Press coverage of AFR launch



Lobbyists dig in as Obama pushes financial overhaul


By Silla Brush
Posted: 06/16/09 07:27 PM [ET]–lobby/lobbyists-dig-in-as-obama-pushes-financial-overhaul-2009-06-16.html
The Obama administration on Wednesday will unveil its wide-ranging proposal to remake the financial regulatory system, but lobbyists across the political spectrum were already digging in and drawing up strategies for a major overhaul battle that will last at least through the rest of the year.Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, intends by the August recess to pass through his committee legislation that restructures the financial system. He is awaiting the final proposal from the administration. “We expect to get a detailed outline tomorrow and in subsequent days we will get legislative language,” said Steve Adamske, Frank’s spokesman. Legislation in the Senate will take well into the fall at the earliest.The administration aims to remove the regulatory gaps and weaknesses in the existing financial system, and has been working since last year to draft the proposal. The selling of the plan on Capitol Hill will begin almost immediately, with Treasury Secretary Timothy Geithner scheduled to testify before House and Senate committees on Thursday.

At various points leading up to Wednesday’s release of the plan, administration officials have sought industry’s input. Officials from Treasury and the National Economic Council have held several rounds of meetings with lobbying groups.

While industry groups will pick apart many details of the plan, some are broadcasting a desire to work with Congress so that the final result wins bipartisan support.

“We’re trying to rebuild a sense of normalcy for the industry regarding the administration and the Hill,” said Rob Nichols, head of the Financial Services Forum, a group with 17 large industry members.

Nichols mentioned that one political model is the bipartisan work to reform the Committee on Foreign Investment in the United States. The House passed that bill by a vote of 370-45; it passed the Senate with unanimous consent and was signed into law by President Bush in 2007.

The lobbying battle so far has taken place largely behind the scenes among Big Business, the companies that finance corporate America, investors and consumer groups. But as components of Obama’s plan have leaked, the fight over financial markets has become more public.

Labor and consumer groups that support most of Obama’s plan announced Tuesday they planned to take on what they see as the banking industry’s dominant position in Washington by stoking grassroots anger over the financial crisis. The new coalition, Americans for Financial Reform, includes roughly 200 organizations such as U.S. PIRG, the AFL-CIO and the AARP, and has a budget of $5 million.

Rob Johnson, a former chief economist of the Senate Banking Committee, said a market has developed in Washington for “buying and selling the rules governing our society.” Johnson is now an economist at the Roosevelt Institute, which is a member of the new coalition.

On nearly every nook of the administration’s plan, lobbyists will attempt to shift the regulations in ways large and small that could benefit companies for years to come. Some fear the bill, a priority for the administration and the Democratic Congress, will attract policy ideas outside to the scope of financial market reform.

“We are worried that any legislation will become a Christmas tree for unrelated proposals,” said David Hirschmann, president and CEO of the U.S. Chamber of Commerce’s Center for Capital Markets.

The administration intends to grant the Federal Reserve greater authority and consolidated supervision over large firms that could topple the system. Under the Obama plan, there would also be a council of regulators with broad authority to look across the system. While industry trade associations have generally voiced support for the notion of a “systemic risk regulator,” the details of the plan will be the focus of much debate.

One flashpoint would be if the administration outlines explicit criteria designating new requirements regarding systemically significant institutions. Another would be over the power vested in the council of regulators compared to the Federal Reserve. Lawmakers from both parties have voiced concern over the central bank, its transparency, its role in overseeing institutions in the financial crisis and its wide latitude to respond to crises.

 “The Fed’s view of the world is relentlessly through the lens of commercial banks,” said Paul Schott Stevens, president of the Investment Company Institute (ICI), a trade association that represents mutual funds. “The whole financial system is not one big commercial bank. It’s much more diverse than that. I think culturally for that reason that the Fed may not have the full field of vision.”

ICI supports a council of regulators that would give greater say to other agencies, such as the Securities and Exchange Commission.

Another key area of disagreement with the administration will be over the plan to set up a consumer financial protection agency. Financial-industry groups argue that setting up a new office would simply add another layer of bureaucracy and trample on already-existing authorities.

