From the Wall Street Journal (7/15/09)
By Jessica Holzer
WASHINGTON — Senate Republicans criticized White House plans for a new agency to regulate consumer financial products as a hindrance to innovation and consumer choice, foreshadowing the battle lines taking shape around the proposal.
“I am greatly concerned over many aspects of the president’s plan, not to mention its underlying premise,” Sen. Richard Shelby of Alabama, the top Republican on the Senate Banking Committee, said in opening remarks at a hearing on the matter.
Republican Sen. Bob Corker of Tennessee called the proposal “an example of this administration being Big Brother” and “a tremendous overreach” that would limit what companies could sell and consumers could buy.
The proposed Consumer Financial Protection Agency would have broad authority to ban practices in the financial industry and require firms to offer “plain vanilla” products that carry fewer risks. It would oversee consumer protection for consumer credit products including mortgages, credit cards and auto loans.
Assistant Treasury Secretary Michael Barr, the administration’s witness at the hearing, defended the plan, saying it wouldn’t prevent firms from offering complex products, such as pay-option adjustable-rate mortgages. Firms will merely have to offer simple products alongside those products, he said.
“I trust consumers tremendously. What I don’t trust is if you set up the marketplace to confuse consumers,” he said. In his prepared remarks to the panel, Mr. Barr argued that the current system allows banks to shop for regulators with the lightest touch on consumer protection. Attitudes toward the proposed agency broke along partisan lines, with Democrats defending it. “It’ll stifle innovation — clever ways to dupe the consumer,” said Democratic Sen. Charles Schumer of New York.