July 17th, 2009
05:28 PM ET
11 years ago

Wall Street fights Obama's proposed financial agency

Congress is considering a new agency designed to give consumers more financial protection.

Congress is considering a new agency designed to give consumers more financial protection.

WASHINGTON (CNN) - If you hold a credit card, mortgage or a student loan, Congress is considering a new agency designed to give you a lot more protection. Called the Consumer Financial Products Agency, it would set new rules to simplify contracts, eliminate fine print, and get rid of the tricks and traps that led so many people to unwittingly sign up for mortgages they couldn't afford.

Guess who is fighting it? The financial services industry. According to one of the industry's top lobbyists, stopping the agency is "our number one priority." That's no small thing given the industry that spent $373 million on lobbying last year alone, according to the Center for Responsive Politics. He insists any changes in the industry would have devastating effects on the economy. He worries the agency "basically has no restrictions on what they can do in the area of consumer protection" and warns this could freeze up the credit market: "If credit goes up and costs more, some people that are eligible for credit today will not be eligible in the future."

"This is the biggest financial fight I have seen in the 20 years I've been in Washington," says Ed Mierzwinksi, with of the U.S. Public Interest Research Group (U.S. PIRG), a consumer advocacy organization. Consumer groups are outraged by the industry's opposition. "The people who are gearing up to kill the agency are the companies whose irresponsible practices and abuses led to the collapse of the world economy," says Mierzwinski. PIRG is one of approximately 200 groups which have formed a coalition called Americans for Financial Reform, which will be pushing Congress to approve the new consumer agency.

President Barack Obama proposed the agency last month as a centerpiece of his new plan for financial regulation. He called it "a new and powerful agency charged with just one job: looking out for ordinary consumers." And it would be designed, he said, to avoid a repeat of the worst abuses that caused the subprime mortgage crisis. As the president explained, "the most unfair practices will be banned. Those ridiculous contracts with pages fo fine print that no one can figure out – those things will be a thing of the past. And enforcement will be the rule not the exception."

The agency was the brainchild of Elizabeth Warren, who is Congress' watchdog for the Wall Street bailout as chairwoman of the Congressional Oversight Panel. She says the agency would require that companies offering credit cards and loans have "page and a half long credit card agreements; there's the interest rate, there's what causes a penalty and how much you'll get charged."

The result says Warren?

"You can compare four credit card agreements in under 30 seconds and you can tell which ones the cheapest which is the riskiest." Unlike current practice, the agency will have enforcement power. "It will have the power to sue [lenders] if they're not following the rules."

Supporters say it's no different from the agencies that oversee how prescription drugs are made, or whether electronic equipment is safe. Warren insists the new limits would help the nation's overall economic picture by reducing the amount of risk in the system. But opponents see it very differently. "I don't think anyone would argue that over the last thirty years financial innovation has been the fuel of the economy," says industry lobbyist Chris Stinebert, CEO of the American Financial Services Association, who believes that's reason to tread carefully. "We need to move more slowly. We need to answer some of these tough questions about cost, about consequences, about will it stifle innovation." The association has joined with other industry groups to fight the proposal.

The House Financial Services Committee, which has been holding hearings on the agency over the last weeks, is planning to vote on it in two weeks. So far there is strong opposition to the plan.

Filed under: Economy • President Obama
soundoff (116 Responses)
  1. Andrew, Buffalo NY

    More proof personal responcibility is just another liberal talking point!

    This is just another scheme for more government control of the people!

    We've moved from creationism to darwinism now to Obamanism, where the govt does everything for you.

    July 17, 2009 05:41 pm at 5:41 pm |
  2. The Lonely Libertarian of Liverpool NY

    Well they do have to spend all that bailout money on something what is wrong with a little lobbying? Not like they are bribing our elected officials? right Barney?
    We rushed to bailout Wall Street saying it was need to save Main Street. Wall Street has record profits.
    main street has...PINK SLIPS!

