Industry Reps React To Reform Proposals

on to President Obama's long-awaited [link=][u]proposal[/u][/link] for financial regulation reform has so far focused most heavily on the administration's plan to create both a new National Bank Supervisor and a new Consumer Financial Protection Agency (CFPA). While many of the lead trade groups agree better regulation is necessary, concerns remain over the plan's framework for how to close regulatory loopholes and prevent another market meltdown. Obama proposed Wednesday to eliminate the federal thrift charter but preserve its interstate branching rules and apply them to state and national banks. "The policy of separating banking from commerce should be reaffirmed and strengthened," according to the administration's blueprint, titled "A New Foundation." "We must close loopholes in the [Bank Holding Company] Act for thrift holding companies, industrial loan companies, credit card banks, trust companies and grandfathered "nonbank' banks." The proposals will produce "great uncertainty" in the financial markets and among regulators while it is pending, American Bankers Association President and CEO Edward L. Yingling said in a [link=][u]statement[/u][/link]. "It needlessly rips apart all the existing regulatory agencies, eliminates charter choices and creates a new agency with powers to mandate loans and services that go well beyond consumer protection," he said. Several groups argue that Obama's proposals lack a holistic view of the complex financial services industry. The [link=][u]Independent Community Bankers of America[/u][/link] (ICBA) says a financial product safety agency "would not have the big-picture view that banking regulators have." "The bank safety and soundness regulators have developed practical expertise in balancing the safe and sound operation of FDIC-insured institutions with the need to provide consumers protection from unfair and harmful practices, and this perspective should not be lost," an ICBA statement says. "Without attention to safety and soundness, the agency is likely to promulgate burdensome regulations that make many safe financial products, which are beneficial to consumers, unobtainable or too costly to offer." As proposed by Obama, the CFPA's rules would serve as a "floor" rather than a "ceiling," meaning that states would be able to go above and beyond any regulations set by the agency. Connecticut Sen. [link=][u]Chris Dodd[/u][/link], who heads the Senate Banking Committee and proposed a similar consumer protection agency last week, applauded the president's outline. Dodd's Republican counterpart on the committee, Ranking Member [link=][u]Richard Shelby[/u][/link] of Alabama, told The Wall Street Journal that the legislation could be the most important legislation the committee's seen in 50 years. ‘Haste is dangerous, especially when you are dealing with comprehensive change in our financial system,’ Shelby said. Others, such as the [link=][u]Mortgage Bankers Association[/u][/link] (MBA) President and CEO John A. Courson, suggest the administration's blueprint has the potential to unintentionally stifle innovation. Echoing sentiments that Obama's regulatory road map could create confusion, the MBA reiterated its support for a national set of mortgage regulations that would replace state and local laws. Also drawing many comments was Obama's proposal to revise securitization markets. His plan includes a risk-retention component that the administration argues would result in better-quality products. "[W]hile we support policy initiatives to align economic incentives among securitization market participants and to achieve greater risk transparency, we believe that mandated retention of risk by asset originators and securitization sponsors may not be the most effective way to achieve this goal," American Securitization Forum Executive Director [link=][u]George Miller[/u][/link] stated. "Undue restrictions" on the ability to fund lending by way of securitization could hamstring broader economic recovery, he said. MBA Chair David G. Kittle said his group will continue to work with policy-makers on ways to ensure those involved in the origination process have a financial interest in ensuring a borrower has a sustainable mortgage payment. A key component of such discussions, he added, was to avoid putting certain business models at a competitive disadv


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