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May 6 White House Press Briefing

By The White House, The White House - May 6, 2010

The White House

Office of the Press Secretary

See below for an answer to a question(marked with an asterisk) posed in the briefing that required follow up.

*On May 4, the Vice President chaired his monthly Cabinet-level meeting on Iraq.  Ambassador Hill and General Odierno briefed Principals on political and security developments via secure video teleconference and the Departments of Justice, State, and Homeland Security discussed Rule of Law programs in Iraq.  Participants included Defense Secretary Gates, Homeland Security Secretary Napolitano, UN Ambassador Rice, Admiral Mullen, General Petraeus, National Security Advisor Jones, Deputy National Security Advisor Donilon, State Deputy Secretaries Steinberg and Lew, Deputy Treasury Secretary Wolin, Deputy Attorney General Grindler, and representatives from OMB, the Departments of Energy and Commerce, the ODNI, and the CIA.

2:13 P.M. EDT

MR. GIBBS:  Good afternoon.  Shortly, the Senate is going to consider Senator Shelby’s amendment to weaken the President’s and Senator Dodd’s proposal for strong consumer protection in the financial regulatory bill.  I think you’ve all seen the President’s statement, and here to talk about that is Deputy Treasury Secretary Neal Wolin.

Neal.

DEPUTY SECRETARY WOLIN:  Thank you, Robert.  Good afternoon, everyone.  The financial crisis has demonstrated beyond any question that our current approach to consumer financial protection has failed.  In the run-up to this crisis, millions of Americans were sold mortgages and other financial products that they couldn’t understand and could not afford.  Unfair and deceptive acts and practices in the consumer finance market have left Americans facing foreclosure and debts they cannot bear.  It left responsible community banks to compete with non-banks and other non-bank institutions in an unlevel playing field, often irresponsible and often unregulated competitors.

Through the market for mortgage-backed securities, bad practices in the consumer financial market put our entire system at risk.  And why is that?  Because the current system puts bank regulators in charge of protecting consumers.  It didn’t work, and there’s no likelihood that it could work.  There’s no focus, no accountability.

Today seven different regulators have some responsibility for consumer financial protection, but none is focused on consumer protection as their priority.  And to the extent that there is any focus on consumer protection, the focus is overwhelmingly on banks, not on many, many other thousands of non-bank financial operations -- payday lenders, check cashers, auto lenders, money transmitters, mortgage brokers, et cetera. 

This unaccountable fragmented system allows for bad practices to take place in the shadows of the marketplace and we have to put an end to this.

The President has been very clear about what real reform means in this area.  It means independence.  It means accountability.  It means the ability to write rules across the consumer financial marketplace, and it makes ensuring that banks and non-banks alike are held to the same consistent standard.

The Dodd legislation pending in the Senate right now does all of that.  The Republican alternative does none of it.  The Dodd bill creates a fully independent, fully accountable bureau.  The Republican alternative just picks an existing consumer office from one banking regulator and drops it into another bank regulator that would be totally subordinate to bank regulators.  As I said earlier, that hasn’t worked; it will not work.

The bureau in the Dodd bill has an independent ability to set clear rules of the road across the marketplace.  The Republican alternative leaves the bank regulators in charge of the consumer laws -- the same regulators who have shown none or little interest in implementing these laws properly over the last series of years.

The Dodd bill creates for the first time effective federal authority to adopt rules banning unfair or deceptive practices wherever they may occur.  The Republican alternative keeps in place huge legal obstacles that make it nearly impossible to ban unfair or deceptive practices by non-banks like mortgage brokers, payday lenders, auto lenders, et cetera, perpetuating an unfair advantage that these banks have over community banks, for example.

The Dodd bill creates a bureau that can ensure consistent enforcement of rules across all of this marketplace.  It can directly enforce against bigger banks, against mortgage companies, against payday lenders, against auto lenders, and other firms.  The Republican alternative gives the so-called consumer office virtually no enforcement authority.

I think in the end, and to sum it up, the Shelby amendment is actually worse than the status quo.  It keeps all of the flaws of today’s system.  It keeps banks regulators completely in charge of protecting American families.  It keeps a huge loophole for payday lenders, for auto lenders, for mortgage brokers, for check cashers, and for all the other lenders and financial businesses that compete with banks but don’t happen to be called banks.  And it actually undermines existing rules.

Let me just say this.  The Republican argument for leaving the bank regulators in charge of protecting consumers is that there is some conflict between consumer protection and the health of financial institutions.  We reject that argument out of hand.  There is no real conflict between safety and soundness of banks and other financial institutions on the one hand, and transparency and fairness for consumers on the other.  Strong protections are actually good for the banking system.  I think we’ve just learned that when you don’t have strong consumer protections, the banking system is very much at risk.

We saw yesterday that the Republicans have decided to join with the Democrats in the Senate in a constructive way on some issues.  But on consumer protection, which really is the issue that arguably sits at the heart of what everyday Americans care about and how they are dealt with by the financial system, the Republicans have continued to oppose serious efforts at reform.  I think two years after this financial crisis began, a crisis that was exacerbated by a lack of transparency, it’s time for us to ensure that we have comprehensive reform that includes these fundamental improvements in consumer protection that the President has put forward and that the Dodd bill in the Senate contains.

Thank you.

MR. GIBBS:  Jonathan.

Q    Can I ask you about the Sanders amendment and what you guys are doing to try to change it or possibly kill it on Fed audit?

DEPUTY SECRETARY WOLIN:  Well, let me say, John, at the start, we oppose the Sanders amendment in its current form.  We think that, as Senator Sanders does, that transparency of the Fed is critically important, but we also believe that it’s important that the Federal Reserve Board have independence.  We think that independence has served this country very well over a long period of time.  We think that countries that have had either the reality or the perception of political influence in their central banks have had real problems -- problems with respect to inflation, with respect to the cost and availability of credit, including to consumers and to small businesses.  It hasn’t worked out well where the question about whether the congress or the executive branch of various countries have interfered with or had the perception of interfering with their central bank.

So we will continue to work with Senator Sanders, Senator Dodd and others to make sure that we have appropriate transparency of the Fed.  We think that is important, but also that we make sure that we do not encroach on the independence of the central bank.

Q    Would you veto -- would the President veto this bill if the Sanders amendment is in there?

DEPUTY SECRETARY WOLIN:  As I said, John, we are continuing to work with Senator Sanders, Senator Dodd and others to make sure we can accomplish these twin objectives.  We think that we’ll move forward in those discussions before we get to any discussion about vetoes.

MR. GIBBS:  Julianna.  

Q    Would the President veto the bill if the Shelby amendment was in it?  And also where -- is there any room for the President when it comes to the CFPA?  Are there elements that he would accept, for example, it being housed in the FDIC as Shelby has proposed?

DEPUTY SECRETARY WOLIN:  I think the President has expressed his support for the Dodd approach; it very closely mirrors his own.  I think -- we don’t expect that the Shelby amendment will pass.  We think that there are enough senators who, like the President, are committed to making sure that this incredibly important piece of reform is appropriately addressed.  And so I think the question of veto is something that’s premature.

Q    What are the elements to it that the Dodd -- if the CFPA, as Dodd has proposed, is amended, are there elements that Shelby has proposed that the President would accept?

DEPUTY SECRETARY WOLIN:  Well, we’ll see what others put forward.  As I just tried to outline, I think the elements of the Shelby approach, the Republican alternative in the Senate, are things that really gut the strength of this piece of this important legislation with respect to independence, with respect to accountability, effective rule-writing, and then obviously the need for enforcement across this marketplace.

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