do that first the full committee hearing from this morning is officially a today there is no single soley on protecting consumers from financial products and services that could be detrimental to their financial health the idea of having a single consumer of financial products in a single agency also as a matter of public policy we will examine whether and how the federal reserve can effectively balance responsibilit policy take on a new role in systemic regulation and continue to have this role protect consumers effectively for far too long consumer protection has been an also hope that today's hearing testimony will begin to address some of the questions surrounding the operational details of the proposed consumer protection agency including coordination between a federal regulators and state regulators so that there is a regulation of the nation's consumer protection laws in the financial services area as many believe we have in the food federal reserve is a very important issue i look at this somewhat differently than others because they talk about consumer protection and they're thinking about financial products and services credit cards and gift cards and that if there is any harm done to the consumer that additional regulation will handle this i think there's a much bigger issue related to the consumer and the federal reserve something i think is neglected in a serious manner for instance the fed reserve has something to do with the value of our money the reserve has been around since one thousand thirteen and now we're working on a dollar so the systematic destruction of the value our money has not helped our consumers our consumers are destroyed by the loss of their purchasing power the fact that the federal reserve regulates interest rates and gets him down to one or two percent so if you happen to be a saver in your retirement are the consumers think about how the consumer was protected with the collapse of the financial bubble the financial bubble is well known that financial bubbles come from inflating the money supply at lower interest rates  malinvestment too much debt the source of all this mischief comes from the federal reserve and who suffers the consumer who benefits the people who have been making bundles on wall street for years when the bubble is being built then all of a sudden the consumer when the when the concern destroys under under the under these conditions think about the consequence of the collapse of the bubble that has been artificially created  it's the concern of the people who lose their jobs the poor people the middle class type of we have today historically it is well known if we pursue it and we are in the we are pursuing it because middle class gets wiped out look at all the inflation throughout history all the paper money that history middle class eventually gets wiped out because the people who suffer the most aren't the people on wall street the people who suffer the most of the middle class they lose their jobs maybe it will help a little but if you don't address the subject of how the consumer is destroyed it will help mexico has gone through this quite a few times with the destruction of currency who gets wiped out the middle class they're all holding pesos the peso goes to the dogs now and i've had correspondence in meetings with members of congress from mexico and now they have a savings account in mexico where if you're frightened about the destruction middle class by having honest money and not allowing the monetary system to inflate behind closed doors and to benefit special interests what's been happening for a long time  constitutional democracy we have one person one vote the executive branch is headed by the president and all important executive branch appoint pointed by the president or appointed by the president  there is one incredible inoffensive exception that is the federal reserve where at the regional banks the majority are selected and ultimately on the federal open market committee perhaps the most important government agency we have a majority of the power in the hands of one bank one vote or should i say one big bank one big vote one small bank one small  this is an affront to the constitution which will be exacerbated if we transfer more power to the federal reserve without mandating that all governors be a point of those who are elected by the voters it is a testament to the power of the banks that such incredible governmental power is invested in agencies where the voters don't decide who are the governors i realize the board of governors is appointed but those regional slots and the open market committee are very important centers of government power second the ranking member on this committee has a bill which i have co sponsored to audit the federal it is absurd to have a government agency with this kind of power the agency immune from such audit and finally there's the idea of where do we put consumer protection right now we have a federal reserve where the banks the majority of those on the regional boards and on the federal open market committee and then we're told that the agency that will protect consumers from the banks no other industry has that much power to select its regulators finally if the fed is going to be the systemic risk regulator we've got to recognize that ripping off consumers is one way to ameliorate systemic risk because if you can double cycle billing you can get the banks a little more healthy and maybe they'll survive their stress test we can't put those responsible for the stress test on the one hand with the responsibility for protecting consumers on the other and i don't care how financial markets in addition we all agree that calm form of our financial regulatory system but i think it is or should be clear to all of us that last acted with good intentions and i believe much more catastrophic economic collapse and i'm not sure this congress and the people we represent new layer of bureaucracy with an arbitrary power to a brand new agency with absolutely no experience it is a plan that continues the kana turf battles that undermine rather than promote effective consumer protection in closing let me say that i understand it will be suggesting some other approaches and i think other approaches probably will carry the day given the fed's extension of regulatory recognized for two minutes thank you mr chairman and i do want to associate myself with some of the comments made by the the ranking member of the full committee appreciate what you said about averting the the  catastrophe that the country was facing and that