President Obama announced today a sweeping overhaul of the way the US financial system is regulated and as a part of that overhaul, the way that mortgage brokers and banks are regulated may change once approved by congress.
According to the plan laid out by President Obama, there would be at least two new agencies created to help protect consumers. First, the new Consumer Financial Protection Agency would oversee products from mortgages to credit cards. It would have authority to ban “unfair terms and practices,” punish companies for violations with fines and penalties and write rules to set higher standards for banks and non-bank companies.
In addition tot he new CFPA, there would be a “new” regulator to oversee banks that would be called the National Bank Supervisor, would watch over federally chartered lenders. It would assume the duties of what the OTS and Office of the Comptroller of the Currency do now as well as expand on those duties.
The Federal Reserve will also see a more active role in regulating financial business, although while it will gain a bigger role as the systemic regulator, would have some of its emergency lending power curbed. The plan calls for the Treasury secretary to approve in writing any emergency funding.
Reaction to the plan was mixed.
Edward Yingling, president of the American Bankers Association, said his group has some “real concerns” about the consumer protection measures. “For community banks that had nothing to do with this crisis, this will be massive regulation that will burden them with new costs,” Yingling said as he arrived at the White House for the announcement.
David Hirschmann, president of the U.S. Chamber of Commerce’s capital markets center, said the largest American business lobby group is disappointed with the plan.
“While the administration has made several positive recommendations, we’re concerned that overall, the proposal simply adds to the layering of the system without addressing the underlying and fundamental problems,” he said. “We can’t simply insert new regulatory agencies and hope that we’ve covered our bases.”
Democratic Representative Barney Frank of Massachusetts, chairman of the House Financial Services Committee, said, “I like what I see” of the proposal. He said lawmakers likely will make some changes, though he refused to go into specifics.
