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74–090 2012

THE PROPOSED CONSUMER FINANCIAL PROTECTION AGENCY: IMPLICATIONS FOR CONSUMERS 

AND THE FTC 

HEARING 

BEFORE THE

SUBCOMMITTEE ON COMMERCE, TRADE, 

AND CONSUMER PROTECTION 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED ELEVENTH CONGRESS 

FIRST SESSION 

JULY 8, 2009 

Serial No. 111–57 

( 

Printed for the use of the Committee on Energy and Commerce 

energycommerce.house.gov 


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COMMITTEE ON ENERGY AND COMMERCE 

HENRY A. WAXMAN, California, Chairman 

JOHN D. DINGELL, Michigan 

Chairman Emeritus 

EDWARD J. MARKEY, Massachusetts 

RICK BOUCHER, Virginia 

FRANK PALLONE, JR., New Jersey 

BART GORDON, Tennessee 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

BART STUPAK, Michigan 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

Vice Chairman 

LOIS CAPPS, California 

MICHAEL F. DOYLE, Pennsylvania 

JANE HARMAN, California 

TOM ALLEN, Maine 

JANICE D. SCHAKOWSKY, Illinois 

CHARLES A. GONZALEZ, Texas 

JAY INSLEE, Washington 

TAMMY BALDWIN, Wisconsin 

MIKE ROSS, Arkansas 

ANTHONY D. WEINER, New York 

JIM MATHESON, Utah 

G.K. BUTTERFIELD, North Carolina 

CHARLIE MELANCON, Louisiana 

JOHN BARROW, Georgia 

BARON P. HILL, Indiana 

DORIS O. MATSUI, California 

DONNA CHRISTENSEN, Virgin Islands 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

CHRISTOPHER S. MURPHY, Connecticut 

ZACHARY T. SPACE, Ohio 

JERRY MCNERNEY, California 

BETTY SUTTON, Ohio 

BRUCE BRALEY, Iowa 

PETER WELCH, Vermont 

JOE BARTON, Texas 

Ranking Member 

RALPH M. HALL, Texas 

FRED UPTON, Michigan 

CLIFF STEARNS, Florida 

NATHAN DEAL, Georgia 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

JOHN B. SHADEGG, Arizona 

ROY BLUNT, Missouri 

STEVE BUYER, Indiana 

GEORGE RADANOVICH, California 

JOSEPH R. PITTS, Pennsylvania 

MARY BONO MACK, California 

GREG WALDEN, Oregon 

LEE TERRY, Nebraska 

MIKE ROGERS, Michigan 

SUE WILKINS MYRICK, North Carolina 

JOHN SULLIVAN, Oklahoma 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

PHIL GINGREY, Georgia 

STEVE SCALISE, Louisiana 

(II) 


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(III) 

SUBCOMMITTEE ON COMMERCE, TRADE, AND CONSUMER PROTECTION

BOBBY L. RUSH, Illinois 

Chairman 

JAN SCHAKOWSKY, Illinois 

Vice Chair 

JOHN SARBANES, Maryland 

BETTY SUTTON, Ohio 

FRANK PALLONE, New Jersey 

BART GORDON, Tennessee 

BART STUPAK, Michigan 

GENE GREEN, Texas 

CHARLES A. GONZALEZ, Texas 

ANTHONY D. WEINER, New York 

JIM MATHESON, Utah 

G.K. BUTTERFIELD, North Carolina 

JOHN BARROW, Georgia 

DORIS O. MATSUI, California 

KATHY CASTOR, Florida 

ZACHARY T. SPACE, Ohio 

BRUCE BRALEY, Iowa 

DIANA DEGETTE, Colorado 

JOHN D. DINGELL, Michigan (ex officio) 

CLIFF STEARNS, Florida 

Ranking Member 

RALPH M. HALL, Texas 

DENNIS HASTERT, Illinois 

ED WHITFIELD, Kentucky 

CHARLES W. ‘‘CHIP’’ PICKERING, 

Mississippi 

GEORGE RADANOVICH, California 

JOSEPH R. PITTS, Pennsylvania 

MARY BONO MACK, California 

LEE TERRY, Nebraska 

MIKE ROGERS, Michigan 

SUE WILKINS MYRICK, North Carolina 

MICHAEL C. BURGESS, Texas 


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C O N T E N T S 

Page 

Hon. Bobby L. Rush, a Representative in Congress from the State of Illinois, 

opening statement ................................................................................................ 1 

Prepared statement .......................................................................................... 4 

Hon. George Radanovich, a Representative in Congress from the State of 

California, opening statement ............................................................................. 11 

Hon. Henry A. Waxman, a Representative in Congress from the State of 

California, opening statement ............................................................................. 12 

Hon. Cliff Stearns, a Representative in Congress from the State of Florida, 

opening statement ................................................................................................ 13 

Hon. John D. Dingell, a Representative in Congress from the State of Michigan, opening statement ....................................................................................... 14 

Hon. Ed Whitfield, a Representative in Congress from the Commonwealth 

of Kentucky, opening statement ......................................................................... 16 

Hon. Janice D. Schakowsky, a Representative in Congress from the State 

of Illinois, opening statement .............................................................................. 17 

Hon. Joe Barton, a Representative in Congress from the State of Texas, 

opening statement ................................................................................................ 18 

Hon. Gene Green, a Representative in Congress from the State of Texas, 

opening statement ................................................................................................ 19 

Hon. Joseph R. Pitts, a Representative in Congress from the Commonwealth 

of Pennsylvania, opening statement ................................................................... 20 

Hon. Doris O. Matsui, a Representative in Congress from the State of California, opening statement .................................................................................... 21 

Hon. Betty Sutton, a Representative in Congress from the State of Ohio, 

opening statement ................................................................................................ 22 

Hon. Kathy Castor, a Representative in Congress from the State of Florida, 

opening statement ................................................................................................ 23 

Hon. Steve Scalise, a Representative in Congress from the State of Louisiana, 

opening statement ................................................................................................ 24 

Hon. G.K. Butterfield, a Representative in Congress from the State of North 

Carolina, opening statement ............................................................................... 25 

WITNESSES

Michael Barr, Assistant Secretary for Financial Institutions, Department of 

the Treasury ......................................................................................................... 26 

Prepared statement .......................................................................................... 30 

Answers to submitted questions ...................................................................... 189 

Jon Leibowitz, Chairman, Federal Trade Commission ........................................ 47 

Prepared statement .......................................................................................... 50 

Answers to submitted questions ...................................................................... 202 

Gail Hillebrand, Senior Attorney and Manager, Financial Services Campaign, 

Consumers Union ................................................................................................. 80 

Prepared statement .......................................................................................... 83 

Answers to submitted questions ...................................................................... 257 

Stephen Calkins, Esq., Associate Vice President for Academic Personnel and 

Professor of Law, Wayne State University ........................................................ 107 

Prepared statement .......................................................................................... 108 

Answers to submitted questions ...................................................................... 261 

Prentiss Cox, Associate Clinical Professor of Law, University of Minnesota ..... 120 

Prepared statement .......................................................................................... 122 

Answers to submitted questions ...................................................................... 267 

Rachel E. Barkow, Professor of Law, New York University School of Law ........ 137 

Prepared statement .......................................................................................... 139 

Answers to submitted questions ...................................................................... 270 


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VI 

Chris Stinebert, President and CEO, American Financial Services Association ........................................................................................................................ 154 

Prepared statement .......................................................................................... 156 

SUBMITTED MATERIAL

Statement of J. Thomas Rosch, Federal Trade Commission ................................ 177 


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THE PROPOSED CONSUMER FINANCIAL PROTECTION AGENCY: IMPLICATIONS FOR CONSUMERS AND THE FTC 

WEDNESDAY, JULY 8, 2009 

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON COMMERCE, TRADE, 

AND CONSUMER PROTECTION, 

COMMITTEE ON ENERGY AND COMMERCE, 

Washington, DC. 

The Subcommittee met, pursuant to call, at 10:10 a.m., in Room 

2123 of the Rayburn House Office Building, Hon. Bobby L. Rush 

[Chairman of the Subcommittee] presiding. 

Members present: Representatives Rush, Schakowsky, Sarbanes, 

Sutton, Green, Gonzalez, Butterfield, Barrow, Matsui, Castor, 

Space, DeGette, Dingell, Waxman (ex officio), Radanovich, Stearns, 

Whitfield, Pitts, Terry, Gingrey, Scalise and Barton (ex officio). 

Staff present: Anna Laitin, Professional Staff; Will Casey, Special 

Assistant; Michelle Ash, Chief Counsel; Timothy Robinson, Counsel; Marc Groman, Counsel; Stephanie Bazell, Intern; Caren 

Auchman, Communications Associate; Bruce Wolp, Senior Adviser; 

Phil Barnett, Staff Director; Jeff Wease, Deputy Information Officer; Earley Green, Chief Clerk; Brian McCullough, Senior Professional Staff; Shannon Weinberg, Counsel; Will Carty, Professional 

Staff; and Sam Costello, Legislative Assistant. 

OPENING STATEMENT OF HON. BOBBY L. RUSH, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS 

Mr. RUSH. The Subcommittee on Commerce, Trade and Consumer Protection will now come to order. 

The purpose of today’s hearing is to hear witnesses on the subject of the proposed Consumer Financial Protection Agency, implications for consumers and the FTC. I certainly want to welcome all 

the witnesses, Mr. Barr and Chairman Leibowitz. The Chair recognizes himself for 5 minutes for the purposes of an opening statement. 

I would like to thank all my colleagues and all the witnesses who 

diligently worked to prepare testimony over the Fourth of July holiday so that today’s hearing would be as meaningful as possible as 

we commence our examination of the Administration’s proposal to 

create a new Consumer Financial Protection Agency. My view on 

the matter is fairly straightforward. I believe that the FTC should 

remain intact as it is currently constituted and that this committee 


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and subcommittee should continue to oversee and authorize the 

FTC. 

The Commission, which was established in 1914 during our Nation’s Progressive Era, was designed to be a regulatory agency with 

disinterested expertise to ensure compensation and to promote free 

enterprise. That mission and those prescient concerns are as vital 

today as they were almost a century ago. The Commission operates 

best as a lone eagle. From high above, the agency can survey the 

marketplace and swoop down on predators that deceive 

unsuspecting and misinformed consumers. The higher and farther 

away that the FTC is from other agencies and the entities that it 

regulates, the better it is at spotting unfair commercial and trading 

practices and at isolating those practices that cast the longest 

shadows. Similarly, by staying at a distance, the agency can keep 

would-be credit captors at bay while staying on course to achieve 

its critical mission of protecting consumers. 

Looking at all reliable indicators, the commission has performed 

commendably for a small and scrappy staff and abridged powers, 

working alone with a five-person bipartisan commission, possibly 

1,100 dedicated employees spread out across three bureaus: Bureau 

of Competition, Consumer Protection and Economics. Although its 

expertise is deep and broad, the FTC’s statutory tools under the 

FTC Act consist of an antiquated and cumbersome of rulemaking 

under the Magnuson-Moss Act paired with anemic litigation authority. These two may be successful at landing glancing blows but 

they fail to pack a full punch of detergents that businesses will respect and consumers deserve. Currently at the FTC’s disposal are 

its expertise and its agency crafted instruments of research, policy 

and study development, consumer compliant and education, competition, legal analysis and economics. While the FTC does well, it 

has done without power relative to its sister agencies, and what it 

hasn’t done particularly well is in the process of being fixed. 

Just a few weeks ago, our subcommittee worked intently to mark 

up H.R. 2309, the Credit and Debt Protection Act, which directs 

the FTC to adopt rules using APA rulemaking authority that would 

address rampant unfair and deceptive practices in the area of payday lending, automobile financing, mortgage and foreclosure rescue 

and debt settlement. Our subcommittee’s objective in passing H.R. 

2309 was to confer more authority upon the FTC and to equip it 

with sufficient resources so that it could adopt rules faster in the 

areas of credit and debt through APA rulemaking procedures and 

bring enforcement action through the threat of civil penalties. Our 

committee had worked devotedly in the past more than a few times 

with members from the Financial Service Committee to bolster the 

FTC’s shortcomings, hold out the FTC’s best practices for banking 

agencies to emulate and protecting consumers and to improve the 

ability of bank regulatory agencies to protect consumers by ensuring unfair and deceptive rules under the FTC Act. I have witnessed 

the respective chairs of the Committees on Energy and Commerce 

and Financial Services jointly introduce H.R. 3525 to tackle some 

of these challenges. 

