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. Moderate Democrat

    "That's no small thing given the industry that spent $373 million"

    The only way you can have that much money to spend on lobbying, is by cheating the public with fraudalent and/or misleading contracts. Hang em and hang em high.....let their children watch their criminal parents put to justice!

    July 17, 2009 06:55 pm at 6:55 pm |
  2. addon

    Thank You "fair is fair"......I see your point! Spending is out of control and Obama is pushing ahead.

    I felt the same discomfort with Bush pushing ahead with wars while avoiding publishing the budget of same. The wars will cost us more than $2.5 trillion over the next ten years. The cost for healthcare for all americans is less that 1/2 that amount.

    Now I go to this premise......is it more patriotic to put that amount of money into Iraq and Afghanistan and avoid doing what's necessary for the american public (just because we screwed up our priorities)?

    Please answer ...and I say this with respect for your intellect and honesty

    July 17, 2009 06:56 pm at 6:56 pm |
  3. Moderate Democrat

    Fair is Fair July 17th, 2009 5:56 pm ET

    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.
    Thanks for admitting it. But let's not pretend they are taking huge losses. Where did they come up with that lobby money, of 327 million?

    Let's be real, they are ripping off america, plain and simply. Should people read the fine print...by all means yes. But there should also be criminal suits and ALOT more regulation on these villians.

    July 17, 2009 06:58 pm at 6:58 pm |
  4. Gerry

    So you think that we need another government agency. This will cost millions of more dollars each year and accomplish nothing just like most of the government agencies that aren't doing anything now. I can't believe that sobody should be watching them already.

    July 17, 2009 06:59 pm at 6:59 pm |
  5. Marc

    Like THEY are the ones that deserved the biggest trust from our part in this issue... Yeah, right...

    July 17, 2009 07:00 pm at 7:00 pm |
  6. Robert

    I am really happy to hear that the President is trying to help consumers and not to make the richer have the privilege to charge for whatever they want and to have luxury at consumer's cost. it is time for americans not to be afraid and support Obama. This will bring or leave more money in our pockets and not on the wealthy Republicans who protect the rich as usual.

    July 17, 2009 07:03 pm at 7:03 pm |
  7. Robert

    i just wonder who lobby for the middle class?

    July 17, 2009 07:04 pm at 7:04 pm |
  8. Zero.

    With Hillary, you would have also had Bill. A respectable stability.

    A proven stability. But with Barack Obama your left with a little boy, playing skittles.

    July 17, 2009 07:10 pm at 7:10 pm |
  9. Charlotte

    Nathan is a twit. How does wanting to protect consumers amount to arrogance? The arrogance is that of the greedy, money-grubbing Wall Street financiers who are fighting tooth and nail against regulation because they want to be able to continue sucking gullible people into usurous lending situations. These jerks know that if they are required to spell out terms of loans honestly, people would probably look to another lender if there's anything fishy, and if they must make it comprehensible then they cannot steal from as many unsuspecting people. There is nothing arrogant about wanting to reel these sharks in. And no, whats-yer-butt – oh, yeah, "Fair is Fair" – high interest rates are NOT needed to "cover deadbeats." Your so-called "deadbeats" would not exist if loan contracts could be read and understaood by these people – they'd be much less likely to get in over their heads if they know what they're getting into. All Obama is asking for is some RULES to make sure people know what they're signing, and to make sure these thieves in the lending industry aren't trying to pull a fast one on the consumer. You aren't smart enough to grasp this, but it's actually a very, very good idea.

    July 17, 2009 07:11 pm at 7:11 pm |
  10. annie for Palin


    July 17, 2009 07:15 pm at 7:15 pm |
  11. Nathan @ 5:48

    P.i.S.S.O.F.F. you little girlie boy

    July 17, 2009 07:25 pm at 7:25 pm |
  12. Good for Obama

    F-Wall Street.

    Bunch of whinney little thieves.

    More Regulation NOW !!!!

    July 17, 2009 07:26 pm at 7:26 pm |
  13. Jeremy

    I think our president is the best leader in the world. He used our money to bail out same banks that are busy fighting to bring him down! What if he let them collapse and expand small scale banks which practised ethical lending? What if he blacklisted all those inept CEOs. We need a true dictator to pump sanity back to this greedy corporate madness! I can't believe these banks are using millions of $ to fight ethical practice. We are tired of this bank theft.