we did some good here in congress by working with the fed and and helping i think that that was important and i think that that mr bernanke has done a good job an outstanding job and i salute him for what he's done as he has been very much amiable and have a couple in terms of working with the congress to the extent that he can without surrendering his autonomy and i don't expect him to  this i think the fed has an awesome task right now we're talking about this did make risk regulation you currently deal with setting and executing monetary policy and now we're looking at the possibility of adding consumer protection with reference to your consumer protection function currently deal with supervision and enforcement complete investigation rule making consumer education as well as community development  reaction to what was about to become congressional action and i'm concerned that we won't have a proactive if we have this in the hands of the fed so i welcome your comments opportunity to appear today to discuss regulatory restructuring and the role of the federal reserve board in consumer protection the members of the federal reserve board are in strong agreement with the administration that a fundamental lesson of the financial crisis is that we need to do a better job for consumers of financial products while arguments for consolidating consumer protection functions may be compelling it is important to also consider the substantial opportunities presented by existing arrangement in our view the federal reserve has the resources and the experience to execute an ongoing comprehensive program for effective consumer protection and financial services our team of seasoned professionals and specialists focus exclusively on the panopoulos of activities that taken together can most effectively protect consumers over their work is augmented by supplemental expertise in markets research and supervision from within the board and the twelve regional reserve bank we believe that replicating in another agency the full array of functions that support our consumer protection program would be enormously challenging a report outlining our extensive program and recent actions is provided as an attachment to my recent testament to my written testimony we also view consumer protection as complimentary to rather than in conflict with the other functions of the federal reserve such as prevention supervision and financial stability these missions reinforce one another for example sound underwriting benefits consumers as well as institutions and strong consumer protections can add certainty to the markets and reduce grist to the financial system we have demonstrated particularly in the recent years with which i am most familiar our commitment and capacity to effectively execute our congressionally assigned consumer protection responsibilities board is also a concern that removing consumer protection responsibilities from the federal reserve would weaken the consumer perspective that currently exists in our monetary and supervisory policy discussion it is appropriate and beneficial that the central bank has a mission that includes an analytical and nuanced understanding of developments in the consumer marketplace for these reasons we stand ready to work with the subcommittee and others in congress to help identify ways to further strengthen our consumer protection program institutionally as congress considers regulatory reform one option that might be considered would be to retain the federal reserve's consumer protection responsibilities and consider additional policies to strengthen and further reinforce our commitment going forward along these lines i would like to offer some suggestions for how this could be accomplished first we believe that i have enhanced accountability could be achieved by kata firing or otherwise institutionalizing consumer protection as a core mission or responsibility for the federal reserve just like monetary policy and bank supervision this would provide a clear and ongoing understanding that consumer protection matters are an integral part of the federal reserve's overall mission second congress could require the chairman of the federal reserve board to annually report regarding the state of consumer protection similar to the semiannual policy reports to the congress so its reporting could include a comprehensive review of the federal reserve's actions taken to strengthen consumer protection plan future actions to address potentially unfair and deceptive acts and practices a review of enforcement actions studies of consumer finances availability of financial services especially in under served areas or other matters as requested by the congress hard we play conduct periodic sufficiency reviews of consumer regulations  policy will consider emerging trends in consumer financial services whether existing regulations are adequate for protecting consumers and identify those areas in which new consumer protection measures are needed we will develop a process that includes regular public hearings in washington and regional locations around the country similar to the process required by the credit card act of two thousand and nine the findings and recommendations could then be reported to congress as part of the annual testimony and report discussed strong timely and thoughtful consumer protection is critical for the economic health and vitality of our country with the federal reserve strongly committed to effectively protecting consumers and we look forward to continuing protection one part of their role writing and the other part the inspection within the institutions to ensure that all of the rules are being followed and so within the within the banks within the banking industry there are on site examinations similar to prudential supervision examinations but focused entirely on consumer compliance and consumer issues and so to the extent that there would be any conflict between the prudential supervision the safety and soundness side and the consumer compliance side as a matter of practice right now within the agencies because of the day to day contact those are usually resolved in the ordinary course of business i think that's another question that i have but my time has run out and i don't want federal agency from my viewpoint i'm not sure it makes a whole lot of difference i think it's the principle of regulation whether it works or not but it is rather ironic that a lot of people are talking about putting me in the face with with the amount of failure of the federal reserve and the amount of non compliance