By Sally Greenberg, NCL Executive Director
The U.S. House of Representatives recently passed the most sweeping overhaul of our financial regulatory system, the Wall Street Financial Reform and Consumer Protection Act, since the Great Depression. Unfortunately, not a single Republican supported the 223-202 roll call vote. For those of us interested in consumer protection, the centerpiece of the bill is the creation of a federal agency whose job it is to police the financial landscape for systemic risks, begin to oversee the largely unregulated derivatives market, and give shareholders a larger say in the executive compensation. The House bill also sets aside billions to assist unemployed homeowners.
The new agency was the brainchild of Harvard Law Professor Elizabeth Warren, who observed that if you buy a toaster, it’s assumed to be safe. As an individual consumer, you’re not expected to detect a defect by reading the 30-page manual; just the same, Warren argued that a financial instrument like a mortgage or car loan can be—and too often is—filled with tricks and traps that result in consumers being ripped off.
The bill has yet to pass the Senate, but we are encouraged by the House action and believe it’s past time that consumers receive the protection from a federal financial agency, filling a gap that exists today because agencies like the Federal Reserve and the Office of the Comptroller of the Currency have fallen down on the job so miserably in the past. This new agency — whose mandate it will be to focus on protecting consumers and the financial markets from dangerous financial products (like certain types of derivatives or subprime home loans that were packaged by the millions and sold to banks with no one concerned about whether the homebuyer could actually pay the mortgage) — will now fulfill this critical role.