Geithner Urges Passage of Financial Reform
By JACK HEALY, New York Times
Published: September 23, 2009
Treasury Secretary Timothy F. Geithner urged Congress on Wednesday to adopt the Obama administration s proposals to overhaul financial regulations, warning that the system was still fraught with the same problems that helped to create last year s crisis.
‽The flaws in our financial system and regulatory framework that allowed this crisis to occur, and in many ways helped cause it, are still in place,” Mr. Geithner said in prepared remarks to the House Financial Services Committee. ‽We may disagree over details of how to best fix those flaws, but that cannot mean we do not act.”
Representative Barney Frank, the Massachusetts Democrat who leads the committee, said legislative hearings on specific pieces of the bill would begin next week.
In testimony on Capitol Hill, Mr. Geithner sought to shore up support for financial reform. Momentum behind the administration s proposals has flagged recently as shocks of the credit crisis faded, Americans grew weary of big government interventions and financial lobbyists pushed back against some of the plans, including creating a new agency to protect consumers.
Indeed, a memo from Mr. Frank detailed changes that could sap the administration s proposed Consumer Financial Protection Agency " a centerpiece of its reform plans " of some of its powers.
Mr. Frank said that nonfinancial firms would be exempt from the agency s powers, and that banks would not be required to offer ‽plain vanilla” products " such as 30-year fixed mortgages " to consumers. Additionally, financial companies would not be required to assess whether customers understood products and services they were being offered " a demand that would put companies in an ‽untenable position,” Mr. Frank wrote.
Mr. Geithner called the changes helpful and pragmatic, and said the administration was ‽very supportive” of many of them, but said that financial products, such as home loans and credit cards, should be more understandable.
‽The broad thrust of those proposals looks very encouraging and promising to us,” Mr. Geithner said.
In addition to creating a consumer protection agency for financial products, the administration has also proposed giving the Federal Reserve new powers to oversee systemic risk in the banking system and grapple with companies ‽too big to fail,” like the insurer American International Group, whose problems threatened the stability of the entire economy.
In his opening remarks, Mr. Geithner laid out three baseline goals for financial reform.
He said any new laws must offer substantial new protections to consumers and investors, make the financial system less vulnerable to crisis, and protect taxpayers from having to bail out future crises.
‽We simply cannot walk away from the worst financial crisis since the Great Depression and not do everything in our power to reform the system that contributed to this breakdown,” Mr. Geithner said.
His appearance on Capitol Hill came a week after Mr. Obama went to Wall Street to mark the anniversary of the collapse of Lehman Brothers by exhorting financial executives and public officials to adopt his reform plans. ‽Those on Wall Street cannot resume taking risks without regard for consequences, and expect that next time, American taxpayers will be there to break their fall,” Mr. Obama said.
Published: September 23, 2009
Treasury Secretary Timothy F. Geithner urged Congress on Wednesday to adopt the Obama administration s proposals to overhaul financial regulations, warning that the system was still fraught with the same problems that helped to create last year s crisis.
‽The flaws in our financial system and regulatory framework that allowed this crisis to occur, and in many ways helped cause it, are still in place,” Mr. Geithner said in prepared remarks to the House Financial Services Committee. ‽We may disagree over details of how to best fix those flaws, but that cannot mean we do not act.”
Representative Barney Frank, the Massachusetts Democrat who leads the committee, said legislative hearings on specific pieces of the bill would begin next week.
In testimony on Capitol Hill, Mr. Geithner sought to shore up support for financial reform. Momentum behind the administration s proposals has flagged recently as shocks of the credit crisis faded, Americans grew weary of big government interventions and financial lobbyists pushed back against some of the plans, including creating a new agency to protect consumers.
Indeed, a memo from Mr. Frank detailed changes that could sap the administration s proposed Consumer Financial Protection Agency " a centerpiece of its reform plans " of some of its powers.
Mr. Frank said that nonfinancial firms would be exempt from the agency s powers, and that banks would not be required to offer ‽plain vanilla” products " such as 30-year fixed mortgages " to consumers. Additionally, financial companies would not be required to assess whether customers understood products and services they were being offered " a demand that would put companies in an ‽untenable position,” Mr. Frank wrote.
Mr. Geithner called the changes helpful and pragmatic, and said the administration was ‽very supportive” of many of them, but said that financial products, such as home loans and credit cards, should be more understandable.
‽The broad thrust of those proposals looks very encouraging and promising to us,” Mr. Geithner said.
In addition to creating a consumer protection agency for financial products, the administration has also proposed giving the Federal Reserve new powers to oversee systemic risk in the banking system and grapple with companies ‽too big to fail,” like the insurer American International Group, whose problems threatened the stability of the entire economy.
In his opening remarks, Mr. Geithner laid out three baseline goals for financial reform.
He said any new laws must offer substantial new protections to consumers and investors, make the financial system less vulnerable to crisis, and protect taxpayers from having to bail out future crises.
‽We simply cannot walk away from the worst financial crisis since the Great Depression and not do everything in our power to reform the system that contributed to this breakdown,” Mr. Geithner said.
His appearance on Capitol Hill came a week after Mr. Obama went to Wall Street to mark the anniversary of the collapse of Lehman Brothers by exhorting financial executives and public officials to adopt his reform plans. ‽Those on Wall Street cannot resume taking risks without regard for consequences, and expect that next time, American taxpayers will be there to break their fall,” Mr. Obama said.
