By Leah Valencia, University of New Mexico – Talk Radio News Service

Treasury Secretary Timothy Geithner urged Congress to act quickly in executing a comprehensive overhaul of the financial regulatory system, telling members of the House Financial Services Committee on Wednesday that, “Time is the enemy of reform.”

Geithner said lawmakers must act to correct the regulatory problems that have left the financial system in disarray.

“As some normalcy returns to our financial system and our economy, we cannot let it be cause for complacency,” he said in a hearing on Capitol Hill. “We simply cannot walk away from the worst financial crisis since the Great Depression and not do everything in our power to reform the system.”

Geithner explained that the regulatory reform plan proposed in June by the Obama administration aims to achieve three main goals, including providing consumer protection, creating a new financial system less prone to crisis and safeguarding taxpayers from bearing costs of future crises.

A key aspect of the proposal seeks to merge the Office of the Comptroller of the Currency and the Office of Thrift Supervision into a new consumer financial protection agency. Lawmakers from both parties raised concerns about such an agency.

House Financial Services Chairman Barney Frank (D-Mass.) wrote proposed changes to the consumer agency in a memo Tuesday. The changes excluded a range of non-financial businesses, such as retailers and auto dealers, from oversight by the agency. Frank also said he plans to fund the agency in a way that would not burden financial institutions, and will no longer require them to offer “plain vanilla” financial products, such as 30-year fixed mortgages.

Geithner said in his testimony that all institutions providing financial credit should be subject to the same regulation and credit standards as banks, but he did not indicate whether these standards would extend to non-financial businesses

“If you are in the business of providing financial credit and you are competing with banks and thrifts to do that, there should be a common set of standards,” he said. “In general, we’re very supportive of the changes proposed by the chairman.”

Frank said he will be holding a series of hearings on the regulatory proposal in coming weeks and plans to have legistlation in the House and Senate by the end of the year.

“This is going to be a very time-consuming committee in October and November,” Frank said.

The new legislation would mark the most drastic governance changes for financial institutions implemented in seven decades.

Steve Bartlett, the president and CEO of the Financial Services Roundtable, says that regulatory reform is necessary and consumer protection is needed. However, he opposes the creation of a Consumer Financial Protection Agency. Bartlett recommends strong national consumer protection standards instead. (0:42)

 

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by Michael Ruhl, University of New Mexico and staff-Talk Radio News Service,

At a press conference House Financial Services Committee Chairman Barney Frank (D-Mass.) spoke on what the federal government is doing to deal with the economic crisis. Frank said that it is likely that a federal entity will be empowered to regulate systemic risk, and that this entity will very likely be the Federal Reserve. He said that the powers given to the Federal Reserve will be newly created powers of the federal government, and will not be taking powers from other organs of the federal government. Frank said that a “prohibition” on irresponsible subprime lending would be necessary, because if enough bad loans are made, it is “hard to protect yourself against them”. Frank continued that the government wants the institutions “To be safe and sound”, but that the goal is for lending to increase. He also said that the House is working closely with the Obama Administration, and that their aim is to coordinate Systemic Risk Regulation with allies in Europe and Asia.

Chairman Frank also spoke of other priorities of the House Financial Services Committee in the coming year, which included refocusing on debt relief and expanding consumer protection. Frank also said that the Federal government will take a more active role in building houses and keeping people in their homes.

When addressing the topic of America borrowing so much money from foreign countries, in particular China, Frank said that he is alright with these lending arrangements, because he doesn’t feel it gives those foreign governments undue influence on America. However, Frank said that spending is too high in some areas, particularly in defense spending that the country is engaging in.

The Talk Radio News service spoke with Rep. Barney Frank (D-Mass.) during the People’s Inaugural LGBT Gayla. The Chairman of the House Financial Services Committee discussed the TARP legislation and the progress that the gay community is making. Frank predicted full legal equality within fifteen years.

Ron Gettelfinger, the President of the United Auto Workers (UAW), says that auto workers are doing what they can to fix the inherent problems in the auto industries. He did caution against blaming workers for all the problems associated with these companies. (1:29)

 

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Rep. Spencer Bachus (R-Ala.) says that while high foreclosure rates do not help anyone, the government should not mandate bailing out all borrowers. (1:31)

 

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Rep. Barney Frank (D-Mass.), Chairman of the House Financial Services Committee, said he has seen “encouraging signs,” in efforts to reduce foreclosures in the U.S. During a Financial Services Committee hearing today, Frank said it would be very important to the economy to reduce foreclosures and to use the rescue plan to put money into the economy.

Chairman Frank stated that taxpayer dollars wouldn’t be used to help others “pay their mortgages,” believing there was “zero likelihood” that that would happen. Frank also felt that decisions on the housing crisis are “unmakeable” in government currently, adding, “Someone has got to have the authority to make a decision.”

Rep. Spencer Bachus (R-Ala.) said that while the U.S. should work to reduce foreclosures, “We need to be careful to prevent all foreclosures.” Bachus stated, “If a homeowner is under water, if the house is worth substantially less than the mortgage, it is predictable that many are going to walk away from their obligation. In fact, we are seeing a good percentage of foreclosures in which the homeowner is under water and they are walking away.” He added, “I don’t see any practical way of preventing that.”

While Bachus agreed that the government could not allow an economic collapse, he asked “Where does it stop?” Bachus did praise government’s intervention in the crisis to this point, saying “So far, we’ve made a terrible situation better,” but advocated the need for an “exit strategy.”

Rep. Paul Kanjorsky (D-Pa.) made a reference to homeowners, saying that it was important to “keep them afloat.” He added that current foreclosure rates have “decimated some communities.”

According to Rep. Randy Neugebauer (R-Texas), it is important not to “encourage borrower behavior that is not appropriate.” He did think that if dialogue between borrowers and lenders is encouraged, “there will be some effort” to keep people in their homes.

Benjamin Allensworth, Senior Legal Counsel for the Managed Funds Association, said “the wave of foreclosures has placed downward pressure on home prices, which in turn has eroded home equity and consumer confidence in the mortgage market.” He advocated “effective mortgage modifications over foreclosure whenever possible.”

Thomas Deutsch, Deputy Executive Director of the American Securitization Forum, felt that government assistance in the crisis is vital and while mortgage lenders have made efforts to prevent “avoidable foreclosures,” “Macro economic forces bearing down on an already troubled housing market are simply too strong for private sector loan modification alone to counteract the nationwide increase in mortgage defaults and foreclosures.” Deutsch felt the housing crisis could not be resolved without government assistance.

Rep. Frank says there are many different people at fault for the current housing disaster. (0:23)

 

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When the housing market is down, the “whole economy gets hurt,” said Rep. Barney Frank (D-Mass.)in a hearing today. The Financial Services Committee met to discuss the problems and possible solutions to the current housing market.

Frank added that the federal government’s feelings are not only of sympathy to those in foreclosure. He said that some people have committed to mortgage policies out of their price range.

Rep. Jeb Hensarling (R-Texas) said that the United States needs to “preserve the paycheck” of its homeowners. Hensarling continued by stating that no one would want to be a seller in this market.

Sheila Blair, Chairman of the Federal Deposit Insurance Cooperation, said the current housing market is due to a “complex set of interrelated causes.” She said the housing market in the United States had the most severe drop of the past 60 years.

Brian Montgomery, Chairman of the Board of the new “Hope for Homeowners Program,” said that the program is slated to be ready to open on Oct. 1 of this year. He said the goals of the program are to help improve homeowners’ chances of refinancing their loans, mitigating monetary losses for both buyers and sellers of mortgages, and to reduce the number of foreclosures nationally.