    July 17, 2009 07:26 pm at 7:26 pm |
  14. Ryan

    The Walstreet fat cat who fights against Obama says "He insists any changes in the industry would have devastating effects on the economy"

    hmm Devastating he says ......what do you call the biggest recession since ww2 ?

    July 17, 2009 07:30 pm at 7:30 pm |
  15. Jan in AZ.

    Hey if you don't like some one trying to fix the worst mess in history that the Bush people have made for us then do something about it.
    Obama is only man trying for the first time that I have noticed in all my adult lift that is trying to tackle everything that we have all been complaing about for years. Healthe care that is fair for all and protecting the middle class that is responsible for the growth of the Nation. Let's try to support the ones that try and boo the complainters.

    July 17, 2009 07:30 pm at 7:30 pm |
  16. Concerned American

    How suprising, the people who helped fuel the problems would really like us all to just leave them alone, please.

    July 17, 2009 07:30 pm at 7:30 pm |
  17. Daniel

    Big surprise...they don't give a shit about this country, as long as they make/steal money.

    July 17, 2009 07:38 pm at 7:38 pm |
  18. a

    bye bye greed greed... were are tired of this companies trying to control out lives... bye bye... GOP will get voted out of their offices

    July 17, 2009 07:40 pm at 7:40 pm |
  19. GoldenEst82

    I think the American Culture is so fixated on "right now" it is the equivalent of a national case of ADD.
    We live in the coming of age of the "Me generation", and they are not interested in who they screw on their way to the top.
    Everyone is so busy pitching themselves its hard to believe ANYONE is working for us in the literal sense.

    July 17, 2009 07:42 pm at 7:42 pm |
  20. Zoe Hall

    There needs to be a reform in many areas of the economy. Credit companies & Mortgage companies. Certainly have always been out for themselves. The "No Document" Loans would never be allowed if this were not the case. Wow, Talk about an invitation to lie. What about Credit card companies, They give credit cards to students? when has a student had enough money to pay for anything, other than a pizza & a movie, not to mention the students education loans. They are being defaulted on as well as mortgages. What about Real Estate Companies that work in connection with Mortgage companies, You don't think they know when someone is looking at Pie in the Sky homes rather than what could actually be afforded? They all have one thing in common, Commissions & Bonuses. I think that if something doesn't change that's what will bring this economy to its knees, again and again. Thank you OBAMA!

    July 17, 2009 07:43 pm at 7:43 pm |
  21. Julie

    Stifle innovation...........really, like those "funny" loans and credit card practices. Those are just out and out thievery not innovations. The regulations are needed because time and again this industry has proven it cannot be trusted to perform ethically and greed prevails. All consumers should be outraged by this industry's deceptive practices.

    July 17, 2009 07:47 pm at 7:47 pm |
  22. Reinstate Darwinism

    How about we start enforcing the laws we ALREADY have, with all of the agencies we ALREADY have? Can anyone say SEC Fail? Anyone go to jail yet over the financial meltdown? Can we say blatant fraud? Anyone get fired at the SEC?

    We need politicians that are as intelligent as the people on Wall St. or atleast, politicians who are bright enough to have advisors as intelligent as the ones on Wall St.

    We DO NOT need another GOVERNMENT AGENCY! If you PUNISH them when they do something wrong. They won't do it anymore. Instead you have REWARDED THEM for doing something wrong. A lot of those companies should've been structurally dissolved by our government. Instead they are posting profits and paying bonuses out (to the vast majority of the people who got us into this, who's personal wealth hasn't be greatly affected btw). A lot of them are using OUR money to do it.

    July 17, 2009 07:48 pm at 7:48 pm |
  23. Aunt Bea and Opie

    Sounds like the spyder and the fly.

    July 17, 2009 07:52 pm at 7:52 pm |
  24. Ken

    Is this surprising that the greedy bastards who bankrupted the country are upset that they might actually have to perform according to some rules?? They needed the bailouts because they were broke and this is how they thank the American people??

    Cry us all a river!

    July 17, 2009 07:59 pm at 7:59 pm |
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