Geithner Urges Financial Watchdog For Consumers

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The health care debate has slowed things down, but Congress is still working on new rules governing the financial industry. Treasury Secretary Timothy Geithner testified on Capitol Hill Thursday about the need to protect consumers and rein in financial institutions. He wants lawmakers to create a Consumer Financial Protection Agency.


It's MORNING EDITION from NPR News. I'm Steve Inskeep in New York.


And I'm Linda Wertheimer in Washington. We're getting a range of perspectives on the world of finance now, from Capitol Hill to the G20 summit in Pittsburgh to Michael Moore's latest film. We'll start with Congress, where new rules are being discussed for the financial industry. Several key regulators, including the treasury secretary, were called to testify about the approach the Obama administration is taking. NPR's Audie Cornish reports from Capitol Hill.

AUDIE CORNISH: Treasury Secretary Timothy Geithner highlighted the proposed Consumer Financial Protection Agency as a key reform. The agency would have the power to write and enforce rules in areas of consumer credit from debit cards to car loans.

Secretary TIMOTHY GEITHNER (Department of the Treasury): So that consumers can understand the risks of the products they're sold and have reasonable choices and institutions have to live with some common sense rules about financial credit.

CORNISH: Right now that duty is split among many financial regulators, who are really much more focused on making sure banks are stable, says House Financial Services Chair Barney Frank.

Representative BARNEY FRANK (Democrat, Massachusetts): It's not that they are bad people. It is, in fact, safety and soundness is their main concern. They regard consumer affairs as a kind of a nuisance.

CORNISH: But the head of the Federal Deposit Insurance Corporation, Sheila Bair, disagreed. Bair says Congress has ignored calls from her and others to close gaps in the law.

Ms. SHEILA BAIR (Chairman, Federal Deposit Insurance Corporation): On subprime lending, on yield spread premiums, on credit cards, on overdraft protection. We have vigorously pressed for a number of years for stronger consumer protections in key areas. My examiners are only as good as the rules they have to enforce. So that's that.

CORNISH: Baird says the new agency should stick to writing rules, not enforcing them. Chairman Frank says he wants the consumer agency to do both and he's got more ideas on improving the administration's proposal. In his draft bill Frank is dropping a provision requiring banks to offer a low risk alternative alongside their harder to understand products. And he wants a process for institutions to resolve conflicts between the new agency and existing regulators.

Audie Cornish, NPR News, the Capitol.

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