Washington, DC – This week, President Barack Obama
will lay out principles for the upcoming debate over modernizing regulations of
the financial market. Oregon’s Senator Jeff Merkley is urging the White
House to include strong protections for consumers in that effort.
The lack of clear regulations and strong protections for
consumers directly resulted in today’s economic meltdown which has cost our
nation hundreds of thousands of jobs and forced tens of thousands out of their
homes. Empowering working Americans and providing clear rules of the road
for financial transactions will help ensure we don’t face similar crises in the
future.
“Our financial system has gone totally off-track.
Banks and other financial institutions peddled dangerous and tricky loans to
consumers. They then bundled these dangerous loans into ever more
intricate and incomprehensible financial products – products that no one could
properly value, then or now,” said Merkley. “When the housing bubble
collapsed, financial institutions did not have the assets to back up the risks
they had taken. Taxpayers were asked to commit billions to rescuing these
institutions, even as lending dried up, families were thrown out of their
homes, and the economy slowed to a halt. The collapse of this system
makes it crystal clear that we cannot continue down this path again – we need
strong rules that both financial institutions and working Americans can
understand.”
In a letter to the White House, Merkley urged the President
to support three components of financial regulation that would help protect
consumers:
- The creation of an independent financial
products safety commission that would guarantee financial products receive
the same scrutiny as other products. While we currently have a Consumer
Products Safety Commission which protects consumers from dangerous appliances
and clothing, we have no similar commission to protect financial consumers from
dangerous mortgages, credit cards and other financial products. Moreover,
creating an independent agency focused on financial consumer protection is the
most important thing we can do to ensure the long-term safety and soundness of
our financial system because, as this crisis has taught us, the best systemic
risk regulation is good consumer protection. - Including a housing expert in any body
created to evaluate the systemic risk of the financial system. The
two largest financial crisis of the last thirty years – the savings & loan
crisis of the 1980s and the present subprime crisis – originated in failures in
housing finance. Today’s crisis, in particularly, was caused in part because
regulatory bodies were not looking at whether it was likely that housing prices
would forever increase. When they started to decrease, financial
institutions did not have sufficient capital reserves to cover their
losses. A housing expert would help ensure that financial institutions
and regulatory bodies have a clear understanding of that market. - Implementing laws that would ban the most
egregious lending practices, such as prepayment and steering penalties.
These practices trapped families in loans they could not afford but could not
refinance. Senator Merkley has introduced two bills to end these types of
penalties.
“Restoring the rules of the road for our financial
regulatory system is critical to protecting the American economy and ensuring
its stable growth over the long term,” said Merkley. “Over the last
several years, the financial markets became casinos where the banks made bets
and the taxpayers paid the bills. Americans deserve better than to have
their jobs, homes, and savings subject to the whims of such a market. I
look forward to working with the Administration to restore fairness and protect
consumers.”
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