Obama Plans For Financial Regulation Overhaul
P: Good morning, John.
JOHN YDSTIE: Hi, Renee.
: Tell us about this document. For one thing, it shows the Federal Reserve gaining power in one area, but losing power in another.
YDSTIE: But the Fed's power to take some of the unusual emergency action it has during this crisis would be reined in somewhat, requiring an okay from the Treasury. And in addition, the Fed would lose some of its consumer protection authority to this new entity, the Consumer Financial Protection Agency.
: And what's the thinking behind taking away consumer protection authority from the Fed and then putting it into a new agency?
YDSTIE: As the administration has pointed out, you can buy a toaster for about 30 bucks, and it's more highly regulated than a mortgage that will cost you hundreds of thousands of dollars. But both can cost you your home if they catch fire.
: So in the president's proposal, there's a new consumer protection agency, but one less bank regulator.
YDSTIE: But that still leaves three federal regulators, not to mention state bank regulators.
: Talking to NPR economics correspondent John Ydstie. And John, it doesn't sound like a whole lot of streamlining.
YDSTIE: No, it's not. But the problem is that there are powerful interests protecting their turf. And the administration may feel it's not worth a fight, especially since there's so much more they want to do, like force banks to hold more reserves against losses, institute some regulation of hedge funds and things like that.
: Just let me - this new Consumer Financial Protection Agency, is it likely to have enough support in Congress, for instance, to get off the ground?
YDSTIE: Well, consumer groups are very strongly for it, but the financial industry opposes it very strongly. They argue it's going to undermine consumer protections already in place, and that it might make consumers less likely to take responsibility for their own actions. So this is likely to produce a big fight.
: John, thanks very much.
YDSTIE: You're welcome, Renee.
: NPR economics correspondent John Ydstie.
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