Letter To The Honorable Timothy Geithner, Secretary Of The Treasury, Department Of The Treasury

Letter

Assistant Senate Majority Leader Dick Durbin (D-IL), Senator Chuck Schumer (D-NY) and Senator Ted Kennedy (D-MA) released a letter to Treasury Secretary Tim Geithner today, encouraging him to include their proposed Financial Product Safety Commission in the Administration's plans for financial market reform.

"[T]here is no reason for us to have regulations that prevent toasters from exploding into flames, but no protections to prevent mortgages and credit cards from doing the same," the senators wrote. "Deceptive and dangerous financial products imperil millions of individual families. A Financial Product Safety Commission would set baseline safety standards for financial products like mortgages and credit cards, just as the Consumer Product Safety Commission sets standards for consumer goods."

The senators sent the letter yesterday; the same day President Obama and Secretary Geithner met with the heads of the nation's largest credit card companies to discuss lending policies. The letter also comes at a time of rising credit card delinquencies and defaults.

"The failure to keep dangerous and deceptive financial products out of the market was a key cause of the current financial crisis," said Elizabeth Warren, Chair of the Congressional Oversight Panel and Leo Gottlieb Professor at Harvard Law School. "We need a Financial Products Safety Commission, not only to protect American families from predatory credit card and mortgage products, but also to restore confidence in our financial system and achieve a sustainable economy for our children and grandchildren."

Last month, the senators introduced legislation to create a Financial Product Safety Commission - a single government agency in charge of ensuring that the offering of financial products to consumers is responsible, accountable, and transparent. This new agency would:

* Reduce consumer risk in using financial products by preventing predatory or deceptive financial practices and educating consumers on the responsible use of financial products and services;

* Coordinate enforcement with the other federal and state regulators and with the private sector to establish a floor beneath which consumer financial product safety could not fall; and

* Report regularly to the public regarding the state of consumer financial product safety and recommend the steps that should be taken to improve the value of financial products for consumers.

The bill is supported by over 55 national and state organizations, including Consumer Federation of America, Center for Responsible Lending, Leadership Conference on Civil Rights, NAACP, La Raza, AFL-CIO, SEIU, National Consumer Law Center, Consumers Union, Public Citizen, and US PIRG.

A copy of the full letter appears below:

April 22, 2009

The Honorable Timothy Geithner
Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, D.C. 20220

Dear Secretary Geithner:

We write to encourage you to include our proposal to establish a Financial Product Safety Commission in the Administration's plans for reviving the American financial system and ensuring that a crisis such as this never happens again. Regulators cannot effectively manage systemic risk and restore the confidence of American families in the financial system without making sure that the financial products themselves are safe.

As the President has noted on a few occasions, there is no reason for us to have regulations that prevent toasters from exploding into flames, but no protections to prevent mortgages and credit cards from doing the same. Deceptive and dangerous financial products imperil millions of individual families. These products also endanger our entire economy by creating markets built upon unstable assets like bad mortgages and unsustainable credit card debt. The collapse of the mortgage market last year, and the ensuing crisis at large financial institutions like AIG, clearly demonstrates this danger. Despite general recognition that deceptive and dangerous financial products have contributed to our current crisis, many such products are still widely marketed to consumers to this day.

We applaud and support the framework for a dramatic overhaul of the financial regulatory system you proposed recently in testimony before the House Financial Services Committee. As you unveil more details of this framework, we encourage you to include our proposal to establish a Financial Product Safety Commission based on the bill S.566 which we have introduced.

A Financial Product Safety Commission would set baseline safety standards for financial products like mortgages and credit cards, just as the Consumer Products Safety Commission sets standards for consumer goods such as toasters and children's toys. Preventing dangerous products from undercutting new and innovative products would strengthen the market for consumer financial credit, benefiting the families that use these products and the industry participants in these markets.

On the other hand, if dangerous and deceptive consumer financial products continue to be available, even the best regulation of risk on Wall Street will not eliminate the dangers posed by an economy built upon a foundation of unsteady, and potentially explosive, consumer financial products.

We hope you will join us in supporting this vital reform.

Sincerely,
Senator Richard J. Durbin
Senator Charles Schumer
Senator Edward Kennedy

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