WASHINGTON, D.C. — The financial firms whose greed and reckless behavior wrecked the nation’s economy in the collapse that began a year ago this week now want to block the regulatory reforms that will prevent the next meltdown from happening, said Consumer Watchdog. Banks and their allies are spending millions on a public campaign to defeat legislation that would create an agency dedicated to consumer financial protection.
“The financial industry is using scare tactics to try and block real reform but weak rules and poor oversight are what got us into this mess. Tinkering around the edges won’t get us out. Wall Street’s attempts to preserve the status quo show they’re not serious about protecting consumers and taxpayers from the next financial meltdown. President Obama should answer banks that drag their heels with even stronger rules to make sure consumer protections stick,” said Carmen Balber, Washington Director for Consumer Watchdog.
President Obama promised transparency and accountability in his speech to Wall Street today. His proposed Consumer Financial Protection Agency needs the right tools to ensure transparent, accountable oversight, said Consumer Watchdog. The legislation must: Ensure public access to documents obtained and issued by the Agency, protect states’ authority to create and enforce financial consumer protections, allow the public to enforce the rules when regulators do not, and encourage consumer participation through a funded intervention process.
* Transparency. A sound regulatory system includes: transparency of process, meaning the rules are applied in a way that government officials, the media and the public can readily observe and review; and transparency of substance, meaning that the objects of regulatory oversight – the company’s books and the regulator’s findings – are public documents, not classified as trade secrets or otherwise withheld from independent public scrutiny.
* Accountability. To achieve accountability, rules must be both written and enforced – one without the other and a regulation is useless. This includes giving existing state regulators the power to enact financial protections, and act as ‘first-responders’ to identify unsafe practices before they spread nationwide. Accountability also requires giving individuals the power to enforce laws when regulators do not.
* Consumer Participation. Includes giving the public a formal role in the regulatory process, which provides a check on the political influence of financial institutions and reinforces government regulators. Creating a funded intervenor program incentivizes public participation by removing some of the financial hurdles to involvement and makes it reasonable for nonprofit public advocates to play a consistent and effective role in the process.
As proposed, legislation creating the Consumer Financial Protection Agency would preserve state authority to enact and enforce consumer protection rules, but is missing the other tools necessary to ensure transparency, accountability and consumer participation.
Similar tools, approved at the ballot in Proposition 103, have been used for twenty years in California to oversee that state’s multi-billion dollar insurance industry. The regulatory system saved drivers $62 billion on their auto insurance premiums since the law was enacted. Click here for more information.
“Strong regulation, and a new agency dedicated to consumer protection, is the key to financial reform. Otherwise we’re doomed to keep repeating the same mistakes: Weaken oversight when times are good and the financial industry is flying high, followed by a mad scramble to patch things up after the next disaster strikes,” said Balber.
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