Terry Goddard (D)PHOENIX, Ariz. (Legal Newsline)-The Obama administration is correct to seek to merge existing consumer protection authorities into one blanket agency, Arizona Attorney General Terry Goddard said Wednesday.
President Barack Obama's proposed Consumer Financial Protection Agency would "strengthen federal consumer protections for families and individual investors and enforce the rules consistently," the Democratic AG told reporters.
The attorney general said the federal government needs to have a coordinated effort to fight such crimes as mortgage fraud.
"Abusive lending practices and regulatory loopholes are at the heart of the mortgage crisis that has devastated Arizona families and our state's economy," Goddard said. "I am aggressively prosecuting those who defraud Arizonans, but state action alone is not enough. Federal policy makers must reform the system to be more efficient and operate in the best interests of consumers."
Goddard's comments came the same day the House Committee on Financial Services met to discuss H.R. 3126, the Consumer Financial Protection Agency Act of 2009. The committee is led by Rep. Barney Frank, D-Mass.
Democrats on the committee are seeking to also regulate the $592 trillion over-the-counter derivatives market, which includes the credit default swaps. Some blame for exacerbating last year's global financial crisis.
"Today's events indicate that the House ... is well on the path toward comprehensive financial reform," Assistant Treasury Secretary Michael Barr said on a conference call with reporters.
Opposed to the proposed financial watchdog agency is, among other groups, the U.S. Chamber of Commerce, the American Bankers Association and the Independent Community Bankers of America.
Bill Himpler, executive vice president of the American Financial Services Association, said: "Putting an untested, inexperienced agency in charge of consumer protection for the entire financial marketplace could exacerbate existing problems, rather than reducing them."
The Frank bill will have to be reconciled with draft legislation pending in the House Agriculture Committee before a single bill will go to the House floor for a vote.
In addition to Goddard, attorneys general of 21 other states are urging Congress to pass the plan. Of the attorneys general, only one -- Hawaii's Mark Bennett -- is a Republican.
"The current financial crisis, caused in part by irresponsible subprime lending and inadequate oversight, has demonstrated the need for comprehensive and effective consumer protection and enforcement at the federal level," the AGs' letter said. "We believe an independent federal agency combined with joint enforcement by state officials is the best option for meaningful consumer protection in this area."
Ben Bernanke, the chairman of the Federal Reserve, testified before the Senate Committee on Banking, Housing and Urban Affairs in June that Obama's plan is unnecessary because the Fed can handle the issues.
"The Federal Reserve's combination of expertise in financial markets, payment systems and supervision positions us well to protect the interests of consumers in their financial transactions," Bernanke wrote.
From Legal Newsline: Reach staff reporter Chris Rizo at email@example.com.