Further, I offered a further amendment to H.R. 3526, which was 

introduced by the chair of the Financial Services Committee in the 

110th Congress to require that a GAO report investigating federal 


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banking and credit union regulations and the perpetuation of unfair and deceptive acts and practices by depository institutions. Importantly, this push and pull between our respective committees 

has pressured providers of financial services and products including banks and depository institutions to balance the allure of profits and determination of safety and soundness against the needs of 

consumers. This collaborative working relationship between committees has produced good and sustainable consumer protection 

bills to safeguard consumers of financial services and of consumer 

credit products and is a vital example of the independent agencies 

that would be affected by the Administration’s proposal as it will 

allow each of them to maintain their independence and respective 

biases and expertise when addressing serious problems that cut 

across sectors and affect market supplies and consumers. 

I want to thank the witnesses for being here today, for taking the 

time out from their busy schedules to participate in this hearing. 

With that, I yield back the balance of my time. 

[The prepared statement of Mr. Rush follows:] 


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Mr. RUSH. The Chair now recognizes the gentleman from California, the ranking member, Mr. Radanovich for 5 minutes for the 

purposes of an opening statement. 

OPENING STATEMENT OF HON. GEORGE RADANOVICH, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA 

Mr. RADANOVICH. Thank you, Mr. Chairman, good morning. I appreciate your calling today’s hearing on this important topic. 

Whenever something goes wrong in this country, Washington 

proposes a solution regardless of whether the situation calls for 

one. However well-intentioned our actions, they rarely work out because they are often undertaken as a knee-jerk response. We have 

seen many unintended consequence of rush to legislation in recent 

history, for example, the Sarbanes-Oxley Act. At best, we have seen 

marginal improvements in the markets diverting billions of dollars 

toward new compliance costs to the detriment of many small- and 

medium-sized businesses. In another example, last Congress we enacted a law in response to lead paint on toys. The paint violated 

an existing standard but what was a compliance problem rather 

than a deficient standard problem led to numerous costly new mandates that put many small- and medium-sized businesses out of 

business because the cost was too high without any corresponding 

increase in safety. 

This is not to say that weaknesses in our financial system don’t 

exist; they obviously and clearly do. The failure of so many financial institutions and the ongoing problem of foreclosures on mortgages some borrowers never should have taken out are evidence of 

that, and if the bailout of banks and financial firms really were 

necessary to save the financial system, something clearly needs to 

be done to address the systematic risk. 

Additionally, fraud and deception by both lenders and borrowers 

in the mortgage market ran rampant. The FBI reported an increase in fraud by more than 400 percent since 2005. Few people 

question anything was wrong in the market until home prices 

started plummeting and borrowers began defaulting. If uniformity 

in the enforcement of existing laws can address these problems, I 

would support that. Apart from the lack of systemic risk regulation 

to prevent future financial collapses required in the taxpayer bailout, I am still trying to understand what holes exist in the FTC’s 

consumer protection authority and to what extent the government 

contributed to the crisis with its intervention in housing policy. I 

am far from convinced that the market problems require the creation of a new federal regulator as contemplated by the Administration’s proposal. 

Fannie Mae and Freddie Mac are under government control in 

part because they did exactly what Congress and the government 

wanted: extend home ownership to as many people as possible 

under the watch of the federal regulators. Fannie and Freddie 

along with the federal housing agencies and programs were encouraged to extend credit, and when they did, their shareholders played 

the price for failing. To accomplish the policy goal of extending 

home ownership to as many people as possible, changes in lending 

standards had to occur. The lowering of lending standards meant 


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more borrowers qualified for loans they couldn’t afford. My point is 

that laws on the books didn’t stop people from taking out risky 

mortgages, either in spite of or because of rapidly increasing home 

prices, nor has it stopped regulators and law enforcement from 

prosecuting those who we now know committed fraud and broke 

the law. 

While many experts believe that the banking regulators performed their duties inadequately, I will leave that to the Financial 

Services Committee to decide. But with regard to the FTC, it seems 

to me that we are throwing out the baby with the bathwater by 

stripping the authority over consumer protection for financial products and services from the one agency that has performed well. If 

we agree we need legislation, we should take the approach of legislating with a scalpel rather than with a bulldozer. 

With that said, I have two primary concerns with this proposal. 

First, it creates a new federal entity with an enormous scope of authority. The proposal grants sweeping authority to a new agency 

over financial products that would cover every sector of the economy. As I understand it, the draft legislation would touch everyone 

from a certified public accountant to a realtor and subject them to 

a new tax to fund the agency. 

Second, I am concerned about transferring functions from the 

FTC to a new agency without any evidence that it is necessary or 

that it will be as effective as a regulator as the FTC is. By removing the FTC’s authority, we could lose the FTC’s unique expertise 

in balancing consumer protection and competition. 

Finally, the legislation contains several new broad authorities for 

the FTC regarding rulemaking authority and civil penalty authority. I have previously disagreed with these and do not need to repeat them at this time. However, I do have some questions of the 

witnesses regarding these provisions and I will ask them when 

they are appropriate. 

I want to welcome the members to the panel as well and yield 

back, Mr. Chairman. 

Mr. RUSH. The Chair thanks the gentleman. The chairman of the 

full committee is recognized for purposes of opening statement for 

5 minutes. 

OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA 

Mr. WAXMAN. Thank you very much. I want to thank you, Mr. 

Chairman, for holding this important hearing. 

Last year, as chairman of the House Oversight Committee, I held 

several hearings examining the causes of the financial crisis. Those 

hearings revealed a government regulatory structure that was unwilling and unable to meet the complexities of the modern economy. We found regulatory agencies that had fully abdicated their 

authority over banks and had done little or nothing to curb abusive 

practices like predatory lending. The prevailing attitude was that 

the market always knew best. Federal regulators became enablers 

rather than enforcers. 

The Obama Administration has developed an ambitious plan to 

address these failures and to strengthen accountability and overVerDate Mar 15 2010 05:51 Aug 02, 2012 Jkt 74090 PO 00000 Frm 000018 Fmt 06633 Sfmt 06633 E:\HR\OC\A090.XXX A090

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sight in the financial sector. Today’s hearing will take a close look 

at one piece of that plan, the proposal to create a single agency responsible for protecting consumers of financial products. A new approach is clearly warranted. The banking agencies have shown 

themselves to be unwilling to put the interests of consumers ahead 

of the profit interests of the banks they regulate and the structure 

and division of responsibilities among these agencies has led to a 

regulatory race to the bottom. The Federal Trade Commission has 

taken steps to protect consumers but its jurisdiction is limited and 

it has been hampered by a slow and burdensome rulemaking process. 

I am pleased that this subcommittee is holding today’s hearing 

and examining the Administration’s proposal carefully. There are 

two areas of which attention and focus from this committee are 

particularly needed. First, the new agency must be structured to 

avoid the failures of the past. It only makes sense to create a new 

agency if that new agency will become a strong, authoritative voice 

for consumers. And second, we must ensure that the Federal Trade 

Commission is strengthened, not weakened, by any changes. Unlike the banking agencies, FTC has consumer protection as its core 

mission. 

In recent months, FTC has taken great strides to protect consumers of financial products, bringing enforcement actions against 

fraudulent debt settlement companies and writing new rules governing mortgages. The Administration’s proposal would give most 

of the FTC’s authority over financial practices and some of FTC’s 

authority over privacy to the new agency. At the same time, the 

Administration proposes improving FTC’s rulemaking authority 

and enforcement capabilities. It is not clear what impact these proposals would have on FTC or its ability to perform its consumer 

protection mission. As we build a new structure for protecting consumers of financial products, it is our responsibility to ensure that 

we do not weaken the agency currently responsible for consumer 

protections in this and many other areas. 

Once again, I thank Chairman Rush for holding this hearing. I 

welcome our witnesses to the committee and look forward to their 

testimony. 

Mr. RUSH. The Chair thanks the chairman of the full committee, 

and now the Chair recognizes the gentleman from Florida, Mr. 

Stearns, for 2 minutes for the purposes of opening statement. 

OPENING STATEMENT OF HON. CLIFF STEARNS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF FLORIDA 

Mr. STEARNS. Good morning, and thank you, Mr. Chairman. 

This is a very important hearing. It is important for us as members of this subcommittee, and Mr. Chairman, in terms of our jurisdiction and what the implications are for jurisdiction in the future. 

The Administration’s newly proposed CFPA, or the Consumer Financial Protection Agency, is relevant. It is an idea that a lot of 

us have mixed reactions. It has implications for our subcommittee. 

Although this is only one component of the Administration’s broadreaching financial regulatory reform proposal, it certainly is an important part of that overall program and it needs detailed examination. 


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We must carefully consider the long-term effects that this will 

have on the Federal Trade Commission, the consumers it is 

charged with protecting and on industry. Currently, the Federal 

Trade Commission has broad authority to protect consumers from 

unfair and deceptive practices in the credit and debt areas, and the 

FTC has notably been an effective and reliable agency in terms of 

consumer protection. We have seen it in this subcommittee. However, this new agency, the CFPA, proposal strips the Federal Trade 

Commission of virtually all of its consumer protection authorities 

pertaining to financial practices and even some of its privacy protection authority. So, Mr. Chairman, I think that has to be a concern. 

The proposal compensates for this shifting of authority by granting the Federal Trade Commission streamlined Administrative Procedures Act, APA, rulemaking authority and the ability to seek 

civil penalties against unfair and deceptive practices. But this is a 

term of which there is no clear definition as well as making it unlawful to ‘‘aid and abet’’ in deceptive acts. So due to the shifting 

of power and the potential economic consequences of businesses, we 

must ensure that effective stakeholders have a voice at the table 

but ultimately we need to be sure that the CFPA, the new agency, 

will be an agency designed to do what is in the best interests of 

the consumers and not what is in the best interest of the bureaucrats who run it. 

One other concern I would have, Mr. Chairman, with the APA 

is it has 180 days for consideration. Is this sufficient time under 

the Magnuson-Moss Act rulemaking requirements included a public hearing and so, Mr. Chairman, perhaps as this bill moves along 

we might want to include some kind of public hearing as well as 

this 180 days of consideration. 

With that, I yield back the balance of my time. 

Mr. RUSH. The Chair thanks the gentleman. The Chair now recognizes the gentleman from Michigan, the chairman emeritus of 

the full committee, my friend, Mr. John Dingell, for 5 minutes for 

opening statement. 

OPENING STATEMENT OF HON. JOHN D. DINGELL, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MICHIGAN 

Mr. DINGELL. Mr. Chairman, I thank you, and I commend you 

for this hearing. It is a very important one. It follows on a series 

of events which began with a raid on this committee by other committees and by the banking industry and by repeal of GlassSteagall, which removed all the penalties and prohibitions against 

many of the illegal activities which brought us to the current lowest state in which we find ourselves financially and economically. 

At the Treasury Department, there was an office still in being 

called the Controller of the Currency, who pushed to totally deregulate banks and to unlearn the lessons which we learned during the 

Depression and to permit the abuses which the Pecora Commission 

found to be a problem, things which brought about the 1929 crash, 

and lo and behold, the failure to learn those lessons or to preserve 

the protections which the Congress and the President in the 1930s 


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put into place led to the economic collapse which occurred in the 

United States in the last calendar year and this calendar year. 

So the questions that we will be concerned with are going to be, 

are consumers protected, is the Federal Trade Commission able to 

continue doing the work that it does to protect consumers, and this 

committee is going to concern ourselves this morning with these 

issues and means by which to ensure improved consumer protections continue to exist with regard to financial products and services and to see to it that the Federal Trade Commission is able to 

carry out the responsibilities which in a rather contemptible fashion were disregarded by the SEC and also by the Controller of the 

Currency. 

Now, we need to know if our concerns here and the pause which 

it gives us occurs in part because of a transfer of existing authority 

from the Federal Trade Commission to a newly minted Consumer 

Financial Protection Agency, an agency whose behavior we don’t 

know but an agency which is going to probably be composed of 

many of the goodhearted people who have brought us to this curious and unfortunate state of events. I will be truthful: I have significant concerns about these plans and I will be intending to engage today’s witnesses in a frankly discussion about their merits. 

The Administration, which has no fault in the events of the deregulation and the collapse of the American economy last year, envisions consolidating all consumer protection functions related to financial products including rulemaking, supervision, examination 

and enforcement under the aegis of the new CFPA, which would 

receive sole rulemaking enforcement authority over consumer financial protection statutes such as the Truth in Lending Act. At 

first glance, this strikes me as a dejure and possible unwarranted 

reassignment of FTC’s consumer protection authorities in the financial services area. I will be looking to see whether this is so and 

whether in fact is a good thing or can be justified by the Administration. 

