Thursday, October 15, 2009
To fix financial system, protect consumers first
By Nick Porcell
Even though, the economy is starting to recover, yesterday the DOW Jones Industrial Average went above 10,000 for the first time since plummeting down to 6,500 in March earlier this year, there is still a long way to go before we fully recover from the worst economic downturn since the Great Depression. President Barack Obama's answer to help make sure such a downturn does not happen again is a new agency called the Consumer Financial Protection Agency. The new agency will help protect consumers against predatory marketing of subprime mortgages which were a root cause of the current recession. Those toxic loans were bundled in complex mortgage-backed securities that went through the global financial system, destroying enormous sums of investor wealth and nearly paralyzing credit markets.
The Consumer Financial Protection Agency would improve transparency, fairness, and the appropriateness of financial products and services like home mortgages, credit cards, and bank overdraft loans. Banks would be prevented from suddenly jacking up credit card fees and hiding rate increases in pages of fine print. And financial institutions would be pushed to describe their products as clearly, comprehensibly, and concisely as possible. To prevent the megabanks from getting around any new rules, the legislation must preserve the ability of the states to impose consumer finance protections of their own. State attorneys general usually do a good job defending the consumer’s interest, while international financial giants have a history of getting their way with the federal government.