June 25, 2010

• Financial Reform Just A Heartbeat Away, Pt.2
     Scrutiny of risky activities.

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  One of the more controversial parts of the financial reform bill was the consumer financial protection agency which will be housed with the Federal Reserve. It will, however, have its own leader who will be appointed by President Obama. The agency will also have its own budget. It will have the authority to oversee and write consumer protection rules that will protect consumers in regard to credit card regulation, mortgage lending, consumer loans, and other consumer financial products. The agency is designed to watch over credit card and other consumer credit products to ensure brokers are not paid by financial institutions based on higher interest rates. During the credit card and loan crisis, brokers received commission off these higher interest loans that caught borrowers by surprise.

  In addition to monitoring the credit card and banking industries, the agency will also oversee the development of new financial products and the trading of derivatives or exotic securities. Although it might seem that the financial industry will be faced with powerful forces that greatly limit their ability to conduct normal everyday activities, the bill avoids dictating to Wall Street, credit card companies or prohibiting derivative trading. The agency will have the authority to seize banks or financial institutions that are experiencing financial difficulty and whose collapse would significantly affect the economic stability of the United States. Banks will also be required to maintain higher reserves on hand for protection in the event of another economic crisis.

  The new consumer financial protection agency will monitor credit card companies to ensure they provide clear and easily understood terms and conditions in credit loan contracts. Additionally, large financial companies such as Goldman Sachs will be highly scrutinized by the new consumer protection agency. As one of the nation's largest financial companies, trading and some of the company's other risky activities will remain under the eagle eye of the agency.

  to be Continued...
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