While a comparatively small agency, it is to be observed that 

FTC has some superb work in protecting consumers, and in this 

the country would benefit not from a diminished mandate to that 

agency but rather to additional statutory authority, personnel and 

funding. Consequently, I have more than a modest degree of skepticism regarding the Administration’s proposal. In brief, I wish for 

our witnesses to elucidate upon several matters associated with the 

CFPA proposal. 

First, if CFPA were mandated under law, what authorities would 

be left to FTC and why would that occur. Second, what latitude 

would FTC have in enforcing consumer protection statutes as they 

relate to financial services, and what consumer protection statutes 

would be denigrated or dissipated under this proposal. Third, how 

would one characterize the level of interagency cooperation in the 

drafting of the Administration’s proposal. Financially, if CFPA receives its proposed mandate, what will become of this committee’s 

jurisdiction over consumer protection as designated under rule 10 

of the House of Representatives? I will welcome the witnesses’ responses to these and other questions in order to properly establish 

an adequate record for additional action by the Congress if such is 

deemed necessary. 


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I would ask at this time that I have unanimous consent to keep 

the record open to submit a list of questions to the witnesses today 

and to have those responses and the questions inserted into the 

record. 

I want to commend you, Mr. Chairman, for your courtesy and 

foresight in this hearing. I would conclude by a personal note in 

welcoming Dr. Stephen Calkins, associate vice president for academic personnel and professor of law at Wayne State University in 

my home State of Michigan. His testimony has been invaluable to 

my understanding of this matter and I look forward to his participation in the continuing debate on consumer financial protection, 

and I note, Mr. Chairman, that my wife is a member of the Board 

of Governors of that great institution, which gives me a particularly warm feeling about it, and again, Mr. Chairman, I urge you 

and my colleagues to be most diligent, most cautious, most careful 

and most dutifully suspicious of the events that we inquire into 

today. Thank you. 

Mr. RUSH. The Chair thanks the chairman emeritus. The Chair 

wants to put before the committee the UC request, and hearing no 

objection, so ordered, the UC request by the chairman emeritus. 

And the Chair also wants to take a moment of personal privilege 

to celebrate the chairman emeritus’s birthday and to wish him a 

happy birthday, so we want you to know that we all wish you a 

very happy birthday and many, many more. 

Mr. DINGELL. Mr. Chairman, I thank you for your kind observations. At 83, a fellow is a little more careful about celebrating his 

birthdays. The good news is, I am celebrating my 83rd birthday. 

The bad news is that I am 83. I thank you, Mr. Chairman, for your 

courtesy and I thank my friends for their kindness and their courtesy. 

Mr. RUSH. Thank you. The Chair now recognizes the gentleman 

from Kentucky, Mr. Whitfield, for 2 minutes for opening statement. 

Excuse me. I didn’t see Mr. Barton there. He just walked in? OK. 

Mr. Barton is recognized. 

Mr. BARTON. Well, you can go to Mr. Whitfield. He was here before me. I am fine with going to Ed and then come back to me after 

the next—— 

Mr. RUSH. You all worked that out then. OK. Mr. Whitfield. 

OPENING STATEMENT OF HON. ED WHITFIELD, A REPRESENTATIVE IN CONGRESS FROM THE COMMONWEALTH OF KENTUCKY 

Mr. WHITFIELD. We are all very polite today so thank you very 

much. 

Mr. Chairman, I want to thank you also for holding yet another 

important hearing examining the ongoing financial crisis and ways 

we can help our constituents get through these difficult times and 

mitigate future problems. Secretary Geithner said that this new 

Consumer Financial Protection Agency would have only one mission, and that is, to protect consumers. It is also my understanding 

that this proposal would eliminate the consumers protections at the 

FDIC, the Federal Reserve Board, the Controller of the Currency, 

and the impact on the FTC, perhaps we should explore expanding 

the authority of the FTC. 


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Another problem that concerns me about the proposed legislation 

is that there is no federal preemption of any State law that is more 

stringent than the federal law, and anyone that has gone through 

a mortgage process and when they hand you the 45 pages of documents, you are going to find yourself getting more documents if you 

have these conflicting State laws on these consumer issues, and I 

think that is a real concern as well. 

But the problem that I have most of it, how much will this cost? 

Every day we pick up another article in a newspaper, growing national debt may be next economic crisis. Unless we demonstrate a 

strong commitment to fiscal sustainability in the longer term, we 

will have neither financial stability nor healthy economic growth. 

Interest payments on the debt alone last year were $452 billion. 

This year it is expected to be $470 billion, the largest federal 

spending category after Medicare, Medicaid, Social Security and defense. Another article today, economist declares train wreck because out-of-control federal budget deficits. The economist talks 

about the real question is, how much damage will greater indebtedness do to economic growth and government’s credit worthiness. 

Those things may transcend what limited additional protection consumers get from this legislation. So I think we need to move cautiously, find out how much costs are we talking about here and 

what will the benefits be. Thank you, Mr. Chairman. 

Mr. RUSH. The Chair thanks the gentleman. The Chair now recognizes the vice chair of the subcommittee, my friend from Illinois, 

Congresswoman Schakowsky, for 2 minutes. 

OPENING STATEMENT OF HON. JANICE D. SCHAKOWSKY, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS 

Ms. SCHAKOWSKY. Thank you very much, Mr. Chairman. 

I just came from a roundtable on women’s financial literacy, 

clearly an important issue, but what we have found is how 

daunting the environment has been for anyone who even is pretty 

literate in financial issues. We have seen the systematic production 

and marketing and sales of countless financial products including 

mortgages that were extremely risky, even downright dangerous 

for borrowers, and often it was pretty hard to figure out what was 

what. For years bank and non-bank lenders operated with too little 

oversight by government regulators, and when regulation was taking place there was little focus on whether the financial products 

and services sold were safe for consumers. 

The Federal Trade Commission, and I am so glad its chairman 

is here today, is essentially the only agency with a mandate to 

prioritize consumer safety and protect Americans from unfair or deceptive practices, and I commend Chairman Leibowitz for his renewed commitment to consumers’ rights in the areas of credit and 

debt. However, as has been mentioned, the FTC’s jurisdiction is 

limited to non-bank activities. The agency has been hampered for 

decades by cumbersome rulemaking authority and in recent years 

its actions were limited by the previous Administration’s general 

contempt for oversight of the private sector. 

Overall, current regulations aren’t sufficient and they aren’t 

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tection for the bulk of the financial service industry. Americans deserve access to honest information that will help them make educated decisions on mortgages, credit cards and bank accounts. Dangerous financial products should be kept off the markets and advertisers must be held accountable for their claims. We have to move 

forward with these goals, and I look forward to hearing today’s testimony on how a consumer financial protection agency might 

achieve them. 

Thank you, and I yield back. 

Mr. RUSH. The Chair thanks the gentlelady. The Chair now recognizes the ranking member for the full committee, the humble 

and honorable Mr. Barton from Texas, for 5 minutes. 

OPENING STATEMENT OF HON. JOE BARTON, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS 

Mr. BARTON. Well, thank you, Mr. Chairman. Before I give my 

opening statement, let me amplify what you said about the chairman emeritus, Mr. Dingell. Some people get 1 year of experience 

and that is it. In his case, you could say that would be 1 year 83 

times. But in Mr. Dingell’s case, each year he adds it to the base 

where it compounds and amplifies by orders of magnitude. I think 

you can honestly say that our friend and chairman emeritus is the 

most influential Member of Congress in our lifetime and it is such 

a privilege to have him on our committee and it is really fun when 

he is on my side. It is not so much when he is not on my side, but 

even then I learn from him. So the heartiest congratulations from 

the minority to a true gentleman of the House, the conveyor and 

the protector of institutional viability for this body. We wish you 

many, many more. 

With regards to this hearing, Mr. Chairman, I would bring the 

members’ attention to today’s Wall Street editorial op-ed piece 

about the particular agency. It is entitled, ‘‘Let us treat borrowers 

like adults.’’ It calls into question whether there needs to be a 

super consumer financial products protection agency which the legislation we are looking at today would empower. We accept the intention as being honorable but people like myself have extremely 

strong reservations about the implementation of such an agency. 

What would the legislation actually accomplish that some federal 

agency isn’t already attempting to do? We would like to know what 

is gone so wrong with our existing protection agencies that we 

deem it necessary to create another brand-new agency. 

I am a bit taken back by the breadth of the proposed coverage. 

This legislation, of course, relates a great deal to banking and other 

financial institutions over which this committee unfortunately has 

no jurisdiction, at least not now. One never knows about the future. But it reaches beyond that. It could reach accountants, auditors, gift cards, all other types of institutions and entrepreneurial 

activities. It doesn’t fall strictly within our jurisdiction because it 

applies to banks but it is still of concern. There seems to me to be 

an exception that swallows the preemption rule. According to the 

proposal, if I understand it correctly, State consumer laws of general application and those State laws enacted pursuant to federal 

law intended to, and I quote, ‘‘exceed or supplement federal law’’ 

will now apply to any national bank. The Harvard professor who 


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is credited with inspiring this all-inclusive consumer financial protection agency described the need for it in her article, ‘‘Unsafe at 

any Rate.’’ Professor Warren wrote that we need this agency in 

order to reverse industry practices that make it difficult for consumers to understand what they are getting in a financial product 

world, for example, 30 pages of contract terms for a simple credit 

card or 50 lines of convoluted and excessive text to explain all required disclosures. I understand that. I just cosigned for my stepdaughter’s new condo in Austin, Texas, and it took an hour of signing various documents, some of which were documents I signed certifying that I just signed the previous document. So I understand 

the need for simplicity and the need for perhaps a review of some 

of the existing documents that we are asked to sign but I am not 

sure that this agency gets there. 

This bill would assume that businesses and their customers are 

eager to pay more for such protection, maybe even a lot more, because there are no limits on the burdens to either. There are all 

kinds of reports this new agency could mandate, regular and special requests, but there are no limits to how often the agency could 

require those reports, and there is no mandate to consider the burden placed on the businesses to produce these reports. The preemption provisions really convey no preemption at all. In one paragraph, the proposal mandates all State laws are preempted but 

only to the extent that they conflict. In the next, the legislation 

permits a State law to supersede federal law if the new agency determines the State law is more protective. That seems to be almost 

in direct opposition to the prior paragraph. What if a company is 

compliant with the federal law, but while the agency hasn’t yet determined whether a state law is more protective, the attorney general believes it is and brings action against the business for a violation, is that company liable for its violations of State law without 

any notice? This would seem to exacerbate the decisions but rather 

by making certain that the products themselves don’t become the 

source of the trouble. 

I see my time is about to expire, Mr. Chairman. I have another 

page and a half of written commentary. Simply put me down as extremely doubtful about the positive impact of this legislation. I 

think we would be better served on this committee and your subcommittee to go in and reform existing authority, clarify the differences between existing regulatory agencies, and if there is something that has really fallen through the cracks, try to figure out 

one of the existing agencies like the FTC and see if we couldn’t give 

them explicit authority in that area that needs reinforcing. 

With that, Mr. Chairman, I yield back. 

Mr. RUSH. The gentleman from Texas, Mr. Green, for 2 minutes 

for opening statement. 

OPENING STATEMENT OF HON. GENE GREEN, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS 

Mr. GREEN. Mr. Chairman, thank you for holding this timely 

hearing to examine the Administration’s proposal to create a new 

agency that would consolidate and be responsible for consumer protection with regard to financial products and services. After the 

events of last year, there should be no doubt that Congress needs 


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to act to further protect consumers with regard to financial regulation. 

This subcommittee has already taken steps to address this by 

moving forward legislation, H.R. 2309, the Consumer Credit and 

Debt Protection Act, to give the Federal Trade Commission additional powers to better address consumer credit and debt issues. It 

was widely agreed in the hearings that the legislation with the 

added authority H.R. 2309 would provide the FTC, it should take 

a broader and more effective role in consumer financial protection. 

With regard to the new tools this proposal would give the FTC, 

the Administration has addressed many of the problems that have 

hamstrung the Commission from taking steps to implement additional financial consumer protections equally with regard to the 

FTC rulemaking process. Magnuson-Moss procedures are lengthy 

and cumbersome and can prevent the FTC from taking action on 

widespread problems in a timely and efficient manner, so I strongly 

support the provision in the Administration proposal to grant the 

Commission authority to conduct rulemaking under the Administrative Procedures Act. The proposal also follows 2309 granting the 

FTC authority to seek civil penalties for any violations of section 

5 of the FTC Act which would provide a great deterrent to wouldbe actors. 

