The New York Times ran this excellent editorial on September 13, 2009. Here’s an excerpt explaining the need for a strong Consumer Financial Protection Agency (CFPA):
CONSUMER PROTECTIONThe financial crisis would have been less severe — or largely avoided — if regulators had curbed abusive and unsound lending back when bad mortgage loans first began to proliferate. But all too predictably, they failed to act.
Prominent overseers like the Federal Reserve and the Office of the Comptroller of the Currency had long viewed consumer protection as a regulatory backwater. In keeping with the prevailing antiregulatory ethos, they also tended to equate bank profitability with bank safety and soundness. That led them to view products and practices that boosted bank profits as “good”— even as tricky loans and lax lending standards set the stage for mass defaults, and systemwide collapse.
The strongest of the administration’s proposed reforms — a Consumer Financial Protection Agency — seeks to rectify that regulatory failure. The new agency would take on the consumer protection responsibilities that are currently dispersed among numerous regulators and police the financial system with a sole focus on the best interest of the consumer. It could ensure, for example, that lenders — whether banks or nonbanks — provide simpler alternatives to complex mortgages and could impose restrictions on other forms of credit, like stealth overdraft fees.