“Give the power for consumer protection to the agencies that have real power,” Steve Bartlett, head of the Financial Services Roundtable, recently told reporters.

Consumer groups and Elizabeth Warren, head of the Congressional Oversight Panel looking into the $700 billion financial rescue package, back the idea. Democratic Sens. Dick Durbin (Ill.), Charles Schumer (N.Y.), Chris Dodd (Conn.) and Edward Kennedy (Mass.) are also in support.

Richard Hunt, head of the Consumer Bankers Association, said that his association is concerned that some of the consumer protection changes could lead to states “all trying to outdo each other”; that more regulations could further hamper the flow of credit.

While the administration has talked for months about setting up a way to deal with non-bank financial institutions whose failure threatens to affect the wider economy, the details of the program and how it is paid for will be controversial and will likely spiral into a broader debate between smaller banks and large institutions.

Private equity and venture capital firms have argued that they did not play a role in pushing the system into crisis. Left unclear is whether the administration will make a push this year or later to establish an office at the federal level on insurance issues.


K Street Files: Wall Street Watchdog?

June 16, 2009
By Kate Ackley
Roll Call Staff

A coalition of unions, community organizations and progressive groups today are launching Americans for Financial Reform, which will call on Congress to set up a system to police Wall Street.

The group, whose budget is more than $5 million, is asking for a consumer watchdog to keep a close eye on the nation’s financial systems and is advocating for reforms to help homeowners avoid foreclosure.

The groups involved include Campaign for America’s Future, the Leadership Conference on Civil Rights, Service Employees International Union, US PIRG, the Opportunity Finance Network and the National Community Reinvestment Coalition.

Most of the budget will go toward advertising, lobbying and grass-roots efforts, according to a coalition organizer.

“Finance is too important to be left to the bankers,” said Toby Chaudhuri, communications director for Campaign for America’s Future. “These fast-talking banksters saw an opportunity to get rich quick, and they brought the global economy to the brink of the abyss. We want those responsible to be held accountable, and we want to make certain it can’t happen again.”

Heather Booth, director of Americans for Financial Reform, added: “For too long the big banks have been making their own rules and gambling with your money. We’ve come together today to tell them those days are over. The excesses of Wall Street have spilled over into our communities, and now our communities are going repaying the favor by taking on the fight for real financial reform.”

Consumer Coalition Lobbies Ahead of Financial Reform

June 16, 2009 11:05 am

A number of advocacy groups locked at the elbows this morning to call for widespread changes in the financial markets, in step with expected policy changes to financial regulation set to be unveiled by the Obama Administration on Wednesday. The new initiative is called Americans for Financial Reform, and includes members from all types of interest groups, from former Soros fund managers, to AARP legislative policy directors to firms such as the National People’s Action.

During a conference call to announce strategy, and to rail a little against the financial markets, the speakers expressed their support for Obama’s upcoming announcement for a new regulatory regime, as long as such an entity is publicly accountable.

“Wells Fargo is pulling money on a die casting plant,” in the United States, said George Goehl, from the National People’s Action, “yet Wells Fargo received $25m in Tarp money.” Goehl hinted that this decision seems unfair considering that Americans’ jobs could be lost as a result and that the Federal funding would be better directed more broadly into the country’s economy.

The coalition intends to make its biggest impact through lobbying for stronger consumer protection services.

“We want to expand strengthened and enforced regulation. Only 6% of subprime loans were covered by the Community Reinvestment Act,” adds Jim Carr, CEO of the National Community Reinvestment Coalition in response to a question posed by HousingWire, adding that if the 1970s Act would have been properly implemented in the new millennia, “we wouldn’t have this crisis.”

Members of the association did not seem automatically opposed to new initiatives, such as [1] APD Solutions, a new capital provider of socially responsible investing, despite its affiliation with Australia’s Macquarie Group a global financial firm of the caliber the coalition vilified today.

“Unfair and deceptive mortgage products that disproportionally targeted disadvantaged families destroy communities,” Carr argues, echoing a common refrain among consumer advocates. In the short-term, however, the Americans for Financial Reform hopes to conduct “more specific work around REO,” according to Carr.