The portions of the proposal I am less certain about, however, 

would move nearly all the FTC’s consumer protection authority for 

financial practices to the newly created Consumer Financial Protection Agency. I do not disagree that additional law enforcement is 

a good thing for the consumers. My main concern is, we are adding 

a new enforcement regime that is siphoning off authority from our 

Nation’s primary consumer protection agency when that agency is 

more than capable of doing the job given the necessary tools and 

funding. Many of the consumer protection functions the new agency 

would be responsible for would be moved from other agencies and 

departments that do not have consumer protection as their primary 

function. However, this is not the case with the FTC. 

I look forward to hearing from our witnesses on why the Administration believes the FTC should not continue these roles, and 

again, Mr. Chairman, I thank you for the timeliness of the hearing. 

I look forward to exploring with regard to this bill and look forward 

to the best paths to protect consumers. 

Mr. RUSH. The Chair thanks the gentleman. Mr. Pitts is recognized for 2 minutes for the purposes of opening statement. 

OPENING STATEMENT OF HON. JOSEPH R. PITTS, A REPRESENTATIVE IN CONGRESS FROM THE COMMONWEALTH 

OF PENNSYLVANIA 

Mr. PITTS. Thank you, Mr. Chairman. Thank you for holding this 

important hearing on the Administration’s proposal to create a new 

agency responsible for consumer protection. 

I think we all agree that we need strong consumer protection 

measures. The recent housing and credit crisis our country has 

faced makes this abundantly clear. We must do this prudently, 

though, avoiding the mistakes of the past. It seems, however, the 

proposal we have before us creates yet another divided system of 

regulation, making room for gaps in oversight. We saw the effects 


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of divided regulation at Fannie Mae and Freddie Mac where two 

regulators meant less regulation, not more. 

The proposed new agency would also have the authority to set 

prices rather than allowing costs to be determined by consumers in 

the marketplace. Everything from ATM fees, check overdraft fees 

and late payment fees for credit cards would fall under the purview 

of this new agency. Instead of adding layers of bureaucracy to financial regulation and intervening in the marketplace, things we 

have tried in the past, we should work to bring transparency and 

consumer choice to our markets. 

Consumer financial protection is a worthy goal. Unfortunately, 

increasing the layers of bureaucracy in the financial industry has 

not protected consumers in the past and I see no reason why it will 

this time around. Again, we all desire effective and efficient enforcement of consumer protection laws. It is my hope that this committee moves forward in a wise and careful manner with increased 

transparency and consumer choice as their primary goals. 

I look forward to hearing from our distinguished witnesses. 

Thank you, and I yield back. 

Mr. RUSH. The Chair now recognizes the gentleman from Texas, 

Mr. Gonzalez, for 2 minutes for the purposes of opening statement. 

Mr. GONZALEZ. I will waive opening. 

Mr. RUSH. The Chair now recognizes the gentlelady from California, Ms. Matsui, for 2 minutes. 

OPENING STATEMENT OF HON. DORIS O. MATSUI, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA 

Mrs. MATSUI. Thank you, Mr. Chairman, and thank you for calling today’s hearing. I applaud your leadership in addressing this 

important issue. I would also like to thank the witnesses for joining 

us today. 

In today’s economic recession, many families in home district of 

Sacramento are struggling to make ends meet. I have heard countless stories of people struggling to keep their homes, their jobs and 

their way of life. California and in particular my constituents in 

Sacramento have been greatly impacted by the economic crisis. 

Many of my constituents were and continue to be victims of predatory home loan lending, unfair credit card practices, payday loans 

and other forms of unscrupulous business practices. 

Just recently, the President signed into law credit card reform 

legislation to regulate unfair credit card practices. The ink is hardly dry. The companies are already trying to find ways to arbitrarily 

raise credit card interest rates and fees on consumers. Struggling 

homeowners are also seeking assistance to keep their homes but 

continue to be tricked into contacting scam artists who just so happen to be the same crowd that initially steered homeowners into 

subprime loans. This is also occurring as job losses mount, foreclosures continue to rise and Americans are increasingly turning to 

other forms of credit to make ends meet. It is clear that consumers 

are not being properly protected from unfair and deceptive financial practices. When is enough enough? 

The President’s proposal to create a new financial consumer protection agency could be the answer that American consumers are 


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seeking but it must be done in a thoughtful way to ensure consumers are protected from fraudulent activity. We must make sure 

any new agency has real authority and just as much bite as it has 

bark. Consumers need to feel protected and have confidence in our 

financial system. Right now it is clear that they do not. 

I thank you, Mr. Chairman, for holding this important hearing 

today and I look forward to working with you and the committee 

on this issue moving forward. I yield back the balance of my time. 

Mr. RUSH. The Chair thanks the gentlelady. The Chair now recognizes the gentleman from Nebraska, Mr. Terry, for 2 minutes. 

Mr. TERRY. Thank you, Mr. Chairman. I will try to be quick. 

I think the fundamental premise of this bill is that the FTC, the 

entity in charge of protecting consumers, has evidently been an 

abysmal failure. I don’t agree with that premise. I think the issue 

should be, how do we make sure that the FTC is properly empowered to protect consumers and that should be what we are working 

for as opposed to stripping away whatever jurisdiction they have 

over protecting consumers and creating some monolithic new government agency in replace of what already exists. 

So I am very skeptical of this process or this bill and I look forward to hearing from our witnesses so we can determine if FTC is 

capable of doing what they have been doing and whether or not 

this bill is even necessary. So I yield back. 

Mr. RUSH. The Chair recognizes the gentlelady from Ohio, Ms. 

Sutton, for 2 minutes. 

OPENING STATEMENT OF HON. BETTY SUTTON, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF OHIO 

Ms. SUTTON. Thank you, Chairman Rush, and thank you for 

holding today’s very important hearing on the newly proposed Consumer Financial Protection Agency. 

As Elizabeth Warren aptly stated in describing the need for an 

agency like this, ‘‘It is impossible to buy a toaster that has a one 

in five chance of bursting into flames and burning down your house 

but it is possible to refinance an existing home with a mortgage 

that has the same one in five chance of putting the family out on 

the street, and the mortgage won’t even carry a disclosure of that 

fact to the homeowner.’’ Unfortunately, many people in my district 

who were preyed upon by so many unscrupulous companies, people 

know this all too well. 

The well-known and tragic case of one of my constituents, Addie 

Polk, is a shocking example of a financial product that not only 

caused someone to almost be homeless but caused someone to attempt to take their own life. At the age of 86, Ms. Polk was given 

a new 30-year mortgage on a house she already owned and for an 

amount greater than the value of her house. Let me say that again. 

At the age of 86, Ms. Polk was given a new 30-year mortgage on 

a house she already owned and for an amount greater than the 

value of her house. Less than 4 years later, Ms. Polk, probably of 

no surprise to the person who sold the mortgage to her, began to 

have trouble making her payments and her house fell into foreclosure. Feeling trapped and without options, Ms. Polk shot herself 

rather than lose the house she lived in for 40 years. No one ever 

should be in Ms. Polk’s position. Now is our chance in honor of Ms. 


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Polk and countless other Americans who have found themselves 

the unfortunate owners of financial products with indecipherable 

terms, smoke-and-mirror-like provisions and gotcha fees to truly 

support strong consumer protection. 

I look forward to hearing from the panel about how we make 

sure we provide the needed protection, and I yield back. 

Mr. RUSH. The Chair thanks the gentlelady. The Chair now recognizes the gentleman from Georgia, Dr. Gingrey, for 2 minutes. 

Mr. GINGREY. Mr. Chairman, I thank you, and I thank you for 

calling the hearing and welcome back Jon Leibowitz and Honorable 

Barr, the assistant secretary of financial institutions. 

I associate my remarks really with what the gentleman from Nebraska on our side just said, Mr. Terry. Here we are creating a 

whole new federal government bureaucracy when we have one already that is doing a heck of a job as it certainly seems to me and 

I think most members on this panel. So the question becomes, you 

know, why, to use a medical expression, throw the baby out with 

the bathwater if the FTC is doing the right and proper job and the 

right and proper oversight and all of a sudden we come in and 

spend more federal dollars, as the gentleman from Kentucky was 

talking about earlier, by creating a whole new federal bureaucracy. 

So again, I am happy to hear from the witnesses and maybe they 

can explain that. Hopefully they will explain that. 

But I think this is something that we need to look at very, very 

carefully as we just continue to create one more or consider creating one more government bureaucracy at a time when we are 

running billions of dollars of deficit year after year after year. And 

with that, Mr. Chairman, I will yield back. 

Mr. RUSH. The Chair recognizes the gentlelady from Florida, Ms. 

Castor, for 2 minutes. 

OPENING STATEMENT OF HON. KATHY CASTOR, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF FLORIDA 

Ms. CASTOR. Thank you, Chairman Rush, for calling this critically important hearing on the Obama Administration’s proposal 

for a Consumer Financial Protection Agency. 

Last Congress, in the wake of widespread concerns about toxic 

lead in paint on children’s toys and other toxic consumer products, 

this subcommittee originated legislation to reorganize and strength 

the Consumer Product Safety Commission, and last year as the 

economy plunged, there were some analogous terms being used to 

describe some of the mortgage and investment products. We heard 

about toxic assets, poisoning banks balance sheets and toxic mortgage products, leaving millions of our neighbors facing foreclosure. 

Predatory lenders wreaked havoc on my community and the subsequent significant decline in property values has affected millions 

of folks in my home State, and unfortunately consumers could not 

count on State oversight of these mortgage brokers. In my home 

State, they just turned a blind eye and I recommend the Miami 

Herald expose that documented how many convicted felons entered 

into the subprime mortgage loan marketing business. 

So this financial crisis has taught us that in order to maintain 

a healthy economy, effective regulation must focus on protecting 

consumers from abusive, deceptive and unfair lending practices. 


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The FTC has the enforcement authority to go after only non-depository lending institutions that deal unfairly with their borrowers 

but the abuses that led to the financial crisis spread deep into the 

banking system. So in light of the need for more-effective regulation of all lending institutions, depository and non-depository, the 

Obama Administration has rightly proposed a reorganization, and 

I think all of us can agree that regulation of financial institutions 

must be improved to better protect consumers. However, we must 

be aware not only of the impact of granting authority to a new 

Consumer Financial Protection Agency but also the consequences 

to consumers of the changes that have been proposed to the FTC. 

The Administration’s proposal would reshape the FTC by shifting 

authority over consumer credit but also by streamlining its rulemaking process and allowing it to assess civil penalties on bad actors. 

So I look forward to your testimony on what this new FTC might 

look like and how its ability to achieve its mandate of consumer 

protection will be affected. I yield back. 

Mr. RUSH. The Chair now recognizes the gentleman from Louisiana, Mr. Scalise, for 2 minutes. 

OPENING STATEMENT OF HON. STEVE SCALISE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF LOUISIANA 

Mr. SCALISE. Thank you, Mr. Chairman. I want to thank you and 

the ranking member for having this hearing. 

The Administration is proposing yet another new federal agency 

with vague, sweeping authority. We all know there have been bad 

actors in our financial system that took advantage of consumers 

and contributed to the current economic crisis. Unfortunately, 

many of the problems that brought on today’s financial crisis are 

not even being addressed in this bill. The proposed legislation does 

not address the real bad actors in our financial systems, Fannie 

Mae and Freddie Mac and other institutions that engaged in 

subprime lending and relaxing their standards to encourage more 

people to take out loans they could not afford. Those warning signs 

were brought before Congress for years and yet many of the same 

people in this Administration and in the leadership in this Congress are the same people who opposed the very reforms that would 

have prevented this financial crisis from happening in the first 

place. 

This proposed new agency represents yet another step in the federal government trying to run all aspects of our lives. The government is running banks and car companies with disastrous results. 

The so-called stimulus bill, which spent $787 billion of money we 

don’t have, is now being recognized even by this Administration as 

a failure that didn’t create any jobs that were promised. There are 

even some in this Administration floating the reckless idea of yet 

another massive spending bill since the last one didn’t work. Scores 

of experts predict that this Administration’s cap-and-trade energy 

tax will cost us millions of jobs while increasing electricity rates on 

all American families. We are debating a bill that proposes a government takeover of health care, which has been tried and failed 

in other countries to the point that sick people with the means in 


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those countries come here to get their health care because government-run health care leads to rationing everywhere it has been 

tried. Now we have this bill to create a consumer czar. Enough is 

enough. Let us fix the problems that exist and make reforms to federal agencies that are causing these problems rather than adding 

yet another layer of government bureaucracy that simply covers up 

the root causes of the problem while punishing those who play by 

the rules. 

I look forward to hearing the comments from today’s panel and 

would like to hear how the Administration’s plan impacts the FTC. 

