Posts Tagged ‘federal reserve’

Financial Reform Passes: What Does It Mean For The Average Consumer?

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So the Senate voted today to pass financial reform, a bill aimed chiefly at reining in Wall Street from doing the kinds of things that lead to the financial collapse of 2008. There has been a lot of talk about derivatives  and credit default swaps, and while these are important parts of the reform bill, which ultimately affect each and every one of us, there are other aspects of this bill that will more directly affect average Americans.

The largest of these is the creation of a new consumer watchdog agency known as the Consumer Financial Protection Bureau. This agency will be located within the Federal Reserve but will be completely independent from it. It will have an independent director and will have the authority to make and enforce rules against unfair and deceptive consumer credit practices. This agency will regulate the practices any business that engages in consumer lending, from credit card companies and mortgage lenders to payday loan companies. The one group exempted from CFPB authority are auto dealers.

Basically, what the CFPB will do is make sure that when you sign a credit card agreement, you know exactly what you’re getting into. Even more importantly, it will ensure that if you borrow money, you can do it safely and with the knowledge that you can pay it back without going broke. Hopefully, the CFPB will put an end to the usurious practices of payday lenders, for example.

Finally, the reform bill contains new regulations with respect to mortgage lending.  Lenders will no longer be allowed to pay brokers additional fees for steering borrowers into riskier and more expensive loans if they qualify for cheaper safer ones. It also forces lenders to adopt stricter underwriting standards to ensure that no one receives a loan they can’t afford to repay and it reduces abusive repayment terms like huge prepayment penalties and other “junk” fees.

While the reform bill isn’t as strong as many would like, it does have some good aspects that will help consumers better manage their debt. I hope that Elizabeth Warren is appointed to be the director of the CFPB. 

I’m curious….what do YOU think about the financial reform bill?

Senator Sanders’ Amendment To Audit The Fed Passed Unanimously 96-0

 

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In  a rare show of complete bipartisanship, the Senate today voted unanimously,  96-0, to approve an audit of the Federal Reserve.  The audit would be limited to Federal Reserve activity that took place from the beginning of the financial crisis in December of 2007 until the time the law is enacted. In addition, the Fed would be required to disclose the recipients of the more than $2 trillion dollars in emergency aid funding since that time. The list of recipients will be available on the Fed’s website beginning on December 1st 2010. The GAO will also look into whether or not there were any conflicts of interest involved in any of these financial deals granted during the review time period.

Today’s vote was on an amendment, proposed by Senator Bernard Sanders,  to the larger financial reform bill currently being worked on by both houses of Congress.  Originally, the measure had stronger language that would have required an on-going audit of the Fed, but faced with bipartisan opposition in the Senate as well as opposition from the White House and from Federal Reserve Chairman Bernake himself, the scope of the audit was scaled back to a one time occurrence.  In addition, the names of the recipients of the two trillion dollar emergency aid would not have to be published on the Fed’s website until December 1, 2010 instead of within 30 days of its enactment.

While this is good news, it is important to remember that this vote was only on an amendment to the larger financial reform bill, which is still has a long way to go before it passes, after which, it must be signed by President Obama in order to become law.

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