As part of the Obama Administration's efforts to build support for a new federal agency, the Consumer Financial Protection Agency, Deputy Treasury Secretary Neal S. Wolin published an op-ed in The Hill. In his op-ed piece, Wolin argues that creating an agency focused on the interests of consumers of financial products would level the playing field and eliminate what he terms as the "race to the bottom" among firms and regulators.
Wolin argues that the systemic problems encountered over the past year and half cannot be solved by a council of regulators like the Financial Services Oversight Council, a council comprised of the heads of the Treasury, Federal Reserve Board, Comptroller, SEC, CFTC, FDIC, FHA, and other regulators. Rather, Wolin states:
The regulation of the most interconnected financial institutions and critical financial systems requires tremendous institutional capacity and accountability. We must leave no room for doubt about who is responsible for supervising them. The Federal Reserve is the only regulatory body with the experience and with the broad and deep knowledge of the capital markets that the task requires. You cannot supervise financial holding companies by committee.
Wolin also argues that separating rulemaking for consumer protection from enforcement and supervision makes no sense.
What does cause problems is separating consumer protection rule-writing from enforcement and supervision, as we do today. That separation deprives the rule-writer of market information and causes the rule-writer and the supervisor to point fingers instead of acting.
Wolin also rejects any assertions that this new agency might stifle innovation and limit the new financial products in the market available to consumers.
The agency will not limit consumers' ability to choose the products they want. But it will make it harder to sell consumers products that they don't understand and cannot afford.
We reject the false choice between consumer protection and innovation. Americans deserve a financial system that both fosters innovation and provides strong consumer protections.
Given the controversy surrounding this new proposed Consumer Financial Protection Agency, there will no doubt be more op-ed articles and efforts in other media on both sides of the argument, designed to sway opinion both of the public and in Congress.
The full text of Neal Wolin's July 22, 2009 op-ed in The Hill is available at: http://thehill.com/op-eds/consumer-protection-agency-would-stop-companies-race-to-the-bottom-2009-07-22.html
- "Consumer Protection Legislation Delivered to Congress," July 14, 2009
- "President's Plan Maintains and Strengthens SEC's and CFTC's Powers," June 18, 2009