    July 17, 2009 05:43 pm at 5:43 pm |
  3. virginia for obama

    Watch the Republicans help them fight. . . .

    July 17, 2009 05:45 pm at 5:45 pm |
  4. Nathan

    How arrogant. He is becoming a dictator. He doesnt take advice from anyone. He also throws like a girl.:-P

    July 17, 2009 05:48 pm at 5:48 pm |
  5. Sue Ohio

    Another timely needed piece of legislation. Some many Bush laws to overturn. The current administration should be very busy over the next 3 years.

    July 17, 2009 05:48 pm at 5:48 pm |
  6. addon

    I need to hear from my fellow american – republicans (a dying breed but certainly a vocal lot)

    I'm seeing several posts that say directly or indirectly that Obama is the worst president in history. Is this what we are to believe? After only 6 months in office? Worst president ever after inheriting the worst economy of our live times?

    Please explain how this can happen so quickly; when most of us believe that the US economy is not something that can be fixed over 2 quarters.

    July 17, 2009 05:49 pm at 5:49 pm |
  7. soulstar

    my mom was a VP at Fleet Credit Card Service and she would NOT allow me to get a credit card until i was 21 and even then strongly advised i don't get one...why??? you figure it out.
    she retired from the industry and now works for a non-profit that helps people get out of debit and educates college kids on consumer credit; the dishonesty, maliciousness, callousness, and trickery of the industry. that industry has our congress in its pocket so don't look for congress to bite the hand that feeds it. Even joe biden (as a Dem) frequently voted for the financial industry over consumers because his state (Del.) is owned by credit card companies!
    it is absolutely astonishing to me the kind of underhanded practices that take place, as my mom tells me, in this industry...it is essentially usury and the government has been complacent in allowing it to get where it is today.
    they say these companies are not even interested in recovering principles in whatever financial product they offer. you are penalized at times for attempting to remit the principle!!!!! the profits are in crazy interest rates, fees, penalties, and $500 credit loans that take 5 years to pay back. by the end, you have paid out $5,000 to cover that small loan...and it is perfectly legal!!!

    sorry for the rant...just knowing what i know, i am saddened and ashamed of our government...if you thought the gov't is looking out for you, think again.

    July 17, 2009 05:51 pm at 5:51 pm |
  8. Larry

    Of course the financial services agency will fight this. They're the same thieves and liars that were responsible for the financial collapse.

    We don't have enough financial regulation, obviously. If we don't get some we're going to keep repeating what we just went through.

    July 17, 2009 05:52 pm at 5:52 pm |
  9. GI Joe

    We need regulation laws enforced. Those yahoos have brought the entire world economy to it's knees. Throw the bums in jail and shoot the lobbyists with tranquilizing guns.

    July 17, 2009 05:52 pm at 5:52 pm |
  10. S M R

    OF course these wallstreet hacks fight oversight. There goes their chance to continue to rip off the American taxpayer. Same goes for institutions like auto manufacturers, health care and banks. Thank you Mr. President for making a difference in the lives of average Americans.

    July 17, 2009 05:53 pm at 5:53 pm |
  11. Denise

    Who cares what WS thinks???? They owe US!!!!

    July 17, 2009 05:54 pm at 5:54 pm |
  12. Lynda/Minnesota

    Therein lays the crust of the economic woes in America. BIG BUSINESS. If the Tarp hasn't proven it by now, nothing will.

    These businesses are out for one thing and one thing only: to screw the American people. Congress is absolutely terrified of big business and their lobbyists. All those lobbyist campaign contributions and other perks certainly haven't help the working poor in this country. They never will.

    Greed. Pure and simple.

    July 17, 2009 05:55 pm at 5:55 pm |
  13. tjaman

    I'd personally rather that these banks and financial megagiants write more loans for small business enterprises and shore up our ailing economy and restore my 401(k) than use bailout funds from our tax dollars to fight legislation aimed at reining in the worst of their shenanigans. Have they forgotten entirely what it is they're meant to /do/?

