Treasury is Determined to Avoid a Rerun of Foreclosure Crisis

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The Treasury is determined to avoid a re-run of the foreclosure crisis by setting up a new consumer protection agency. Lobbyists have given the war cry to stall the measures but the Treasury has given out warnings that it will not back out of the scheme.

The setting up of new agency is part of wider changes to be brought about in the financial system under the aegis of the Obama government. This agency would be empowered to control products like credit cards and mortgages for the safety of consumer interests.

The draft bill running into 152 pages was recently submitted to the Congress. It has irked the financial service firms on the one hand and galvanized the consumer groups on the other setting the background for a big legislative crossing of swords.

A Treasury Department official, Michael Barr, addressing the American Bankers Association on Thursday 2nd July said that the President was determined to set up the Consumer Finance Protection Agency and will go to any lengths to get it pass through the Congress. He said that the present regulatory structure “has failed to protect the American people and needs to be fixed in a fundamental way.”

The officials are hopeful that the new method of regulation will dissuade risky lending – the type that led to the snowballing of this crisis. In the time of the housing boom these mortgages with initial low payments were very popular but many of the borrowers either did not know or could not shoulder the hidden costs that surfaced soon afterwards.

Brian Kettenring of ACORN said, “Our society has a system to protect us from exploding toasters, but not exploding interest rates.” Barr is planning to regularly hold meeting with leaders of the community and the industry to explain the workings of this new agency. It will be a single entity unlike the many regulators that are spread out now. It is expected that the bill will be cleared by the Congress before the latter retires for the summer break on 3rd August.

Financial groups are putting their heads together trying to find out a way to scuttle the scheme and nip it in the bud. Their argument is that it will lead to escalating costs and more red tape that will ultimately harm the consumers. Bill Himpler of American Financial Services Association said, “The consumer is our customer. We don’t take a backseat to anyone who is interested in protecting the consumer.”

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