or at least observation by the congress's inability to audit it makes it sort of ironic that we might give the federal serve the consumer you go bankrupt but when you prop up policies that are bad or mentally the consumer is hurt by these regulations because the market doesn't hold them in check i see that regulate without putting a tax on the consumer i think all consumer regulation and i frankly do think that there needs to be that it needs to be informed by a deep understanding and understanding of the markets an understanding of financial institutions an understanding of the way financial markets operate in the way transactions operate in order to avoid adding excessive costs and such regulations have to be done with an eye toward the availability of financial services so it's a balance between the quality and the quantity financial services right now there's a big grassroots effort by consumers who are saying that the congress has not fulfilled his responsibility in knowing exactly what the federal reserve does what kind of agreements they make with international banks other governments international financial organizations what kind of conversations i've had with companies like goldman sachs and because of this consumer concern they have asked for more oversight of the federal reserve and now two hundred seventy seven members of congress should be the case why why do you think it would hurt consumers for us to know more about what the federal reserve is doing which may well be hurting the consumer if we knew more about it how can this information be harmful mr chairman we're making i mean congressman we're making quite quite a bit of information available now we have a weekly report of our balance sheet we have a monthly report which is submitted to congress we have a great deal of information on our web site and we also are subject to quite a bit of  oversight the one place the one exception to that oversight is in monetary policy and what research is showing with monetary policy is that the independence of monetary policy is important too for expectations of an interrupt because this bill would have nothing to do with monetary policy i might find out what has been done but it would interfere at all with monetary policy and i would beg to disagree there is more than one issues not monetary policy if you  look at the code example about five categories one is all relationships and transactions with foreign governments foreign central banks international financial institutions private corporations so those are exempt two and attention earlier about being proactive as opposed to being reactive and while i appreciate much of what was done in december of last year it appeared to be reactive and i'm interested in how do you move from that level of engagement such that you start to look for ways to protect the consumer which is what i think most people assume that a consumer protection agency would do let me just m and probably have included there's something wrong with this as a relates to the consumer the one that actually received it and that's that undisclosed wherein you qualify the buyer for that and you don't how how would you do this how would you become proactive on an issue like this i appreciate that question we've actually talked about this quite a bit and i've recognized the need to be proactive and i think at least in recent years have become quite proactive in the regulations that i appreciate you mentioning the regulations governing mortgages and credit cards and we recently passed our one example of that second example that you may not be as much aware of is the review of disclosures that we've done the review of disclosures under truth in lending and we have finalized new disclosure rules for credit cards we will this week beyond veiling new disclosures for mortgage loans as well as home equity which will address exactly the spread premium that you're talking about as part of doing that we have instituted consumer testing and we've spent quite a bit of time testing disclosures with consumers to make sure that we understand how they make decisions and what information is meaningful to them and what we're finding is that in some cases there are some practices that you just plain can't explain in a disclosure no matter how hard you try and those are the practices that we elect to prohibit it seems to me and i appreciate what you're doing it seems to me that if we have this located in the of the consumer protection agency that you have a balance that you have to achieve and that is obviously want to always have that in mind and then you want to protect the  consumer i don't think that either agencies should lean one way or the other something that the consumer protection agency is separate and apart from the i think it should be concerned about safety and soundness as well but your perch tends to dictate what your view is you can go to mount rushmore and if you're standing on the wrong side you won't see all of these pictures carving of a president and if you're a consumer protection agent it just seems to me that you would be more focused on the recipient and how the consumer will benefit then you will a person who is in banking and  concerned about the product i think that concerns about the product is what actually caused us to have problems with protecting the consumer so how do you reconcile this if you have a i understand what you're saying and frankly a lot of these discussions talk about prudential sleeper vision the good of the institutions versus the consumers if they're two different things and that might have been a result perception a couple years ago but but given what we have come through recently i don't think anybody can argue that what is important as far as consumers understanding the products they're buying is absolutely important also for the workings of our economy in addition to the financial institutions and that what is good for one is good for the others and that each of those perspectives gives you another window into ferreting out potential problems my concern is that the enlightenment came after a certain degree of friction if you will and i think that a consumer protector being proactive would have picked up on some of these things a little bit sooner because that the job of the consumer protector and my time is up believe that replicating another agency we believe that replicating in another agency the full array of functions embedded within the federal reserve and used to support our consumer protection studies going on on markets for consumer credit on on debt markets