In his testimony, Chairman Leibowitz speaks to the successes the 

FTC has had in protecting consumers in financial matters, which 

begs the question why we need a new agency with all these sweeping new powers and spends more money that we don’t have. I yield 

back. 

Mr. RUSH. The Chair now recognizes the gentlelady from Colorado, Ms. DeGette. 

Ms. DEGETTE. I will waive opening. 

Mr. RUSH. The Chair thanks the gentlelady. The Chair recognizes the gentleman from Ohio, Mr. Space, for 2 minutes. 

Mr. SPACE. I will waive. 

Mr. RUSH. The Chair thanks the gentleman. The Chair recognizes now the gentleman from North Carolina, Mr. Butterfield, for 

2 minutes. 

OPENING STATEMENT OF HON. G.K. BUTTERFIELD, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NORTH 

CAROLINA 

Mr. BUTTERFIELD. Thank you, Chairman Rush, for holding this 

very important hearing and I especially want to thank the witnesses for their testimony today. 

Mr. Chairman, I hope this hearing will provide an opportunity 

for the subcommittee to address some concerns that we have about 

the proposed agency, particularly the loss of jurisdiction on the 

part of the Federal Trade Commission. Now, my colleagues are 

right, Mr. Chairman, there are many actors to blame for the current state of our economy. Unscrupulous subprime mortgage lenders and speculators and the like have all contributed to the financial meltdown. Of deep concern and rightfully so is the regulatory 

patchwork of federal agencies charged with regulating all aspects 

of financial institutions. For example, depository institutions such 

as banks and credit unions are overseen by many different agencies. Conversely, all non-depository institutions are overseen by one 

agency, and that is the FTC. The FTC has done a good job, and 

I think we can agree all on that, at regulating these players and 

I am concerned that reducing FTC oversight as part of the creation 

of the Consumer Financial Protection Agency may do more harm 

than good. While I am pleased that the Administration’s proposal 

seeks to strengthen the FTC’s rulemaking and enforcement abilities in areas unrelated to financial products, I believe that it is extremely important that the FTC maintain strong non-depository institution oversight. 

The Administration’s proposed agency would seek to achieve four 

important objectives aimed at bolstering consumer confidence in fiVerDate Mar 15 2010 05:51 Aug 02, 2012 Jkt 74090 PO 00000 Frm 000031 Fmt 06633 Sfmt 06633 E:\HR\OC\A090.XXX A090

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nancial institutions and transactions, and these objectives include 

ensuring consumer education and understanding of these financial 

products, better protecting consumers from unfair and deceptive 

practices and discrimination, ensuring consumer financial services 

operate fairly, making certain that underserved communities like 

my district have increased access to financial services. These are 

excellent objectives and I strongly support the goals of the proposed 

agencies but I want to be certain that the creation of a new regulatory agency will not place undue and unnecessary strains and 

burdens on existing federal regulatory framework that may still be 

capable of meeting those same goals and objectives. 

And so, Mr. Chairman, this hearing today is vitally important. 

I look forward to hearing the testimony of the witnesses and I 

thank you for the time. 

Mr. RUSH. The Chair thanks the gentleman. The Chair sees no 

other members who have opening statements. 

Now it is my pleasure to introduce panel one. This is a two-panel 

hearing, and panel one consists of the Hon. Michael Barr, who is 

the assistant secretary for financial institutions at the Department 

of Treasury. We want to welcome Mr. Barr back to this committee 

once again. And also joining him at the witness table is one who 

is very familiar to this subcommittee, the Hon. Jon Leibowitz, who 

is the chairman of the Federal Trade Commission, and Chairman 

Leibowitz, we certainly welcome you back again to this subcommittee. It is the practice of this subcommittee to swear in the 

witnesses, so I would like each of you to stand and raise your right 

hand. 

[Witnesses sworn.] 

Mr. RUSH. Let the record reflect that the witnesses have answered in the affirmative. Now we want to recognize beginning 

with Mr. Barr the witnesses for an opening statement. You have 

5 minutes or thereabouts for your opening statement. 

TESTIMONY OF HON. MICHAEL BARR, ASSISTANT SECRETARY 

FOR FINANCIAL INSTITUTIONS, DEPARTMENT OF THE 

TREASURY; AND HON. JON LEIBOWITZ, CHAIRMAN, FEDERAL TRADE COMMISSION 

TESTIMONY OF MICHAEL BARR 

Mr. BARR. Thank you, Mr. Chairman, and thank you, Ranking 

Member Radanovich for providing me with this opportunity to testify about President Obama’s proposal to establish a new strong financial regulatory agency charged with just one job: looking out for 

consumers across the financial services landscape. 

As Secretary Geithner has said, protecting consumers is important in its own right, and also central to safeguarding our financial 

system as a whole. We must restore honesty and integrity to our 

financial system. That is why President Obama personally feels so 

strongly about creating this new Consumer Financial Protection 

Agency. 

I understand the committee’s concerns that have been expressed 

today with respect to boundary issues, jurisdictional issues and the 

role of the FTC. I think as we work together on those issues, it is 

important to keep in mind the central goal we all share: having one 


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agency for one marketplace with one mission, protecting consumers. The new agency will have the authority and the resources 

it needs to set consistently high standards for banks and non-bank 

financial providers alike, to put an end to regulatory arbitrage, to 

put an end to unregulated corners of our financial system that inevitably weaken standards across the board. This agency will be accountable for its mission yet independent. It will have a wide range 

of tools to promote transparency, simplicity and fairness. It will act 

in a balanced manner, considering costs as well as benefits, in a 

way that products consumers from abuse while ensuring their access to innovative, responsible financial services. It will be able to 

reduce regulatory burden while helping consumers, for example, by 

creating one simple mortgage disclosure form for all consumers to 

use. It will not set prices for any service. 

The federal government has failed to date in its most basic regulatory responsibility, utterly failed to protect consumers. The deep 

financial crisis that we are still in, let me emphasize, that we are 

still in today, revealed the alarming failure of our existing regime 

to protect responsible consumers and to keep the playing field level 

for responsible providers. Instead of leadership and accountability, 

we have had a fragmented system of regulation designed for failure. Bank and non-bank financial service providers compete vigorously in the same consumer markets but are subject to two different and uncoordinated federal regimes, one based on examination and supervision, the other on after-the-fact investigation and 

enforcement. 

Less-responsible actors are willing to gamble that the FTC and 

the States lack the resources to detect and investigate them. This 

puts enormous pressure too on banks, thrifts and credit unions to 

lower their standards to compete and on their regulators to let 

them, and no financial provider should be forced to choose between 

keeping market share and treating consumers fairly. This is precisely what happened in the mortgage market. Independent mortgage companies peddled risky mortgages in misleading ways to borrowers who could not handle them. To compete, banks and thrifts 

and their affiliates relaxed their standards on underwriting and 

sales and their regulators were slow to act. The consequences for 

homeowners were devastating and our economy is still paying the 

price. 

Fragmented regulation facilitated abusive credit cards. Tricks 

and traps enabled banks to advertise selectively low annual percentage rates to grab market share and boost income. Other banks 

could not compete if they offered fair credit cards through transparent pricing and consumers ended up with retroactive rate hikes 

and unfair terms. The list goes on and on. Credit unions and community banks with straightforward credit products struggled to 

compete with less-scrupulous providers who appeared to offer a 

good deal and then pulled a switch on the consumer. 

Our federal agencies do not currently have the mission, structures and authority suited to effective consumer protection in consumer financial markets. The FTC has no jurisdiction over banks 

and it does not have supervisory and examination authority to detect and prevent problems before they spread throughout the market. 


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Mr. Chairman, I see that I will be significantly over my time. 

Could I take several additional minutes? 

Mr. RUSH. Yes, you are so approved. 

Mr. BARR. Thank you. 

Mr. RUSH. You are on the ‘‘thereabouts’’ part of your testimony. 

Mr. BARR. Thank you. 

Bank regulators have supervisory powers over banks but their 

primary mission is to ensure that banks are safe and sound and 

not to protect consumer. Consumer protection supervision is never 

going to share the front seat with safety and soundness. Tinkering 

with the consumer protection mandates or authorities of our existing agencies cannot solve these structural problems. We need a 

structural solution. We need one agency for one marketplace with 

one mission: to protect consumers of financial products and services 

and the authority to achieve that mission. That is the agency we 

are proposing to create. 

The CFPA will have the sole mission of protecting consumers. It 

will write rules, supervise institutions, examine them and lead enforcement efforts for the whole marketplace. The implications for 

our proposal for consumer protection and competition are enormous. The proposal will bring higher and more consistent standards, stronger, faster responses to problems, the end of regulatory 

arbitrage, a level playing field for all providers, and more-efficient 

regulation. Our proposal gives the agency the power to strengthen 

mortgage regulation across all lenders and brokers. It can strengthen disclosure, make it easier for consumers to choose simple products, prevent lenders from paying yield spread premiums that pay 

brokers more if they deliver loans with higher rates than consumers qualify for. The agency would implement credit card protections and update these protections as markets change, and it would 

set high national standards for licensing, bonding, monitoring of all 

non-bank financial service providers. 

Let me say the FTC is a good agency. The chairman and I are 

good friends. Our legislation does not affect the jurisdiction of the 

FTC over the vast array of non-financial markets and actually 

strengthens its ability to police those markets. To increase the 

FTC’s ability to protect consumers, we propose that the FTC be 

able to adopt rules to prohibit unfair or deceptive acts or practices 

with standard notice and common rulemaking, to obtain civil penalties when companies act in an unfair or deceptive way and to 

pursue those who substantially aid and abet providers that commit 

unfair or deceptive practices. 

The Administration also supports increased resources for the 

FTC so that consumers can be better protected across all markets. 

As for financial markets, the FTC would continue to have authority 

under the FTC Act to pursue financial fraud without delay including on foreclosure rescue and loan modification scams. The FTC 

will retain authority for writing rules under the Telemarketing 

Sales Act and concurrent responsibility for enforcing them over financial products and services, and the FTC would retain primary 

authority in the area of data security for non-bank entities. In addition, the FTC would have backstop authority to enforce the same 

consumer credit statutes that it can enforce today. Under that authority, the FTC, or frankly, a bank regulator, could if it becomes 


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aware of a possible law violation refer to the new agency, and if 

the new agency doesn’t act, take action itself. That same referral 

requirement will apply to the bank regulators, and it is designed 

to ensure a consistent federal approach to interpreting and enforcing our consumer protection statutes. 

Finally, let me just say this. It is time to put consumer protection 

responsibility in an agency with a focused mission and comprehensive jurisdiction over all financial services providers, banks and 

non-banks alike. It is time for a level playing field for all financial 

services providers. It is time for an agency that consumers and 

their elected representatives can hold fully accountable and responsible for consumer protection in all financial sectors, and it is also 

long past time for a stronger FTC. The President’s legislation fulfills these needs. 

Thank you for this opportunity to discuss the proposal, the additional time you have graciously given me, and I will be happy to 

answer any questions at the conclusion of our opening statements. 

[The prepared statement of Mr. Barr follows:] 


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Mr. TERRY. Mr. Chairman, I would like to make a unanimous 

consent request that the gentleman from the FTC have 9 minutes. 

Mr. RUSH. The chairman of the FTC will take whatever time he 

may consume. 

TESTIMONY OF JON LEIBOWITZ 

Mr. LEIBOWITZ. Thank you so much, Mr. Chairman. 

Chairman Rush, Ranking Member Radanovich, Vice Chair Schakowsky, members of the subcommittee, I appreciate the opportunity to be here to discuss consumer protection regulatory reform 

including President Obama’s far-reaching proposal to enhance consumer protection through the creation of a new Consumer Financial Protection Agency, the CFPA. 

As all of us in this room know and as many of you on the panel 

articulated and as Mr. Barr also effectively articulated, the need 

for reform has become as painfully clear as the distress the consumers are now experiencing in these difficult economic times from 

a failure of regulation. All of us on the Commission support the 

President’s goal of elevating consumer protection, although some of 

us have different views as to the best means to that end. 

For my part, this initiative, which enhances the resources and 

authority for the FTC and which creates the CFPA, is clearly preferable to the status quo. In any case, the Commission will continue 

to vigorously protect consumers of financial services while this proposal is under discussion and while the CFPA if it is enacted is 

ramping up. Beyond that, we look forward to working collaboratively with the new agency. 

