Obama caves to pressure on consumer financial protection
Courtesy of Edward Harrison at Credit Writedowns
At issue here is the news that the Obama Administration dropped plans to force financial institutions to offer “plain vanilla” financial products that are simple enough for consumers to understand. My headline is editorial enough on this issue. So, rather than editorialize this latest announcement, I’ll quote from the press.
- The beginning of the end of meaningful regulatory reform – Felix Salmon
There’s no good reason for this capitulation, except for the financial lobby has so effectively captured Congress that no reform would be able to get through with such a common-sense provision in place… I fear that by the time Congress is done, the Consumer Financial Protection Agency won’t be able to protect consumers at all — and that’s assuming it’ll even exist.
- White House Pares Its Financial Reform Plan – Deal Book
At a hearing before the House Financial Services Committee, Treasury Secretary Timothy F. Geithner announced that the administration had dropped a provision in its plan for a consumer financial protection agency that would have required banks and other financial services companies to offer so-called “plain vanilla” products, such as 30-year fixed mortgages and low-interest, low-fee credit cards
A requirement that firms providing financial products offer ‘plain vanilla’ loans and cards is dropped, indicating the Obama administration is willing to accept major revisions to get its plan passed…
On Wednesday, Treasury Secretary Timothy F. Geithner backed down on a key component that has stirred opposition — a requirement that companies providing financial products offer a "plain vanilla" option, such as fixed-rate mortgages or no-frills credit cards.
His retreat came after Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, floated details of his own version of regulatory legislation that eliminated the requirement.
Geithner’s move showed that, just as with healthcare legislation, the administration is willing to accept significant revisions to get its plan passed.
I said my piece in June. Serious reform is not going to be forthcoming – not on healthcare or in financial services. Am I wrong here? After all, Paul Volcker is singing another tune. Please tell me how you see this.
Update: I found this related item at the FT:
Angela Merkel warned fellow world leaders on Thursday not to make the fight against global imbalances the central issue of a meeting of the world’s 20 largest economies, which kicks off in Pittsburgh on Thursday night.
Speaking in Berlin before boarding her flight, Ms Merkel came close to accusing the US and Britain of backtracking on the issues of financial market regulation and global limits on bonuses for bankers by shining the spotlight on the export-oriented economic policies of Germany and China.
“We should not start looking for ersatz issues and forget the topic of financial market regulation,” she said in her clearest comments to date. “We cannot afford to neglect this issue now.”