we are closely intertwined with the securitization market and in addition all of the supervision people that we have so so having all of that those resources which are core competencies of the federal reserve for the consumer protection group to draw on is something that i think makes their their informs their policymaking in a very positive way and th have that resource i believe that the that the proposal calls for the new agency to have research capability but whether it would replicate the entire research capability of the federal reserve conflict with other responsibilities of the federal reserve supervision and fostering financial stability and of course those are both very important to consumers also  products through less familiarity with with the payment systems and the way those work or the way the markets work the way financial institutions are structured and so mandating protections that are simply more think beneficial changes i think the congress particularly if we leave consumer protection at the fed and that's codified the consumer protection i think that would be important and another thing  you for being here i represent the fifth district of missouri primarily kansas city missouri and of course we have a regional federal reserve office  that the center for all of the national complaints the complaints that that would occur in new jersey end up being routed to the call center and our  federal reserve office and they report that there is about one complaint per bank per year one complaint for bank per year which would suggest i think that's a pretty good average i mean that's unbelievable i mean churches get you know more complaints not on a sunday and so i think that's that's pretty good and while i do agree that problems is that we don't have an opportunity for people to understand what's going on i don't know if you what the what the federal reserve is doing you start asking questions i bet if they ask questions on the street most people would even have any idea what the federal reserve is so most people i would think and maybe you would agree agree if they had a complaint against a bank they would even know where to take it would you agree now stay with me  burger king i used to be on the board our goal was to always have freestanding burger king as opposed to having them in buildings because our research shows that we did infinitely more business if we had free standing burger king stores you still with me  do you agree then that if we had a free standing agency to handle consumer complaints that we might get more than one of the  personal legal interpretation of section thirteen three you'll remember that this is the code section that says that in times of emergency and after proper consultation the fed  extend credit so long as it is secured and your chairman has taken the position what does that security mean to him it means the equivalent of aaa do you agree with that the concerned about forum shopping not just on prevention or regulation but consumer regulation if we bring together all the consumer regulation then it doesn't matter whether you're subject to federal regulation or not  you're going to have the same consumer regulation do you think it makes sense to have the fed provide borrower protection to those who borrow from banks board of governors have dealing with consumer protection and credential regulation very little regional boards are focused primarily on economic matters and the operation of the reserve banks themselves and not on supervision or consumer protection can you identify any harm there would be if we had as presidential appointees all the members of the board of governors of all the regional banks i think that the system that we have with the separate reserve banks who are who have separate boards of directors are important for our independence in monetary policy that they perform a critical role in monetary policy so you think  you think it's critical that monetary policy be determined in large part by those voted on by bankers rather than reflect the outcome of elections it's not it's not exactly that directly and the number of votes on the open market committee there are seven for the governors and five voting members from the reserve bank that's still an important number out of twelve you know it's not like the meatball industry gets representation it's not like the lawyers of the accountants or the shoemaker's get representation they're all affected by the federal open market committee as well and why bankers would have such  tremendous power over governmental over the most famous of all federal government decisions nothing the federal government does it's watched more intently than the federal open market committee actually  it is today how do you feel that we got to the point we're at now over the course of the last eight years you think it has been historically i think you know we when you look back we absolutely could have and should have taken action earlier than we did you know it's hard for me to determine why not but what i can tell you is that since in the time that i've been there and actually when i arrived there there's quite a bit of focus on on both supervision and consumer protection do other central banks around the world have consumer protection within their portfolio it is not a typical central bank function although i would point out that after forty years we have quite a bit of institutional experience and knowledge and memory and that as an overall matter our consumer structure and availability in the united states is the envy of the world yeah thanks for talking about the consumer d on on banking issues there is also within the federal advisory commission which is made up entirely of our consumer advocates on that board they are not so the bankers have their own board and they got part of another one as a good big and it's statutory yeah that's right and i think it's important to point out that congress has been had its own role to play in all of this and i think representation by the banking industry or credit score agency or real estate and that's not a critique of gov it's just that observation and i think it's something we need to look at when we talk about issues of governance is this of already been raised let me kind of pain a scenario for you let's just say that banks are reaping a lot of their profits from say overdraft fees and  to respect every dress but what we have found again particularly in the most recent crisis the important thing for we talk a lot about the conflict but there's also the benefit of having the consumer