Friday, January 28, 2011

Financial Crisis Avoidable-Stronger Consumer Protection Needed

The Financial Commission's full report is now available at http://c0182732.cdn1.cloudfiles.rackspacecloud.com/fcic_final_report_full.pdf. The Commission dismisses the notion that the financial crisis was inevitable. Instead the report states that action and inaction by " “captains of finance and the public stewards of our financial system” led to the collapse.

The report notes that the Federal Reserve failed to protect against predatory mortgage lending and to establish and maintain prudent lending standards. State efforts to regulate national banks were pre-empted by the Office of the Comptroller of the Currency and the Office of Thrift Supervision which prevented adequate protection for borrowers.

The establishment of the Consumer Financial Protection Bureau (CFPB) may help avert similar outcomes in the future. However, according to several newspaper articles, conservative Members of Congress may try to 'starve' the CFPB by not providing adequate funding for the agency to function.

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