Democrats in the U.S. House of Representatives Wednesday introduced legislation that would create a financial products watchdog to crack down on unsafe lending practices.
Bill Delahunt of Massachusetts and Brad Miller of North Carolina introduced the bill to create a Financial Product Safety Commission.
Mirroring legislation introduced in the Senate earlier this month, the bill is in response to the financial and credit meltdown now hurting both institutions which provided questionable products and consumers who received them.
“This meltdown would not have occurred if this commission had been in place,” Delahunt told a news conference attended by consumer advocacy groups and Harvard professor Elizabeth Warren, who conceived the idea of the commission.
“Consumers don’t have the power to protect themselves from the hidden tricks and traps,” said Warren, the head of the congressionally appointed oversight panel for the government’s financial bailout.
Miller, a member of the House Financial Services Committee, said the idea of a commission is supported by key members of Congress such as Committee Chairman Barney Frank and Christopher Dodd, who chairs the Senate Banking Committee.
The House subcommittee on financial institutions and consumer credit may consider the legislation in the coming weeks, Miller said.
He said, however, that he thought the House would not end up voting on the bill, even though it has the support of many members in Congress whose anger levels with financial institutions in the wake of bonuses at insurer American International Group Inc. have hit an all-time high.
Instead, it could be folded into a package of financial regulation reforms that would include creating a systemic risk regulator, Miller said.
“This is part of the systemic risk solution,” said Travis Plunkett, legislative director at the Consumer Federation of America, a consumer group.
Under the bill, the commission would be comprised of a panel of five presidentially appointed members with rule-making authority.
The agency’s mission would include examining the safety of financial products before they hit the market, conduct studies and educate consumers.
The commission also would have enforcement authority that could supersede the authorities of the federal banking agencies to bring criminal and civil charges for some violations.
The bill would make commission rules apply to all states.
“Regulation would be applied everywhere,” Delahunt said.
(Reporting by John Poirier, editing by Gerald E. McCormick)
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