Obama Financial Regulation Plan Includes Merkley-Backed Provisions to Strengthen Protections for Consumers

Wednesday, June 17, 2009

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.