regulation  this may not be a short term source of profitability but it may not be a reliable long term source of profitability and a sound a warning on the side that products that are not well understood and not well used by main point is that you know there has been some dialogue around the conflict not raised by members of our committee and say well there's a conflict in the bill doesn't clearly spell out what to do in the case of the conflict but my point is there already to praise all of our staff but i think that one of the things to consider would be that in the real writing area in particular that as good as they are they might find it more difficult to write their roles without has to do as it has to make the call balancing those two interests from an industry standpoint if i could reach back into my industry i think what that  might mean is if you have one set of regulators telling you one thing and another set of regulators telling you something else a question of which one do you pay the most attention to which gives rise in a differen matter of fact the people who are more frugal people who borrow more they don't care that much but the frugal people who are doing what a lot of people think they should do they get penalized and i know the answer so often that  also argue that prices are going up significantly in certain areas one thing characteristic about inflation all prices don't go up uniformly if they did in wages went up uniformly inflation would be no problem but we have educational  go up disproportionately just think about how military equipment goes up and how the military industrial complex gets served with this system then also the people who participate in the financial bubble able to get out they benefit tremendously but also in medicine today we're facing this medicine crisis and the main problem with medicine today is not that the care isn't there we can get good care but it costs too much that's an inflationary problem as much as anything else because those places where government gets involved in three things i mention that's where the money goes and that's where the prices get pushed up you don't get better services you don't get better education or medical care you get higher prices so what is your defense of this position that the fed isn't a very good protector of the consumer because it undermines a value of the dollar we've lost ninety six percent of the value of our dollar since the fed's been in existence and also this low interest rate issue that i bring up we are conducting monetary policy to achieve our dual mandate which is low inflation and steady prices and economic growth and the inflation rate right now the core consumer inflation is about one point eight percent according to government statistics but not according to the consumer's private sources say the consumer price index is much higher than what the government reports so the interest rates are set and are managed again to meet our mandate and right now particularly love in order to support economic activity particularly funds let me ask we had a panel here earlier before the four committee and what i was trying to figure out and what a number of individuals are talking about is the fact that some are questioning whether the systemic risk regulat legislation we think is going to take place and hopefully survive for seventy eight hundred years what's wrong with letting the fed as a systemic risk regulator doing what it has to do in maintaining this whole spectrum of  actually not a large incrementally large increase in the activities we had today this is chemically important institutions the vast majority of them were not necessarily bank holding companies last fall but through the crisis became bank holding companies and i'm not aware of very many institutions that would be considered systemically important that we don't that we don't supervise today i think the difference would be probably in the focus of that supervision which would look not just to the individual institutions one picked up the problem that we were having in the fed is the one that's supposed to be the independent authority on monetary policy now with the systemic risk on top of that and then what concerns many individuals is the fact that the fed  regulations governing mortgages and credit cards in consumer testing and issuing new consumer disclosures which will be much more helpful to consumers and then also in community outreach for foreclosure prevention and  believe and i'm not certain on this so i if i get too deep into it i may have to respond in writing but i i believe that we issued guidance to those in that we supervise on underwriting but then afterwards when banks bank holding companies and they would say we don't and i found out later that was somewhat half true and that they all had non bank think that that kind of examination was a little unclear under under graeme leach bliley however we did conduct a pilot program within the last year where where we went into non banks subsidiaries jointly quick follow up with reference to the complaint that you received how many complaints have actually gone from complaint to a case that was referred to the justice department with reference to your mission to deal with patterns and practices of discrimination in terms of of numbers of complaints received or otherwise i would have to get back to you in writing on that i do know that we investigate every complaint that we receive on our on our member banks that we actually supervise and with respect to referrals to the justice department they primarily come  reviews of fair lending in the institutions and to the to the extent that we find discrimination we do refer those to the department of justice have you had occasion to have any  a result of the justice department's action respond and take corrective action i believe but if i could follow up in writing with specifics and the reason i'm asking is because every survey indicates that african americans who apply for loans are less likely to get the same treatment as equally qualified persons who are not minorities and i'm concerned that given the history of this and the lack of what i see as affirmative action to correct it what will happen if we leave it there it seems to me that a consumer protection agency would probably look at these things a little bit closer and see it as a great a mission that it has been accorded where it is currently i would just say that our examiners  take take this very seriously and there really two parts to the examination process sometimes they may find a