Lisa Simpson
Aug 17,2009
In: Finance

Treasury Secretary and Chairman of Federal Reserve Disagree About Who Should Give Protection to the Consumers

Timothy Geithner, the Treasury Secretary and Ben Bernanke the Federal Reserve Chairman are disagreeing about who should give protection to the consumers from dubitable mortgage contracts, abusive fees of credit cards, loans advanced on paydays and other types of highly risky financial goods

White House wants to set up a new body – Consumer Financial Protection Agency to supervise a wide range of financial products. This will lead to the taking away from the Federal Reserve and many other regulators their authority for doing the policing.

Speaking to the House Financial Services Committee Geithner said, “I think it’s very hard to look at that system and say that it did anything close to an adequate job of what it was designed to do.” He referred to the foreclosure crisis and credit sectors because of the risky sub-prime loans that were advanced to borrowers who either did not understand or afford these.

Appearing before the above mentioned committee Bernanke speaking after Geithner said that the Federal government should hold on to the powers of consumer protection in regard to mortgages, credit card and the checking of savings accounts. Bernanke said, “Without extensively entering the debate.” He argued that the Congress requires to be alert about “some of the benefits that would be lost through this change.” It would include the consolidated resources of the Feds for also seeing to the safety and viability of the banks.

Geithner did not give importance to the concerns about the chairman regarding this being one of the usual turf battles of Washington. Geithner said, “With great respect to the chairman and other supervisors who are reluctant to do this, they are doing what they should, which is defend the traditional prerogatives of their agencies. I think frankly all arguments should be viewed through that prism.” Geithener insisted that given the circumstances Congress should enter and do something. He went on to say, “Inherent in your job is to think about how to make those choices.”

Regulators testifying with the chairman voiced their concerns about the plans of the government. Sheila Bair of Federal Deposit Insurance proposed that the new agency should have the authority to set down rules aimed at protecting the consumers but the task of executing these rules should be left in the hands of the current regulators.