WASHINGTON (AP) - The Obama administration is actively
considering creation of a regulatory commission to protect
consumers of financial products such as credit cards and mortgages
in an effort to crack down on some of the abuses that helped
trigger the current financial crisis, according to administration
and industry officials.
These officials said that the administration has been exploring
such an approach in meetings over the past few days with executives
of the financial services industry.
There was also a discussion of the proposal at a dinner Tuesday
night at the Treasury Department attended by Treasury Secretary
Timothy Geithner and Lawrence Summers, director of the president's
National Economic Council.
An administration official who confirmed that the dinner had
taken place said that no final decisions had been reached. The
meeting was first reported by The Washington Post on its Web site.
However, an industry official said that the administration
supported the concept that has already been introduced in
legislation by several senators but may offer its own approach to
The officials who spoke Tuesday night did so on condition that
their names not be used because the administration is not ready to
unveil a proposal.
Treasury issued a statement late Tuesday that called the dinner
"one of a series of meetings with a wide range of relevant
constituencies and experts" to seek views on regulatory reform.
"Tonight's outreach meeting was largely attended by academic
experts and former government officials. Other meetings have been
held with consumer and investor groups and a wide range of
financial services and market participants," the Treasury
statement said. "No decisions have been made but the
administration is actively seeking various viewpoints as it puts
together its framework."
The proposal could set off a turf war among current federal
agencies such as the Securities and Exchange Commission and the
various bank regulatory agencies.
The administration is considering centralizing the enforcement
of laws that protect consumers of financial products, such as
mutual funds, credit cards and mortgages - an effort that currently
is spread across a number of federal agencies.
A leading proponent of such an approach has been Harvard
professor Elizabeth Warren, who is currently serving as the head of
the Congressional Oversight Panel for the government's $700 billion
financial rescue effort.
Warren argued in a 2007 article that the government needed to do
a better job of protecting homeowners who take out mortgages and
consumers of other increasingly complex financial products.
Sens. Richard Durbin, D-Ill., Charles Schumer, D-N.Y., and
Edward Kennedy, D-Mass., introduced legislation earlier this year
that would create a commission like the one proposed by Warren.
Some industry groups have already expressed opposition to the
The Financial Services Roundtable, which represents some of the
biggest institutions in the country, has argued that it would be a
mistake to separate the regulation of financial products from the
regulators who oversee the institutions selling those products.
It was unclear whether the administration will propose creating
a new federal agency to house the commission or placing the
commission under an existing agency.
The administration is expected to unveil its proposal in the
next few weeks as it pushes ahead with a sweeping effort to
overhaul the government's financial regulatory system.
Geithner has said that extensive changes are needed to make sure
that the current financial crisis, the worst in seven decades, is
Under the current system, regulation of financial products is
split between a wide range of state and federal agencies, including
the Federal Reserve, the SEC and the Federal Trade Commission.
Under one possible approach, some federal banking agencies might
combined and some powers over consumer products might be
consolidated into a new body.
The administration has already put forward some broad principles
for financial regulatory overhaul, including creation of new powers
to allow authorities to take over major financial institutions that
represent a threat to the system.