practice that is not in itself discrimination but it looks suspect or looks dangerous and they will talk with the bank and take maybe take informal action to get that practice stopped and in those cases the practice does stop in cases where either that's not an option or the practice does not stop those cases are referred to justice thank you mr chairman i will y income or does it indicate something we should be concerned about it is a stream of income however there are also some issues with with overdraft protection or with with we've actually already publicized for comment rules governing overdraft those rules have both an opt in and an opt out alternative and we are now testing disclosures of the alternatives and we'll issue some final rules this year and to the extent that banks are over really overly reliant on overdraft that would in the short term that would be a risk in the long term  that a significant portion of their profitability is based on these overdraft what sort of what is the conversation kind of go like if you understand what i'm saying i mean is it like you're relying on this too much or are you need to develop other products or i mean what because i would imagine a safety and soundness conversation going like this you have to have more capital you have to develop more ways to have income streams  the consumer that i think most people if you bring some specific examples forward would say you know the consumer is getting taken advantage of and yet the only person who i think is going to really raise a stink about it is it is a can somebody was the  knowledgeable and respectful of our views one of the strengths of the proposal to create a new agency is that it will consolidate entire divisions and will retain their experience and knowledge there have been successes over the years but as congressman green pointed out they have tended more to be reactions than proactive measures at the end of the day and example after example described in my testimony written testimony at the said in the other agencies consumers have usually come up short trumped by an excess of faith in the free market and over reliance on more disclosures and antipathy to taking measures opposed by industry this is ironic because listening seriously to consumer concerns can help bolster safety and sound consumer advocates to point out that credit card debt was wrecking havoc on family finances and was unsustainable it was the consumer advocates not the banking agencies who complained repeatedly about mortgages that people could not afford to pay again and again year in and year out and nobody was listening and just one of many similar warning in two thousand and three  york attorney rule maker event in her frustration at the fed's consumer advisory council consumer advocates are from mars and bankers are from venus i sometimes feel that way there are parts of the country where i really feel it's going to be a nightmare this is two thousand and three i think the horse is out the barn door and you know i hope i'm wrong i really hope i'm wrong but i think it's in the interest of the financial institutions to figure out how to fix this problem which some unregulated institutions created which then the financial institutions went and purchased but those concerns and many like them year in year out went and heated mars and venus men and women consumers and bankers we think about things differently we focus on different problems as a former federal governor testified last week in saying that he believes the fed should give up his role as a consumer protection regulator the skills and mindset required to operate as a consumer protection regulator are fundamentally different from those required by a system of regulator i would say the same is also true of the mindset of a prevention regulator precisely because consumer protection is complimentary to safety soundness we need a new agency that will focus on the individual asking questions from their perspective about whether products are fair and contribute to or harm family financial stability  early before they present safety and soundness concerns for an entire portfolio or an entire institution the balance proposal for a consumer financial protection agency ensures that the agency will consider real safety and sound concerns first and most importantly one of the five commissioners will be a potential regulator commissioner president creation will ensure the prudential concerns are integrated into the fabric of the agency's work second the agency is a statutory mandate to coordinate with the banking agencies not every disagreement is a serious conflict but the agency will have every reason to listen to legitimate prudential concerns like fraud money laundering or and other distinguished members of the committee my name is james car and i'm operating officer of the national community reinvestment coalition on behalf of the coalition i'm honored to speak with you today as an organization of more than six hundred community based associations that promote access to basic financial services across the country for working families also pleased to be a member of the new coalition americans for financial reform that is working to cultivate integrity and accountability within the financial system members of the committee the collapse of the u s financial system represents a massive failure of financial regulation that suffered from a host of problems including regulatory system design flaws and oversight conflicts of interest weaknesses and enforcement philosophical perspective on the regulatory functioning of the markets and in adequate resolution authority to deal with problems after they've occurred at the request of the committee i will devote my time today to one issue and that is consumer protection safety and sound consumer protection often discussed a separate issue yet the safety and soundness of the financial system begins with an relies on the safety and soundness of the products that are extended to the public if the expansion of credit by a financial firm promotes the economic wellbeing and financial security of the consumer the system is that reduce risk of failure if the financial products exploit consumers even if they're highly profitable to financial institutions the system is in jeopardy of failure unfortunately for more than a decade financial institutions have increasingly engaged in practices intended to mislead confuse or otherwise limit a consumer's ability to judge the appropriateness of financial products offered in the market and make informed decisions in fact the