Banks Unhappy with New Plan of New Government to Set up New Regulations
The banks are most unhappy with a new plan by the new Obama government to set up new regulatory controls over financial bodies. There is a proposal to set up an agency whose only mission would be to see to the interests of consumers. But banks are ready to take on the challenge to prevent such a move with all the weapons they have at their disposal. The Democrats in the Senate and the House backed by consumer groups are equally determined to see the plan through.
The proposal would take away all the responsibilities that the present bank regulators like Federal Reserve, Insurance Corporation, Comptroller of Currency and Federal Reserve have towards the consumers. The new agency would be given a free hand to introduce standards for the conventional mortgages. It would also have the power to make it mandatory for lenders to offer such types of loans that will give borrowers a chance to opt out of the more dangerous and riskier ones.
Moreover the agency would be able to ban those mortgages that include hidden charges and sharp fines for the borrowers who attempt to clear the loan at a date earlier than usual. The agency would also have the authority to interpret and put into force the revised credit card law that had been passed by the Congress in the previous month. The aim is to prevent banks from continuing with their previous habit of raising interest rates arbitrarily.
There would also be examiners, akin to the current agencies dealing with bank regulations, which would have right to enter certain specific institutions, issue subpoenas, comb through their activities, seek changes and enforce fines.
Government officials opined that the plan would create a fair playing field and allow for the same type of regulation on financial products as was applied on consumer products. In sharp contrast the current regulators have authority over only certain kinds of financial bodies. The Comptroller of Currency oversees and regulates the national banks while the Feds supervise the holding firms.
Michael Barr, the Assistant Secretary for financial institutions said, “The agency will be able to get to the root of the mortgage crisis that we saw in the past. It will be able to go in to examine, supervise the operations of previously unregulated parts of the sector.”
John Taylor of National Community Reinvestment Coalition said, “It’s obvious from the history of the last 20 years that the regulators never understood that protecting consumers is also a way of ensuring the safety and soundness of financial institutions.”