In the last 5 years, we have brought more than 100 financial consumer protection cases and have recovered nearly half a billion dollars in the last decade for consumers. Since I last testified before 

this subcommittee in late March, we have continued aggressively 

pursuing financial predators, bringing 14 new cases in this area. In 

fact, today we are announcing distribution of an additional $8 million in consumer redress checks to Americans who were deceived 

by deceptive mortgage origination fees, and on June 1st, using the 

new APA rulemaking authority that you gave us in the omnibus 

appropriations bill, we began a rulemaking addressing mortgage 

modification and foreclosure rescue scams which have become, as 

all of you know, all too common recently, and also addressing the 

entire mortgage lifecycle, advertising, origination, appraisals and 

servicing. Simply put, this work will help ensure that consumers 

aren’t ripped off by bogus mortgages or false advertising. 

Mr. Chairman, President Obama emphasized the importance of 

giving the FTC tools and increased resources, the ones that we 

need to stop practices that harm consumers and violate the law. 

First, the proposal grows our agency, giving us the staff that we 

need to do the job that you all want us to do. Currently we have 

just over 1,100 FTEs. That is down from about the 1,800 FTEs we 

had in the late 1970s and early 1980s, despite a considerable 

growth in the U.S. population, and in our own responsibilities including enforcing canned spam, Do Not Call, COPPA, the Children’s Online Privacy Protection Act, Gramm-Leach-Bliley and 

other statutes. Second, the proposal provides the FTC with APA 

notice and comment rulemaking which is used by virtually every 


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other agency in the federal government. It would strengthen the 

Commission’s ability to address widespread problems more quickly. 

Third, the proposal authorizes the FTC to obtain civil penalties for 

violations of section 5 of the FTC Act. This new power we believe 

would help deter would-be violations and help protect consumers 

more effectively. I think something like 47 State attorneys general 

have fining authority. And by the way, fining authority was originally proposed by Casper Weinberger when he was chairman of the 

Federal Trade Commission under President Nixon in the early 

1970s. Finally, the proposal authorizes the FTC to go after those 

who aid and abet others who violate the law. 

We would also urge Congress as you consider this legislation to 

give both the FTC and the CFPA the ability to bring civil penalty 

actions on our own, which would put both of us on equal footing 

with other consumer protection agencies like the SEC and the 

CFTC and not make us as we do currently have to wait for the Justice Department to clear our going forward. 

Now, we expect that as with any bold and complex new initiative 

clarifications will be worked out as the legislative process moves 

forward, but from my perspective, the President’s goal of streamlining the overall system for protecting consumers from financial 

abuse is more than commendable, and eliminating the balkanization of consumer protection oversight over non-banks and banks, 

as Mr. Barr has alluded to, is laudable and very, very critical. 

We do have some concerns, however, about the draft legislation 

or the legislation as it was initially drafted, although I am optimistic that we can work these out as the legislative process moves 

forward. So for example, the proposal states that the FTC would 

have backstop authority but the draft legislation imposes a review 

period that could require us to wait 120 days before filing certain 

cases. We also believe it would be helpful to make definitions of the 

proposal’s terms such as credit and financial activity clearer, and 

let me tell you why with an example. So suppose the FTC finds a 

telemarketer making illegal robo calls to millions of consumers on 

the Do Not Call Registry urging them to purchase something like 

advanced fee credit cards which are, I wouldn’t say per se illegal 

but almost always, let us say often illegal, and suppose that a payment processor participated in the fraud. It is critical that we be 

able to bring action against all of the malefactors expeditiously but 

it is unclear under this draft whether we would have the jurisdiction over the telemarketer offering the financial products or the 

payment processor, and if so, whether the 120-day waiting period 

would come into play. Now, we have made much progress with 

Treasury on several of these boundary issues and we are continuing to make progress but getting this right and allowing us to 

put an immediate halt to harmful practices is crucially important. 

Having said that, with this committee involving in writing any 

legislation, I am confident that this very, very important initiative 

will be considered, discussed, clarified and refined with all open 

issues resolved in favor of American consumers. We understand, of 

course, that under this proposal rulemaking authority and primary 

enforcement responsibility for financial products and services 

would go to the new agency but we will continue to aggressively 

enforce these laws as a cop on the beat where necessary as well 


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as each and every other consumer protection law within our jurisdiction. We look forward to working with the Administration and 

Congress to reach a plan that best protects American consumers, 

and I thank you for your time. 

[The prepared statement of Mr. Leibowitz follows:] 


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Mr. RUSH. The Chair thanks the gentleman, the chairman of the 

FTC, and the Chair now recognizes himself for 5 minutes for the 

purposes of questioning the witnesses. 

With the continuation of the financial crisis, we see more and 

more scam artists preying on desperate consumers seeking to reduce their debts and to keep their homes out of foreclosure or from 

selling their homes at a loss, and I am concerned about this proposal in that this new agency would not do enough in the short 

term because we all know that it takes some time for a new agency 

to rev up, to get going and get running. Another option that the 

Administration might have considered is proposing that the FTC 

take on this essential role. By increasing its staff and authority, it 

is conceivable that FTC could be taking on these issues within 

weeks or months rather than years. Mr. Barr, did the Administration consider other options other than creating a new agency? 

Mr. BARR. Yes, Mr. Rush. Let me just say, Mr. Chairman, that 

with respect to the transition issues, our view is that the FTC 

should act aggressively as it is doing now under the chairman’s 

leadership to continue to enforce the law, be a cop on the beat, be 

quite aggressive in this area, and we are at the same time that we 

are pushing to create the new agency pushing on all the existing 

agencies working closely with them to do everything we can under 

existing authority. So I don’t think there is any sense that anybody 

thinks we should slow down, rather, quite the opposite. 

With respect to other options, the Administration considered a 

wide range of options with respect to consumer protection, and our 

basic view was that the existing system was fundamentally broken 

and we needed a quite large, significant change to create one agency whose sole job was protecting consumers across the financial 

services marketplace. I think that the chairman is deeply aware of 

the ways in which consumers have been abused and neglected for 

quite a long time and the existing structure is just inadequate to 

meet the needs. So our strong view, the President’s personally 

strong view was that we needed a new financial agency with that 

core mission that was strong and could achieve the goals that I 

think the chairman articulated so eloquently in the opening remarks. 

Mr. RUSH. Chairman Leibowitz, during this interregnum between this bill becoming law and this new creation actually taking 

place, that is going to put a lot more pressure on the FTC. Do you 

have the requisite resources and personnel? How will the FTC 

function during this interregnum? 

Mr. LEIBOWITZ. I would say that during the sort of interregnum 

period if the legislation is enacted, we are going to work very closely with the new agency. I think the period for transfer is somewhere between 6 and 24 months, depending on how quickly they 

are ready to ramp up. We are going to continue to bring cases, and 

I think that was always the notion. I do think that going forward, 

you know, we could use more resources, and we talked about this 

before in hearings, and I do think that even after the agency is created, assuming it is, that it would be useful for us to have concurrent enforcement authority so that if we are going after—you know, 

the bad guys don’t always act in silos, as Mr. Barr knows, as all 

of you know. You know, sometimes they are violating the Do Not 


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Call rule and they are violating reg Z or reg E which would go over 

to the new agency, and so I think it is important going forward 

that when there is ongoing consumer harm that we are able to sort 

of jump over the kind of legislative, the new legislative fence to 

help consumers and not have to wait potentially 120 days. I think 

we are working through a lot of these issues, making a lot of 

progress between our staffs and ourselves. 

Mr. RUSH. The Chair sees that his time is up. The Chair now 

recognizes the ranking member for 5 minutes. 

Mr. RADANOVICH. Thanks, Mr. Chairman, and welcome, gentlemen, to the panel. I am pleased to see you here today. 

Mr. Leibowitz, welcome back to the committee. I know you have 

been here a number of times already and probably will be more in 

the future. I have to think you are doing a bit of a dance because 

you stand to lose some jurisdiction in the FTC, and it seems to me 

that you are getting, at least under the proposal, getting more 

money and authority to do less, and I want to know what your reaction to that statement is, given the fact that the FTC has dual 

jurisdiction, and that is, two missions to ensure competition but 

also consumer protection. 

Mr. LEIBOWITZ. Well, Mr. Radanovich, let me just start by saying 

I hope that familiarity is not breeding contempt here. 

Mr. RADANOVICH. Not at all. 

Mr. LEIBOWITZ. Look, you know, if you read through our written 

testimony, you can sort of see it is a complex matrix within the 

Commission about what we support and what we don’t. I do think 

from our perspective if you create this—from my perspective, if you 

create this new agency and you also give us more resources and authority, from the perspective of consumers they will be getting a 

better deal because we will be able—we will continue to have a 

backstop authority with respect to financial matters and we are 

going to be able to concentrate and just do more for consumers. As 

you know, because we have talked about this, we spent a lot of 

time leveraging—— 

Mr. RADANOVICH. But if I may, you are losing jurisdiction. 

Mr. LEIBOWITZ. We would be losing jurisdiction and—— 

Mr. RADANOVICH. How does that loss of jurisdiction deal with 

your two missions of ensuring competition and providing consumer 

protection? 

Mr. LEIBOWITZ. Well, I would say on the competition side, we 

wouldn’t be losing jurisdiction. We would still retain that jurisdiction. On the consumer protection side, we would be losing jurisdiction to this new agency but this new agency would be another cop 

on the beat protecting consumers, and then—and we would also be 

losing personnel, and we have already lost a few personnel, I would 

say, to the new agency... 

Mr. RADANOVICH. But it does seem to me like you are getting 

more money and authority to do less. 

Mr. LEIBOWITZ. Well, we will do more. I mean, we really will. It 

is not a question from our perspective of moving to a government— 

I mean, our guys work extremely hard. They have been commended 

by OPM for always scoring high on sort of effectiveness and quality 

of work, and we will just do more in the areas where we have— 

while retaining backup authority, if the proposal goes through, we 


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will do more in the other areas of consumer protection and there 

is plenty to do. 

Mr. RADANOVICH. Thank you. 

Mr. Barr, welcome to the subcommittee. You know, in Russia 

during the height of communism, it was often talked about the fact 

that there was not a lot of food on the shelves, and when you go 

into stores you might be able to get a loaf of bread, but if you wanted sourdough, you probably had to have the standard loaf, if you 

wanted rolls, you got a loaf of bread, if you wanted something else, 

you got a loaf of bread. Tell me how—explain to me how you are 

not doing the same thing in the credit markets in the name of consumer protection. 

Mr. BARR. Thank you very much for that terrific question. I was 

smiling as you were describing the example because I spent some 

time in Poland had the same experience where you go to the store 

and there is nothing there and you can actually literally go hungry. 

This agency has nothing to do with that, literally nothing to do 

with that. The new agency—— 

Mr. RADANOVICH. Tell me how you are not doing that though in 

the credit markets, because that is a question I would like answered. 

Mr. BARR. The new agency is in no way pursuing that kind of 

command and control model. It is in no way pursuing price setting. 

It is in no way saying you can’t offer certain kinds of products. The 

new agency under the legislation—— 

Mr. RADANOVICH. And I understand the reason for looking at this 

because we have all experienced this financial crisis but doesn’t 

this end up providing consumers with less choice and driving up 

the cost of credit for consumers? 

Mr. BARR. With respect, sir, our strong view is that it does not. 

It continues to provide for financial innovation. Consumers can get 

access to whatever products and services providers want to offer. 

Our basic approach is to improve disclosure, reduce regulatory burden, for example, by merging authorities so you can have one simple mortgage form at the time of disclosure, improve—— 

Mr. RADANOVICH. But weren’t there existing authorities that 

have and could and should deal with the current crisis that we are 

in? Doesn’t the added restrictions and regulations that you are 

going to be putting on the credit industry will drive up the cost of 

credit to consumers? 

Mr. BARR. I think that the better judgment, sir, again, with respect, is that the current system we have had, the status quo on 

consumer protection was a dismal failure and I think we have evidence all around us of that, and our view was, both for banks and 

for non-banks, for consumers and for households, the system failed. 

If you talk to, and I am sure you do, the community bankers in 

your community who had to compete against unregulated providers 

who were sucked into offering products—— 

Mr. RADANOVICH. Actually competing against large banks for 

TARP money, but—thank you very much, Mr. Chairman. I yield 

back. 

Mr. RUSH. The Chair now recognizes the gentlelady from Illinois, 

the vice chair, Ms. Schakowsky. 


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Ms. SCHAKOWSKY. Thank you. Mr. Barr, could you describe how 

we potentially would have been in a different situation today had 

this agency been in existence as the current problems started to 

unroll? 

