Geithner: Reform Now to Protect U.S. from Future Crises

Treasury Secretary Timothy GeithnerU.S. Treasury Secretary Timothy Geithner emphatically said today that those whose judgments “brought us this crisis” should not be heard on financial oversight reform.
Instead, he said, the families and businesses that suffered from the crisis and can’t get a loan today should be heard.
In prepared remarks for a speech before the American Enterprise Institute, Geithner strongly defended the sweeping financial regulation bill that today was approved by the Senate banking committee in a 13-10 vote along party lines. The proposed reform is now on its way to the full Senate where its fate is uncertain.
“When the American financial system – once the envy of the world – takes trillions of dollars of savings and puts it into an unsustainable real estate boom, while under-investing in innovation, infrastructure, and the technologies of the future, there’s something undeniably wrong with the system,” Geithner said.  
The reform bill, written by Senate Banking Committee Chairman Christopher Dodd, D-Connecticut, would transform the regulatory system and restrict speculative trading by the largest financial institutions. It would give the Federal Reserve and a new oversight council the responsibility of monitoring systemic risk, with the authority to virtually dismantle a firm for the greater good of the economy.  Fees from the largest firms would help pay for such actions.
The reform also calls for a consumer protection agency within the Federal Reserve with independent authority over credit cards, mortgages and other products.
“Listen less to those who told us all they were the masters of noble financial innovation and sophisticated risk management,” Geithner said, referring several times to the factors that led to the financial crisis more than two years ago. “Listen less to those who complain about the burdens of living with smarter regulation or who oppose having to pay a fee for the costs of this or future crises.”
Instead, he said, “listen to the families and businesses still suffering from this crisis.  Listen to those who borrowed responsibly but today can’t get a loan or can’t refinance their mortgage.”
The banking industry has mounted a formidable opposition to the consumer agency proposal, claiming a potential outcome would be the standardization of financial products which would limit credit availability.
Geithner said that every day bank supervisors should focus on whether their institutions have the capital and the necessary risk-management policies in place.
He said a consumer protection agency would counter with a “capable group of officials with a separate mission, who wake up every morning thinking only about how best to protect consumers and how best to make consumer markets fairer, more transparent, and more competitive.”

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