    July 17, 2009 05:55 pm at 5:55 pm |
  14. Southerner

    Nathan believes in redistributing my money to his party's friends who sell us weapons at a premium. Republicans are socialists as well forcing us to pay for their corporation's tax cuts. Dividend income are not taxed like my W2, they get tax cuts. I dont have any dividends why dfo I have to pay for their free ride because they have dividend income

    July 17, 2009 05:56 pm at 5:56 pm |
  15. Fair is Fair

    I'll be the first to admit, something needs to be done with outrageous credit card companies.

    But perhaps the biggest reason for such high rates on credit cards is because they have to cover their losses for deadbeats that stiff them.

    If you take the profit motive out of business completely, you take the reson for the business existence in the first place.

    That's not the kind of system I want to live under.

    July 17, 2009 05:56 pm at 5:56 pm |
  16. Nia - AZ

    Of course they do...and in response the "speculators" work the stock market to drop the indexes....
    greddy bastards need to be regulated

    July 17, 2009 05:57 pm at 5:57 pm |
  17. katiec

    The financial institutions want to continue to rape the American people. They most certainly do not want regulations that would require them to be fair and honorable.
    The republicans have been classified as our domestic terrorists, now we must add financial institutions, lobbyists and all those who do not want our country, middle class American survive.

    July 17, 2009 05:57 pm at 5:57 pm |
  18. The Party of NO stood calmly by for 8 year while the shrub raped and pillaged America, so, why would we listen to you now?

    "The fnancial services industry. According to one of the industry's top lobbyists, stopping the agency is "our number one priority." That's no small thing given the industry that spent $373 million on lobbying last year alone"

    Well, now we know who provided republiklans with campaign funds for 2008!

    July 17, 2009 05:57 pm at 5:57 pm |
  19. Dutch/Bad Newz, VA

    @ Nathan

    The dictatorship was from 2000-2008. Veto this, veto that, deregulate this, deregulate that. The sub-prime mortgage meltdown happened on your guys watch. I knew when it started the sky was going to fall. Which is primarily the cause of this recession. Shall I list some of the damage?

    -A war of CHOICE in Iraq
    -Sub-prime mortgage meltdown

    July 17, 2009 05:59 pm at 5:59 pm |
  20. Zero.

    Winning isn't everything. He should have let Hillary win the Election.

    Stood out of sight and learned. Now he has to carry the Ball like it or not...

    July 17, 2009 05:59 pm at 5:59 pm |
  21. Jim

    Finally, credit card companies need to be monitored, greedy card companies will do ANYTHING to get in your pockets!

    July 17, 2009 06:01 pm at 6:01 pm |
  22. Fair is Fair

    @ addon, in response to your query –

    First... the "worst president" rhetoric is spewed a lot mainly from the fringe. Take it with a grain of salt.

    Second... the policies that Obama embraces and has put into place flies in the face of the capitalist system which made this the greatest country in mankinds history, in less than 200 years, what other civilizations cound not come close to in thousands of years. It's enough to make anyone shudder.

    Third... his healthcare initiative is alarming. While there undoubtedly needs to be reform addressed, a government takeover of 17% of the economy (in addition to what was already taken over) is unprecedented.

    I could go on...

    July 17, 2009 06:03 pm at 6:03 pm |
  23. Fla.

    Sorry Wall St. greed, your neoconservative cronies were voted OUT of office.

    Many Americans voted for reasonable regulation & oversight to help avoid another financial collapse and ensure proper protections for consumers.

    July 17, 2009 06:04 pm at 6:04 pm |
  24. Jeremy

    Of course they are. It's about the money, stupid.

    July 17, 2009 06:05 pm at 6:05 pm |
  25. Marc

    the whole thing is looking like the guy that buys a lock after the door was forced and somebody broke into his house. If he had a lock before, could the burglar break in? Yes, but it would have been a bit harder.
    So now the guy wants to take precautions against a new 'burglar'. Good for him and the people that lives in the same house than him.

    July 17, 2009 06:09 pm at 6:09 pm |
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