Mr. BARR. Yes. I think we would have been in, could have been 

in a fundamentally different situation if we had an agency that 

could set the rules of the road for everybody to follow, if we had 

an agency that could say to mortgage brokers, you can’t get paid 

more for offering riskier, higher-priced, more confusing products 

than a basic product, if we had a rule that said mortgage brokers, 

you have a duty of care, you have to do best execution for a mortgage so you can’t offer the mortgage that is the best deal for the 

broker, you are supposed to offer a mortgage that is the best deal 

for the consumer, if we had a duty that said mortgage brokers have 

to have some skin in the game, they need to be paid over time, 

securitization trusts have to have skin in the same so that you 

don’t have a system where all the bad mortgages are made up front 

and eventually sold to the investor at the other end with nobody 

in the chain having responsibility, nobody having any of their own 

capital at risk. So we could have had fundamental change. We 

could have had a fundamentally different situation in which consumers were protected at the front end and the financial system 

was protected all the way through. 

Ms. SCHAKOWSKY. And you are saying without any change in legislation beyond the creation of this agency, that you would have the 

authorities then under the bill, which I haven’t read thoroughly 

yet, you would be able to have done all those things? 

Mr. BARR. Yes. This agency would be granted the authority to do 

all the things that I just described. 

Ms. SCHAKOWSKY. Did you want to comment on that, Mr. 

Leibowitz? 

Mr. LEIBOWITZ. Well, I would just say that one of the things that 

is critical here is APA rulemaking authority, and of course, under 

the new proposal, they will be able to do it for non-bank- as well 

bank-related financial instruments and mortgages. And so in the 

omnibus you gave us, for which we are very grateful, APA rulemaking for non-bank mortgages and we are going to look at that 

and we are going to do, I think, a very, very good rule, and Mr. 

Rush, you have legislation that would expand our jurisdiction a little bit more but it only goes—it is only within the context of nonbank-issued financial instruments. So 20 years ago we did a lot of 

matters relating to credit cards and all the credit cards are now, 

virtually every credit card is now issued by a bank. We have no jurisdiction there. So I think that is a critical advantage from the 

consumer’s perspective of what this new agency might do. 

Ms. SCHAKOWSKY. And let me just say that while I absolutely in 

theory think pulling it all together in one place is a good idea, but, 

you know, we have seen in the startup of the Department of Homeland Security lots of difficulties in pulling it all together and making it all happen. The creation of a director of national intelligence, 

certainly in that case many of us on the Intelligence Committee see 

a large bureaucracy itself developing, and have some problems with 

the coordination that was actually supposed to happen. How can 


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we be assured that this will achieve its goals, achieve it in a timely 

way and not just be another bureaucracy? 

Mr. BARR. Thank you very much. Again, I think that our view 

is, the agencies that have the authority now should aggressively 

use those authorities. Those authorities are inadequate to the task. 

The basic structure of the system was a dismal failure. We need 

to do this. We need to take this action. The legislation has tight 

timelines for transition. Treasury has responsibility to make sure 

that transition happens effectively. You can come see me, you can 

come see Secretary Geithner. We are responsible for making sure. 

You can hold us accountable. 

Mr. RUSH. The Chair recognizes Mr. Stearns from Florida. 

Mr. STEARNS. Thank you, Mr. Chairman. Mr. Chairman, we have 

had a lot of hearings on privacy here in this committee, and when 

I was chairman of the committee we had many hearings on privacy, and I think my concern is that if we transfer some of the Federal Trade Commission’s privacy work to this new CFPA, particularly in light of all the expertise that you have, and you have been 

the leading federal agency in the area of consumer privacy for all 

these years, and including financial privacy as well as identity 

theft, information security. So with that in mind, what do you feel 

about this transfer? 

Mr. LEIBOWITZ. Well, I guess I would make a couple points, and 

this committee and you have been leaders in privacy-related issues. 

You know, we will be transferring over a lot of laws. We hope to 

keep sort of a backstop authority that is concurrent, and of course, 

this is the beginning of the legislative process. It is not the end 

and, you know, I see a lot of agreement on many things within this 

committee on ways to go forward. The way we read the legislation, 

it was unclear whether issues like data security, privacy would 

stay with us. I think Mr. Barr has represented today, the better 

reading of the proposed statute or the reading of the way the proposed statute will move forward is that we will keep issues like 

that, and I think that is very, very important. 

Mr. STEARNS. So identity theft, you would still keep? 

Mr. LEIBOWITZ. I think we would keep identity theft. 

Mr. STEARNS. And financial privacy? 

Mr. LEIBOWITZ. Financial privacy, I think mostly moves over to 

the new agency. I mean, again, I think that is to some extent up 

to you. I think we would keep the safeguards rule under GrammLeach-Bliley but a lot of this has to be worked through of course 

during the transition period. We will keep on doing this and again 

we will have backstop authority. And I should probably turn this 

over to Mr. Barr, who is one of the true architects of the plan. 

Mr. STEARNS. But what you are saying today is that some of this 

is still up for negotiation? 

Mr. LEIBOWITZ. Yes. These boundary issues, that you have raised 

the same concerns that we saw when we got the legislation at the 

end of last week but it seems that it is being resolved on many of 

these boundary issues in favor of retaining jurisdiction by the existing Commission, and I assume that, you know, as this legislation 

moves forward, that is what this committee would be most interested in, but let me turn it over to Mr. Barr. 


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Mr. BARR. Just to add to that, the chairman is correct that with 

respect to data security issues, identity issues, safeguard red flags, 

all that would stay at the FTC and the parallel authority for that 

at the bank agencies but the front-end privacy notices that have to 

do with disclosure would fit in the new disclosure regime of the 

new Consumer Financial Protection Agency. 

Mr. STEARNS. So let us say Internet privacy, consumer privacy, 

would that remain with Federal Trade Commission? 

Mr. BARR. Again, with respect to the disclosure aspect on the financial side, the disclosure would be unified with the disclosure regime at the new financial agency. All the data security, identity 

theft and related issues would remain at the FTC and the parallel 

authorities with respect to banks. 

Mr. LEIBOWITZ. But if you are thinking about core issues like 

spam, spyware, behavioral marketing, we keep all of those. You 

know, there might be some issues about whether we are going after 

a malefactor or a group of malefactors and one of them is on the 

other side of the core new agency’s fence, you know, right now 

there’s 120-day waiting period, which we are a little concerned 

about from the perspective of consumers, but going back to your 

original point, a variety of issues including sort of the core privacy 

issues we do we will be keeping and retaining jurisdiction. 

Mr. STEARNS. Well, I think, Mr. Barr, what you should realize 

with all that expertise in the Federal Trade Commission we are 

starting a new federal agency here. You know, I would think that 

as many have pointed out on this side, we are worried about a new 

federal agency, particularly when you have an agency that already 

has the expertise. I think the bill says that the cost of development 

of this new agency is such sums as are necessary. Is there any 

more definitized information you can give on what the cost would 

be for this new federal agency? 

Mr. BARR. I don’t at this time have an overall cost estimate for 

the agency or size estimate for the agency. It is something we are 

working on. We will work with the appropriate committees on it 

and with OMB and CBO. We anticipate that the agency will be 

pulling in staff and resources from the existing agencies and additionally having new resources required. I would be happy to continue to work with you on that question. 

Mr. STEARNS. Can you talk about the resources the agencies will 

need besides—I mean, have you identified any of the resources? 

Mr. BARR. We have begun the process of identifying the number 

of individuals and the other resources the agency would need but 

we are not at a place now where I could give you even a reasonable 

estimate of what additional measures beyond the transfer authorities would be required. It is something we are working quite hard 

on. 

Mr. STEARNS. I will just close. Mr. Chairman, you might think 

as a subcommittee chair since a lot of the expertise for this is already in the Federal Trade Commission and this is a new agency, 

you might—and particularly in your jurisdiction here, I think we 

have to move carefully as Mr. Dingell out, developing a brand-new 

agency. They don’t know how much they are going to spend, they 

don’t know what resources they are going to need, and also they 

are going to be taking on expertise for areas they know nothing 


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about that the Federal Trade Commission has years on, so I just 

wonder, you as the chairman, you might want to be very careful 

and cautious about endorsing this new agency without, you know, 

some more hearings on it and try to get more of the stakeholders 

here, perhaps more than we have on the witness list here, to try 

and get into the discussion here. So I thank you, Mr. Chairman. 

Mr. RUSH. The Chair thanks the gentleman. The Chair observes 

that there is a vote going on on the floor. There are three votes. 

It is the desire of the chairman that we should delay the committee 

hearing until after the votes are concluded and then return. I am 

not sure what the witnesses’ time commitments are but it would 

be very important if you return I would say within 15 minutes 

after the last vote. Then the subcommittee will reconvene. 

[Recess.] 

Mr. RUSH. The subcommittee will reconvene. The Chair recognizes the fact that there might be members of the subcommittee 

who did not have an opportunity to ask questions of our witnesses 

before we recessed. However, I am very cognizant of the witnesses’ 

time and will take this time to go into a second round of questions, 

and if there are members who come in who have not asked questions in the first round, then the chair will prolong their questioning to 7 minutes. 

So with that, the Chair recognizes himself for 2 minutes of additional questions. 

In its White Paper describing the proposed regulatory reforms, 

the Department of Treasury stated clearly that, and I quote, ‘‘The 

FTC shall retain authority for dealing with fraud in the financial 

marketplace.’’ Despite this assurance, the proposed language appears to weaken FTC’s authority in this area. FTC will retain the 

authority to enforce against unfair and deceptive acts and practices 

using the FTC Act. However, the FCC could not add any statutory 

claims such as the Truth in Lending Act or the Equal Credit Opportunity Act to a complaint without first referring the case to the 

new agency and waiting 120 days for that agency to decide if it 

wants to take the case. Chairman Leibowitz, let me ask you, how 

will this change impact the FTC’s ability to consume financial problems? Could the FTC consume one part of a case while the other 

is under consideration or would you expect that it would simply not 

bother with additional claims? Will the FTC’s cases be weakened 

if they only rely on FTC Act claims? 

Mr. LEIBOWITZ. Well, I think, Mr. Chairman, that is an great 

question, and keeping in mind that we are at the beginning of the 

legislative process, not near the end of the legislative process, those 

are questions that this committee will want to think through as the 

legislation proceeds forward. Last week we brought a bunch of 

cases which we called Operation Short Change, and it was about 

scams that were hitting people in economic distress, and a lot of 

those were basically fraud claims under the FTC Act, but one of 

them involved the Electronic Funds Transfer Act, I think it is reg 

E. Now, reg E would go to the new agency, and so this would sort 

of invoke two parts of your question or two components of your 

question, one of which is, would we have to wait 120 days to bring 

this case while there is ongoing harm, and then the second issue 

is really, what is the nature of our backup authority, and I want 


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to say, Mr. Barr and I have been working through this with our 

staffs and very, very productively. You know, I worked on the Hill 

for 13 years and I never wrote a piece for legislation for my bosses 

then that didn’t change as it went forward. And so but I think 

these are precisely the questions that we worry about at the FTC. 

We want to make sure, and I know Mr. Barr does too, that this 

legislation is as effective as it can be for the consumers that all of 

us represent, and so I think it is important that you—— 

Mr. RUSH. Well, it seems that the consumers would benefit more 

if the FTC didn’t have to solely rely on the so-called backdrop authority. Do you agree with that? 

Mr. LEIBOWITZ. Well, again, I mean, from my perspective, and I 

will turn the mic over to Mr. Barr in a second but from our perspective, if the backup authority is weak, and, you know, we have 

backup authority involving the SEC and the CFTC which we use 

very rarely, only when we need it. But here, a couple of points. One 

is, as the transition is happening, if this legislation is created, you 

and certainly even after very good lawyers are transferred and attorneys and jurisdiction, you know, it is going to take a while for 

this agency, and Mr. Barr knows better than anyone, to ramp up, 

and I like—I believe that they are going to want us involved using 

our backup authority, probably more earlier than later. Now, we 

understand that they will have primary jurisdiction but I think it 

is very important that the backup authority be robust so that we 

can sort of help out and also so that when we have these cases that 

involve malefactors that don’t fit into the old or new silos that we 

can effectively go forward and stop ongoing harm involving consumers. 

Mr. RUSH. I have just one question. Earlier you stated that you 

had lost some personnel. Were the individuals transferred to Treasury? 

Mr. LEIBOWITZ. We have one or two people who have gone over. 

Mr. RUSH. And what is the purpose of them going over to Treasury? Are they on loan to Treasury or are they reassigned to Treasury? 

Mr. LEIBOWITZ. Oh, I think they are on detail. 

Mr. RUSH. What is the purpose of them being on detail to Treasury? What are they doing over there? 

Mr. LEIBOWITZ. I think they are—well, I will turn that over to 

Mr. Barr. But I do know that the one person I know who is on detail to Treasury is a fabulous attorney and really cares about consumer protection. 