Obama to propose Consumer Financial Protection Agency

Lobbying groups clash over key aspects of financial regulatory reform proposal

By Ronald D. Orol, MarketWatch

WASHINGTON (MarketWatch) – The Obama administration on Wednesday will propose the creation of a Consumer Financial Protection Agency that will write rules for banks and other institutions limiting what kind of mortgage products they can make available for consumers, according to a person familiar with the proposal.

A CFPA would be a key element of President Barack Obama’s regulatory reform proposal he is expected to announce Wednesday.

The financial protection agency proposal seeks to expand disclosure responsibilities by requiring lenders to define standard mortgage products and prominently promote these products along with all other legal products they choose to offer.

According to the proposal, in some cases, consumers should be able to “opt out” of standard products before they could be offered alternative products. The proposal seeks to give the agency the ability to enforce compliance through fines and penalties. The agency could prohibit lenders from offering mortgage products the commission deems unsafe to consumers.

Obama promised on Tuesday to propose a “very strong set of regulatory measures” and said that the U.S. must have an updated regulatory system.

At a press conference, Obama said he expects Congress to act “swiftly” to put the new rules in place. The plan is expected to have a variety of regulatory reform proposals including a measure that will empower the Federal Reserve to be a “consolidated supervisor” for large financial institutions, whose collapse could cause collateral damage to the markets.

The CFPA would also try to ensure that underserved communities have access to financial services, lending and investment. The measure would aim for lenders to provide consumers with simple disclosure about mortgages, rather than the complex, multi-page disclosures that they typically receive. The agency would require a timely collection and publication of data on loan performance, so officials at the commission could act fast to prohibit problematic mortgage products.

The agency would act as the primary federal consumer protection agency, superseding the consumer safety authorities of other bank regulators. Currently, each bank regulator is responsible for protecting consumers affected by loans generated by financial institutions under its purview.

The proposal would prohibit pre-payment penalties, which can lock borrowers into bad loans. The commission would be responsible for banning certain practices such as side payments from lenders that encourage mortgage brokers to push consumers into problematic higher-priced mortgages.

Opposition and support

As the Obama administration is set to release its regulatory reform proposal, consumer and corporate lobby groups are clashing over the commission and other aspects of the proposal, including whether legislators should set up a regulator to help unwind financial institutions.

“Our economy collapsed because consumers were not protected,” said Ed Mierzwinski, a director at the U.S. PIRG, a federation of state Public Interest Research Groups. “We should have a strong regulatory agency with will and authority to protect consumers. Our regulatory system is broken. Bank regulators are captured by the industry.”

Mierzwinski and members of a new lobby group, Americans for Financial Reform — an organization of labor union, consumer groups and other organizations – are urging the creation of the consumer protection commission. The group believes bank regulators are not protecting consumers effectively and when they do, banks move to register with another regulator.

However, the U.S. Chamber of Commerce is opposed to the creation of such a consumer protection entity, in part, because the group believes it would discourage other bank regulators from fulfilling their consumer protection responsibilities.

David Hirschmann, president of the Chamber’s Center for Capital Markets Competitiveness, said consumer protection may be best suited to a systemic regulator that has all the information about the financial markets. This entity would work with other bank regulators to protect consumers, he said.

“Wouldn’t it be better to have a regulator that knows the entities they are regulating to be responsible for consumer protection?” asked Hirschmann. “Setting up a commission would make the other agencies feel they are not responsible for consumer protection.”

To unwind, or not to unwind?

Consumer groups and the Chamber of Commerce also clashed about whether Congress should empower the Federal Deposit Insurance Corp. with the authority to collect fees and possible accept taxpayer funds to unwind systemically significant financial institutions.

The Obama administration is considering such an entity as part of its proposal, in part, because such an entity could help limit the collateral damage such a failure would have on the markets.

Rob Johnson, former chief economist for the Senate Banking Committee and a member of Americans for Financial Reform, said the group supports giving the FDIC resolution authority to collect fees from large financial institutions that could be used to pay counterparties of an insolvent institution in a way that prevents a systemic impact of its collapse.

