Legislative Spotlight Shifts to Financial Reform

May 7, 2010 by · Leave a Comment
Filed under: The Rating Agencies, The Ratings System 

Now that health care reform has been passed, President Obama is focused on financial reform and pushing for the formation of the Consumer Financial Protection Bureau, a new watchdog agency to protect the interests of American consumers.

Among other things, it would regulate credit cards, mortgages and nearly all other consumer loans; create transparency and accountability for credit rating agencies; and bring oversight to hedge funds.

“Safety and soundness is important, but the Fed also has a consumer role and it has failed miserably,” said Senate Banking Committee member Bob Menendez (D-NJ). “They didn’t take that part of their charge seriously.”

There are two versions in Congress right now: the House version, which would create a stand-alone agency with the power to write and enforce regulations, much like the Federal Trade Commission; and the Senate version, which would put the agency within the Federal Reserve and make its actions subject to veto by other federal regulators.

“Ultimately, I’d love to have a free-standing entity, but I think the reality is that it may not be possible in achieving the ultimate goal,” Mendez said.

It looks like the Senate version will be passed, but the last-minute changes still have to be hashed out.

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