President Barack Obama said Tuesday that today’s antiquated U.S. financial system puts “American dreams” in “consistent danger,” as he announced his proposals to change the laws which govern how financial companies are run.
The system for regulating and supervising the nation’s financial system in the 20th century is no longer useful for the speed, scope, and sophistication of this century’s economy, President Barack Obama said today in a speech at the White House, according to a transcript of his remarks at WhiteHouse.gov.
“We don't want to stifle innovation. But I'm convinced that by setting out clear rules of the road and ensuring transparency and fair dealing, we will actually promote a more vibrant market,” he said.
Among the major proposals were new rules for non-bank financial companies, a new consumer protection agency, one common federal bank charter, and closer scrutiny of financial products.
The president’s plan proposes to begin regulating non-bank financial companies, which have previously taken on bank-like activities without the same regulation as banks.
Another proposal includes setting up a new agency that will be “looking out for ordinary consumers” who enter into transaction for loans, mortgages, credit cards and other financial products.
“This agency will have the power to set standards so that companies compete by offering innovative products that consumers actually want – and actually understand,” he said. “Those ridiculous contracts with pages of fine print that no one can figure out – those things will be a thing of the past.”
The president will also seek to offer only one federal banking charter, regulated by a strengthened supervisor and close the Office of Thrift Supervision to “close loopholes that have allowed important institutions to cherry-pick among banking rules.”
Financial products known as derivatives, which are derived from securities will also come under closer scrutiny. In addition, loan originators will be required to keep an economic interest in the loan to make sure it is repaid, in contrast to the situation today where loans are packaged as securities and sold off to investors.
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