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

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

“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
  • 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

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

“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.