“Too big to fail is too big to exist,” said Johnson. “Now in the era of too big to fail, the burden of the bailout which was several hundred billion in subsidies to banks, we need resolution regimes for financial services institutions.”

However, the Chamber of Commerce opposes such an entity, arguing the existing bankruptcy process could be improved to help restructure financial institutions in a way that does not favor one financial institution over another. Hirschmann argues that the result of such a resolution authority would be more taxpayer funds being allocated to help unwind systemically significant institutions, giving some firms an advantage over others.

“There may need to be some enhancements to the bankruptcy process, but it is far different to have a presumption that a mega firm fail in a particular way with a permanent seat at the table with one hand in the taxpayer pocket,” Hirschmann said.

Credit rating agencies

Obama’s proposal is expected to seek additional requirements to credit rating agencies, considered a key contributor to the financial crisis because of their high ratings for a wide-range of securitized sub-prime mortgages.

Specifically, the proposal is expected to require agencies to differentiate between structured products such as securitized mortgages and unstructured debt products, such as corporate bonds. Details about risks associated with ratings, methodologies and non-public rating data, will need to be disclosed in an easy to understand manner.

Credit rating agencies will need to disclose their performance measures for structured products so buyers of ratings can compare agencies better.


The proposal is also expected to provide more details about the Treasury Department’s hope that the Securities and Exchange Commission, Commodity Futures Trading Commission and the Fed exchange more detailed information about derivatives transactions.

The CFTC and SEC agreed to exchange more data under a current Memorandum of Understanding. However, both agencies do not have the authority to collect useful data on derivatives nor did the MOU require the two agencies to consider the systemic implications of the derivatives.


Feds Call for Consumer Financial Protections

The White House is proposing a new agency that will have broad powers to regulate financial products offered to consumers

By Phil Mintz and Theo Francis

In a move that is drawing stiff opposition from business groups, the Obama Administration is calling for a new Consumer Financial Protection Agency that will regulate providers of financial services. The new agency, to be announced by the White House on June 17 as part of a broad set of financial regulation changes prompted by the economic meltdown, was described by an Administration official as a “strong independent agency with full authority to protect consumers” and oversee “credit, savings, payment, and other consumer financial products and services.”

The official said the new agency would be responsible for promoting clear information for consumers and protecting them from unfair and deceptive practices. At the same, it would seek to promote “fair, efficient, and innovative financial-services markets for consumers” and improve access to financial services.

Expensive or confusing consumer products, particularly exotic mortgages, have been blamed for causing some consumers to take on financial risk that turned out to be unwise or unmanageable—which in turn weakened major financial institutions, helping to precipitate the broader financial crisis.

remedying “divided attention”

President Obama began a public relations push for his regulatory reforms on June 16, appearing in several television interviews. “The problem is right now you have consumers and investors, [and] the agencies that are responsible also have responsibility for the integrity of the institutions,” Obama said in an interview with Bloomberg TV. “So you’ve got divided attention. We want to make sure we’ve got a consolidated focus on consumer and investor protections.”

The new agency will oversee mortgages, credit cards, debit cards, gift cards, and consumer and payday lending, as well as deposit accounts and related services, including overdraft protection, according to people involved in the planning. Investor protection—with oversight of mutual funds, money-market funds, 401(k) plans, etc.—would remain with the Securities and Exchange Commission.

Along with the new Consumer Financial Protection Agency, the key elements of the plan are expected to include an expansion of the Federal Reserve’s oversight of large financial holding companies whose failure could threaten the global economy and new rules to raise capital and liquidity requirements for financial institutions. The Office of Thrift Supervision, which oversees savings-and-loan institutions, would be merged into the Treasury’s Office of the Comptroller of the Currency, which oversees national banks; the combined agency, dubbed the National Bank Supervisor, would work with the Fed, which oversees bank holding companies. The Administration’s reform plan also includes proposals to beef up bank capital requirements, and previously announced proposals to regulate derivatives and other financial products and to give the federal government better powers to shut down and dismantle large, failing financial institutions that aren’t banks.

state rules can be tougher

The proposed consumer protection agency will have enforcement authority to write rules for bank and nonbank firms and enforce the rules through orders, fines, and penalties. The rules will be “a floor” for state rules, which can be tougher. States will be able to enforce the new federal rules, the Administration said. The agency will have authority to examine firms for compliance. Giving the agency broad authority over all sorts of financial institutions will “ensure that banks, nonbanks, and independent mortgage brokers all play by the same rules and no lender or broker falls between the cracks of supervision or enforcement,” according to the Administration.