proliferation of unfair and deceptive mortgage products led directly to the current foreclosure crisis and massive destruction of u s household wealth which currently stands at about thirteen trillion dollars the tricks and traps as it has been described by elizabeth warren used to trap consumers into high cost abusive financial products greatly complicated if not impaired the ability of a consumer to make an informed financial decision about the most appropriate product for their financial circumstances and nowhere was this irresponsible and reckless behavior by financial institutions more prevalent than in communities of color for more than a decade federal agencies independent research institutes and nonprofit organizations have described and discussed the multiple ways in which people of color have been exploited financially within the mortgage market the result today is the foreclosure crisis  having its most damaging impact on communities of color in two ways first people of color are experiencing a disproportionate level of foreclosures and second they are most negatively harmed by rising unemployment the obama administration recently proposed a sweeping reform of the financial system a core element of the president's plan is the establishment of a consumer financial protection agency house financial services chairman frank has proposed a similar agency in his legislation h r thirty one twenty six a consumer protection agency is long overdue currently the financial regulatory agencies compete with one another for fees paid by institutions that are they are entrusted to regulate the winning bid is the regulator that promises the least amount of consumer protection although competition is essential element in a free market oversight and enforcement of the law is not nor should it be available for purchase in a free market and back regulation is one of the few instances in which a monopoly market will result in the most efficient and desired result consumer financial agency as outlined by both the president and the chairman would have a commonsense goal and that is to provide standard products to eliminate unnecessary confusion for consumers on retail on routine transactions the concept of a standard product seems to be an anathema to some of the service but it's worth remembering that the thirty year fixed rate mortgage has been for more than half a century and remains today the gold standard loan product it was created to help the nation recover from the collapse of the previous major fall of the housing and credit markets during the great depression and short sometimes a good standard is the best innovation in order to be most effective the new consumer financial protection agency must examine lending at a community level as well highly segregated communities of color are the primary targets for unfair deceptive and predatory lending as a result the agency must have the knowledge experience and resources to address this critical reality moreover prohibiting reck irresponsible products is only half of the challenge and making sure there is equal access to reliable financial services many financial firms simply deny access to financial services completely america has a long and unfortunate history of redlining the act that most and most technically can address that issue at a community level is the community reinvestment act that law was included in the consumer protection agency proposed by the president and we recommend that it be included in the  being considered by this house in conclusion there has and will continue to be considerable pushback against the idea of a consumer financial protection agency primarily from financial institutions their argument is that such an agency will stifle innovation limit access to credit  lending to families these arguments should be considered as having the same merit as the declaration that the markets are self regulating we have seen the folly of self regulated markets and the american people are paying an extraordinary price  your testimony here today and you know my district in new york is the number one in foreclosures in the city of new york securitize in a way that those individuals incomes and the credit they receive seem to match more or less the mortgages that they were receiving and they're thrown out of their homes so what what what what what what i am concerned with and what i'm trying to is in your vision when we move forward committee it would go you know we'll be talking time after time at a time person after person but no results so in your mind would a consumer financial protection great opportunities of this new agency is to have a staff of the ability and understanding of consumers can examine the trends and practices and patterns and practices to bring forth really powerful studies greater it's a frivolous argument the idea is somehow that every single consumer is different from one another the difference of there is a difference in offering one product to every single consumer in the market as opposed to having products that are based on individual's income their wealth and certain other types of financial circumstances to create classes of standard products and one can be very nimble very innovative with standard products and in fact there are a lot of them that actually exist the problem was they could not compete with the reckless subprime loans that were actually priced at a much higher premium by the investment banks so the idea that somehow you lose innovation because you introduce standards is a frivolous argument pessimism at times and i think the problem is almost bigger than what we're dealing with here and we're dealing on the on the basic problem of the system that we've had this been around a long time  system some people refer to it as capitalism that was unregulated i happen to think that doesn't have much to do with capitalism has to do with corporatism where corporations seem to get the benefits of some of the programs that are designed to help the poor we have multiple programs been going on for a long time designed to help the poor and yet sometimes i think that is so superficial the poor seem to become more numerous and poorer specially since the crisis has federal reserve and why is the bubble forms they benefit nobody complains too much it seems to satisfy a lot of people but when the bus comes then we have a bailout who's the bailouts are we  you know come along with a with a new system that we hope hope will work but for a housing program for instance we want houses for the poor people but developers make a lot of builders make