk-taking, requiring consumers be offered
simple, easy-to-understand choices in mortgage products, and requiring
increased transparency and robust reporting by issuers of asset-backed
securities.
In addition, the President’s reforms would also: require
strong supervision and regulation of all financial firms; strengthen regulation
of core markets and market infrastructure; provide the government with the
tools to effectively manage financial crises; and improve international
regulatory standards and cooperation.
Some of these reforms would depend upon actions taken by
regulatory agencies. Merkley will work with his fellow members of the
Senate Banking, Housing and Urban Development Committee to immediately adopt
the most important of these provisions. In particular, Senator Merkley
has introduced legislation to immediately ban steering payments and prepayment
penalties.
“Our homeowners hired and paid for a mortgage broker to help
them find the best possible loan, but were instead steered into high cost,
exploding interest loans, turning a family’s dream of homeownership into a
nightmare. Banning steering payments – secret kickbacks to brokers – and
prepayment penalties that lock families into bad loans will restore homeownership
as a foundation of the American dream,” said Merkley.
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