On July 16th , the Full committee of the House Financial Services Committee held a hearing on community and consumer advocates’ perspectives on the Obama administration’s financial regulatory reform proposals. Testifying were Joseph L. Flatley- Massachusetts Housing Investment Corporation, Oliver Ireland- Morrison & Foerster LLP, Edmund Mierzwinski-U.S. Public Interest Research Group, Janet Murguia, National Council of La Raza, Travis Plunkett-Consumer Federation of America, John Taylor- National Community Reinvestment Coalition, and Nancy Zirkin- Leadership Conference on Civil Rights.
In his opening statement, Chairman Barney Frank replied to yesterday’s arguments on the “plain vanilla” mortgages. There were concerns that “plain vanilla” mortgage product would have the impact of reducing consumer choice and hurt financial innovations. He explained that the innovations are important. But, innovations should be in the context of regulations. He claimed that although excessive regulations are problems, appropriate regulations provide safety and soundness to the financial environment. Thus, he anticipated that the congress and the private sectors can work together to make suitable regulations.
The testimony is summarized below and copies of the written statements are available on the committee’s web site at
Two consecutive hearings are held to present the views both from the banking perspectives and community and consumer advocates’ perspectives. However, the community and consumer advocates spoke in different voices contrary to the banking perspectives. Most of the witnesses support the establishment of the CFPA.
What they see and expect in the new agency are as follows:
Community Reinvestment Act (CRA)
“The Administration’s proposed CFPA contemplates a massive, unprecedented shift in oversight of Federal laws involving consumer protection.” said Joseph Flatley, President and Chief Executive Officer, Massachusetts Housing Investment Corporation on behalf of NAAHL. But, he also expressed his concern on the transfer of CRA to CFP. “NAAHL bankers have raised concerns about splitting the “Siamese twins” of CRA evaluation (going to CFPA) and the diminished influence of CRA in the regulatory application approval process (retained with the banking regulatory agencies),”said Mr. Flatley.
“Since CRA is a central component of consumer protection and CFPA will be the central agency to protect consumers, CFPA must be charged with enforcing CRA,” said John Taylor, President and Chief Executive Officer, National Community Reinvestment Coalition.
“Regardless of where jurisdiction over the CRA is ultimately placed, LCCR believes that strengthening the law is absolutely vital to ensuring that our communities have access to fair, responsible sources of credit,” said Nancy Zirkin, Executive Vice President, Leadership Conference on Civil Rights.
Credit Rating Agencies
“One disappointing area of the administration’s proposal is its failure to propose robust reforms of the Credit Rating Agencies,” said Edmund Mierzwinski, Consumer Program Director, Public Interest Research Groups.
“The plan’s provisions on credit rating agencies, in particular, are weak considering the central roles these agencies played in causing the current crisis,” said Travis B. Plunkett, Legislative Director, Consumer Federation of America.
Corporate Governance Reforms
“The President’s plan, which includes only two proposals on corporate governance...We believe it would be a grave error to miss yet another opportunity to adopt more far-reaching reforms. Among the top priorities should be legislation giving the SEC clear authority to reform the proxy access rules to make it easier for shareowners to nominate directors,” said Mr. Plunkett.
On the other hand, there is still opposition of the creation of the CFPA. “I believe that creating a separate stand-alone agency for this purpose ignores the increasingly vertically integrated nature of the market for retail financial services and the role that retail financial transactions play in the overall economy of the United States,” said Oliver I. Ireland, Partner, Morrison & Foerster LLP. He worried that “bifurcating regulation of the market as is contemplated by the creation of a dedicated agency that focuses only on the consumer protection aspects of the mortgage lending process, at a minimum, is likely to create conflicts with prudential supervisors.”
Thursday, July 16, 2009
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