a lot of money mortgage companies make a lot of money the banks made a lot of money and all of a sudden the systems in work very well and the poor get wiped out and they lose their houses so if we don't address that major problem the structure of the system this corporatism which is invaded us how this idea that well regulated little bit in order to protect the consumer so i guess i'm rather appreciate the question because i agree with much of what you just said one of the problems that we have in this country is that we have the financial system operating on one side of the ledger and we have special programs for the poor on the other the wa poor became solid middle class in this country by having a financial system that built their wealth and public policies working with that financial system coming largely out of the great depression to build the vast majority of our middle class we do not have that now instead we have a banking system that looks at consumers and says how can we exploit them and that is problematic and until we change that system such that at our financial institution is reaching to a consumer specifically to promote the economic mobility of that consumer and build their well if that's not their goal if that's not what's going to be accomplished by their products the poor will remain poor and all the federal subsidies in the world won't help them that is why it is so critical to put into place an agency that actually combines the knowledge the collective wisdom of people who understand the banking system the financial system and understand it it's their mission to promote the economic mobility of this country because once they are working together there will be no conflicts of promoting wealth instability with working families with financial and then congressman the other programs that you've talked about that have failed  miserably so often those programs will now have a foundation by which they can actually enhance what's happening but if the markets don't work for the general public poverty will never be resolved one other quick question would you have any objection personally to knowing more about what's going on at the federal reserve and had an audit of the federal reserve i am not familiar with the federal reserve audit the gentleman from texas mr green mr chairman and i thank the witnesses for appearing have a question with reference to the continuing to perform the function of consumer protection and i'd like for each of you to give me a reason why that should not this consumer protection agency should not be in the fit and i would like for you to discount is exceedingly important that you do this count past performance not same thing i think the question in here today is pointed out how you know how many people coming from consumer organizations to the board of governors have ever sat on the board of governors even have had a significant or on the consumer statute or not it's always going to be a small part of the overall functions of federal reserve and it is so dominated by bankers and focus on those concerns that it's going to look at things from the fact without looking hindsight or retro retrospectively it's really hard to do that you just asked the question right in the depths of the greatest recession we have had a half century we know that a much of the damage was brought to black and latino communities how many civil rights actions are currently active by the fed and the answer was we're not sure i can look backward but what can i look back just an hour  i think we need an agency that understands that economic opportunity and economic mobility is imperative for this country and that if you can't respond to that in the depth of this crisis how can you be given the mantle to make sure shutting it down first of all i'm on the executive committee of americans for financial reform it is the official position of the organization that should and must be included in the new consumer protection agency second of all l go back to something i said in my opening comments the goal of that agency is to ensure access to safe and sound products and it can't do so to minority communities if it's only looking at individuals because the financial system doesn't treat individuals the same in minority communities they treat them as market and so getting to make issues of failing to live and failing to live as opposed to using exploitive products the community reinvestment act is the only real act that really promotes and holds banks and other financial institutions will banks now hopefully other financial institutions accountable for proactively lending in communities and not part of those daily conversations sharing of information and ultimately the creation of a product and the enforcement of the law it must be in order for that agency to work as it's designed it must be able to look at broad based community  lending where you don't have to give me some signal based on your answer then you would you would support a civil rights division of the financial consumer protection agency fed and even yesterday on the bankers you know about this issue of what takes precedence what will take precedent what has taken precedence for dental regulation or consumer  interest based on the long amount of time that it's transpired between the fed having the authority to make rules regarding good mortgages and the time they actually came up with something credit cards overdrafts all the stuff does the limits of time transpired give us any indication as to how it has grappled with these two conflicting between a new consumer regulatory agency and leaving consumer responsibilities consumer protection responsibilities you pointed out some a conflict between consumer regulation in one place and consumer regulation and other place i think we may have addressed appropriately in the statute  the industry is over and over again is this potential conflict between the consumer and prudential i keep having trouble identifying even what that is all about the regulator didn't suggest that that potential existed today but the industry keeps telling me that there is a conflict between consumer regulation and prudential regulation and is able to tell me one instance where that would raise i was actually looking for say you know that's not out that's not our thing anymore to oversee that so let me get you all to think about that a little bit not that i'm without objection the hearing record will remain open for thirty days for members to submit written questions to these witnesses and their responses in the record we thank you