Among the standards the agency is expected to push for is a requirement that financial-services companies provide easy-to-understand “plain vanilla” offerings along with other financial products. While financial firms would be free to market other kinds of products, they would meet with stricter regulation and might be required to hold extra capital. The plan would also require mortgage brokers to make sure that homeowners are offered the best available products, restrict or ban mortgage prepayment penalties, and ban economic inducements to push consumers into higher-priced loans. It would also require originators of loans to keep at least 5% of the credit risk in any securitization so they “retain skin in the game.”

Business groups immediately began a pushback on the proposal for a new agency. “You cannot separate consumer protection from other regulatory concerns,” said American Bankers Assn. President and CEO Edward L. Yingling in an e-mailed statement. “For example, in the extensive regulation of holds on deposits, the Fed balances consumer protection with safety and soundness, which includes billions of dollars annually in attempted check fraud, and with the capabilities of the elaborate system for clearing checks. That balance would be lost and banks would be subject to conflicting regulation between safety and soundness and consumer regulation in many instances.”

Yingling said that creating a new agency flies in the face of efforts to streamline banking agencies. Plus, he said, the broad authority proposed for the agency would be “an unprecedented grant of power to mandate business practices.”

“yet another regulatory layer”

David Hirschmann, president and CEO of the U.S. Chamber of Commerce’s Center for Capital Markets Competitiveness, said in a briefing, “We will not support a standalone consumer protection agency that cannibalizes regulatory expertise, adding yet another regulatory layer.” He added: “The Chamber will strongly support regulations that will make the regulatory system more effective. And we’ll put up a fight when it comes to regulations that will add to the layering, duplication, and gaps of the current system. We need real reform to spur the efficient capital formation needed to secure real long-term economic growth and job creation.”

But Harvard’s Elizabeth Warren, the head of the Congressional Oversight Panel policing the bailout of the financial markets and the driving force behind the creation of the consumer financial agency, countered that the new agency is not only about consumer protection, but limiting systemic risk. “It’s about protecting the stability of the markets. This crisis started with one household at a time, one lousy mortgage at a time.”

Meanwhile, more than 200 state and local consumer advocacy groups announced a new coalition on Tuesday, Americans for Financial Reform, calling for “game-changing solutions” to solving the problems plaguing the financial sector. They broadly backed the public details of the Obama proposal, and in particular the plan to establish a consumer-protection agency.

“Our economy collapsed because of a lack of strong consumer protections. That’s why reform must include establishment of a strong, independent consumer regulatory agency with the will and the authority to protect consumers from dangerous, deceptive financial practices,” U.S. PIRG’s Consumer Program Director Ed Mierzwinski said in the organization’s news release.

Mintz is news editor for in New York. Francis is a correspondent in BusinessWeek’s Washington bureau. With Jane Sasseen in Washington.



Obama Wants Financial Protection Agency With Teeth
by Karey Wutkowski and Rachelle Younglai


The Obama administration intends to propose the creation of an independent Consumer Financial Protection Agency that will be able to write and enforce rules for a wide group of financial firms.

The administration plans to propose that the new agency enforce fair lending laws, and have the authority to require loan originators to retain 5 percent of credit risk.

According to a document obtained by Reuters and later confirmed by an administration official on Tuesday, the agency will “protect consumers of credit, savings, payment and other consumer financial products and services, and to regulate all providers of such products and services.”

President Barack Obama has identified consumer protection from shoddy financial products as one of his top priorities. But it had been unclear if that would mean beefing up existing agencies or creating a new one that would write regulations and gain supervisory and enforcement powers.

The administration intends to lay out on Wednesday its plan to overhaul financial regulation, which will include a regulator to monitor