Mr. RUSH. All right. Well, why don’t you turn it over to Mr. Barr 

and let him answer the question. Thank you. Mr. Barr, would you 

begin your answer with that last question and then you can respond to the other question. 

Mr. BARR. Sure, and then I would be happy to address the broader points. We have on our staff a terrific attorney from the FTC 

who has come over on detail and is going to be a permanent employee of the Treasury Department working on consumer issues. 

With respect to the broader sets of questions, I would just say first 

and foremost the chairman and I have been working closely together and are committed to working closely together on these sets 

of issues. On financial fraud, it is clear from the President’s proVerDate Mar 15 2010 05:51 Aug 02, 2012 Jkt 74090 PO 00000 Frm 000081 Fmt 06633 Sfmt 06633 E:\HR\OC\A090.XXX A090

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posal that it would not in any way diminish the FTC’s ability to 

take on financial fraud cases as it is stated in the white paper and 

in the legislation. The FTC would retain its authority and its duty 

to bring financial fraud causes without delay. 

With respect to coordination, there are many issues that the 

agencies will want to coordinate on. The 120-day measure is not 

like the existing authorities that the FTC uses where it is the primary entity doing enforcement. This is a proposal that kicks in if 

the FTC is doing its work and finds a problem, it can let the new 

agency know, the consumer agency know about it. It doesn’t have 

to wait as the FTC does today, it doesn’t wait until it has gone 

through its investigation, gone through the whole charging process 

and gotten it all ready and then refer it to the Justice Department. 

It is totally unlike that. This a chance for the FTC to let the new 

agency know about a problem that it sees that has come to its attention. So it is a fundamentally different mechanism. We are committed to being sure that that in no way delays any financial fraud 

cases. 

And with respect to the transition issues again, the FTC and the 

bank agencies will have large transition issues. We are committed 

to working those through and, as I mentioned to Representative 

Schakowsky, Treasury is responsible for ensuring that transition 

happens smoothly and you can hold us accountable for that. 

Mr. RUSH. With that, my time is concluded. Now Mr. Radanovich 

is recognized. 

Mr. RADANOVICH. Thanks, Mr. Chairman, and welcome back. 

Mr. Leibowitz, uncertainty is one of the key factors behind the 

perpetuation of our current economic crisis, and granting a new 

and unknown regulatory agency with this broad scope of power 

places a dangerous—could place a dangerous level of uncertainty 

into the financial markets. Do you think that it might be better to 

have an experienced regular such as the FTC with a long and 

trusted history of working with business at the helm with these 

new powers? 

Mr. LEIBOWITZ. Well, as you know, I am very fond of the Federal 

Trade Commission as you are. I would say this. You know, as you 

know, I testified here a few months ago that we thought we could 

do the consumer protection mission involving predatory financial 

instruments. The proposal that has been developed, though, is one 

that is broader than that. It has bank examiner components. It has 

compliance components. So those are not things in our core competency. You know, again, we are a creature of Congress. We are 

an independent agency, and so we will do whatever you tell us we 

are going to do, and then beyond that, I just want to come back 

to my initial point, which is, based on what we have seen in this 

marketplace and the restrictions that we have operated under, I do 

think that if these issues are worked through, and I believe they 

will be, I do think that having this new agency and the FTC both 

going after unfairness, deception, fraud is considerably preferable 

to the status automobile accident. 

Mr. RADANOVICH. We agree on that. I think the issue is, how you 

go about it. I will say, though, that meeting with the bankers in 

my district back home, they are afraid of this, and I think the uncertainty question is a legitimate question, and if it does bring the 


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specter of increased regulatory management over the industry, not 

that something has to be done in order to correct the mistakes of 

the last year, but, you know, what is it going to do to the industry’s 

willingness to get out there and unfreeze liquidity like we are all 

wanting? 

Mr. BARR. If I could just add to Chairman Leibowitz’s comment 

on that, I think that a key new factor is, this agency would have 

all the supervisory and examination authority it needs, not just 

with respect to banks but also with respect to non-bank competitors of those banks, so I understand that many banks are worried 

about the scope of the new Consumer Financial Protection Agency. 

I appreciate those concerns. I think the additional upside for them 

is that the non-bank competitors will have the same high standard 

that they need to meet, the same level playing field, the same consistent rules. So they don’t have to worry. A community bank and 

a credit union doesn’t have to—— 

Mr. RADANOVICH. Something tells me that you are just broadening the uncertainty to include the entire financial markets, you 

are not—— 

Mr. BARR. No, I think what we are able to do, sir, with respect—— 

Mr. RADANOVICH. It seems to me the uncertainty is being broadened, not—that doesn’t answer the question about uncertainty and 

the banks are afraid of this kind of legislation. 

Mr. BARR. I think what we are able to do is create a high, consistent, clear standard. We are able to reduce regulatory burden in 

many cases, for example, combining the TEAL and RESPA forms 

that drive everybody crazy and don’t help consumers. We need a 

single, uniform, simple standard for disclosure that applies—— 

Mr. RADANOVICH. I suggest that you need to convince the banks 

because they are the ones that are expressing the real concern. If 

I may, though, Mr. Barr, I do have a second question, and that is 

that President Obama has stated that a streamlined system will 

provide better oversight and will be less costly for regulated institutions but the preemption statutes in the bill create a floor rather 

than a ceiling for State regulation. Doesn’t that mean we are looking at 51 different versions of this thing by giving the preemption 

statutes to the States and does that not conflict with President 

Obama’s statement that we are looking at a streamlined system? 

Mr. BARR. Well, as you know, the States have long played an important role in consumer protection. I think one of the upsides of 

living in our country is that we have independent States that—— 

Mr. RADANOVICH. But they have not had preemptive status in 

this situation before. 

Mr. BARR. They have not been able to apply State laws in some 

context to national banks, but they certainly have been very active 

in the consumer area across lots of different products and services 

in the past. 

Mr. RADANOVICH. Do you think that could lead to 51 different 

versions of this—— 

Mr. BARR. I think we are much more likely to see a high standard at the national level. I think it is very rare if you set a good, 

high standard at the national level you are going to find it very 

rare for States to go off in their own way, but sometimes States are 


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right. Sometimes States protect consumers in innovative ways, and 

our view is, we shouldn’t block the States’ ability to do what the 

States think in their judgment is right. 

Mr. RADANOVICH. All right. Thank you, Mr. Chairman. 

Mr. RUSH. The Chair recognizes Dr. Gingrey for 7 minutes for 

the purposes of questions. 

Mr. GINGREY. Mr. Chairman, thank you for your generosity of 

time. I am sorry I missed the first round, and I appreciate you letting me ask some questions. And I did want to ask Secretary Barr, 

in your testimony you indicated that we need only one agency 

charged with protecting consumers for financial products and services. As one of the principal architects of the Administration’s plan 

and the proposed Consumer Financial Protection Agency, you lay 

out very broad and sweeping changes that will fundamentally 

change a number of government agencies of course including the 

FTC. However, while this is still in the early stages, there are some 

concerns held by members including me that an overly broad new 

regulatory agency will have the same effect of hitting a nail with 

a sledgehammer, and these efforts under the guise of uniformity I 

feel that there may be some different standards set for industries 

within this proposed agency. For example, I have heard some suggestion that small banks should be exempt from some or all of the 

rules written by the proposed agency and the drafted legislation 

contains exempted authority based on asset size. Is it the Administration’s play to apply different consumer protections depending on 

whether a customer transacts with a small or a large bank, and 

furthermore, if you intend to carve out smaller institutions, what 

are the types of rules they would be exempted from and what is 

the policy reason for carving out these institutions? 

Mr. BARR. Thank you very much for that set of questions. I do 

think that our proposal does involve sweeping change, a sweeping 

change that in our judgment is essential to protect consumers. Our 

old system was fundamentally broken and we do need fundamental 

reform. 

With respect to smaller institutions, we don’t expect to see, 

would not expect that small banks and big banks would have different rules of disclosure, but you may see differences in, say, how 

much examination or supervision there would be. In the bigger institutions as we do today on site there are examiners on site year 

round. You wouldn’t want that for a small bank. So you may see 

differences like that but not differences in the basic standards affecting consumers. Those would be uniform across the board. So if 

you walk into a bank or you walk into a credit union, you walk into 

a big bank or you go to your independent mortgage broker or you 

go to an independent mortgage company, you get the same simple 

mortgage disclosure so consumers can understand what they are 

getting. 

Mr. GINGREY. Chairman Leibowitz, as you outlined in your testimony, there will be a number of changes to the FTC as a result 

of the Consumer Financial Protection Agency it that becomes law. 

Many responsibilities will be pulled from the current jurisdiction of 

the FTC and to be given to this new agency. With all of these proposed changes, what then will be the role of the FTC in this new 

landscape and how much of that new role will be duplicative of this 


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proposed agency? You guys have been doing a good job, you know, 

we are appreciative of that. 

Mr. LEIBOWITZ. And we appreciate, you know, and are heartened 

by what you said about our agency. I do think we do a good job 

and we have terrific attorneys who really care about enforcing the 

mission of the agency and good commissioners who are also committed. You know, we will still have all of our competition, right, 

our antitrust authority. We will continue to do all the other things 

we do, whether it is fraud or privacy outside of the financial context or, you know, advertising and marketing practices, and then 

we will continue to stay involved here, I think especially during the 

transition period and hopefully beyond with concurrent jurisdiction. 

You know, look, there are, as we know in this room, as you guys 

know better than anybody else, there are a lot of bad actors out 

there who are, you know, trying to rip off American consumers and 

so, you know, by growing the federal ability to go after these malefactors, you know, that can only help even the playing field. What 

we do at the FTC and I think we do it really well but it’s a sort 

of triage, right? You know, we look at different cases, potential 

cases as we are going through an investigation and we say which 

one can we best leverage, which are the ones that, you know, are 

the greatest harm to the greatest number of people, which are the 

ones that might make better, change bad case law, for example, 

and we are always making decisions based on sort of the lack of 

resources that we have. We just try to do the best job we can. 

Mr. GINGREY. Well, let me reclaim my time just for a second. I 

did want to ask you one other question. We don’t disagree with the 

need for oversight, but it seems to me that in this current financial 

crisis that we are in and all of these bad loans and toxic assets and 

all of that, that the oversight got really heavy after the horse had 

already left the barn and so that is kind of a concern, and there 

is always the concern that the oversight becomes too much, so restrictive after the fact that these institutions, particularly your 

small banks and lending institutions, can’t function, and I certainly 

see this across my district in privately held banks, smaller banks 

that the oversight should have been steady and consistent and it 

always should be but yet, you know, when some catastrophe occurs 

because somebody was not minding the store, then all of a sudden 

the oversight comes down on these institutions to the point that all 

of a sudden they go out of business, it hurts the local community. 

But let me just ask you in the little bit of time I have got left, you 

mentioned to us what the FTC would be able to continue to do. 

What percentage of what you currently do is that? Does that represent 50 percent of your current responsibilities, 25 percent? Are 

you losing more than 50 percent of what you currently are charged 

to—— 

Mr. LEIBOWITZ. No, no, no. You know, I think it would be more 

like in terms of—if I think it through in terms of resources, I will 

get back to you with a response but I would say it is more like 5 

to 10 percent of what we do, and of course, it has been an area, 

as you know, that we have been concentrating on more and more 

because it is very important to American consumers, many of 

whom are suffering from—almost of whom are suffering from 

some—— 


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Mr. GINGREY. Well, I would appreciate it if you would get back 

to me. 

Mr. Chairman, thank you for your patience and generosity, and 

thank the witnesses. 

Mr. RUSH. Again, the Chair thanks the witnesses for the use of 

their time. You were very generous to us with your time and we 

want you to know that you have really contributed significantly to 

this process and we are better off because you testified today and 

helped us move along on this new proposal. So we will be in touch 

with you in the future, and the Chair wants you to know that we 

will give members 72 hours to ask questions in writing, and if you 

will respond to them in a reasonable amount of time, the Chair will 

really appreciate it, so thank you so very much. 

The Chair now calls the second panel. The Chair welcomes the 

second panel to this hearing. The Chair apologizes for the inconveniences that you might have had to endure while we were on the 

floor voting, and the Chair is very respectful and appreciative of 

the fact that you have come from far and wide to be here to testify. 

I want to introduce our witnesses, and I will begin my left. Ms. 

Gail Hillebrand is the senior attorney and manager for the Financial Services Campaign for the Consumers Union. Sitting next to 

her is Mr. Stephen Calkins, Esquire. He is associate vice president 

for academic personnel and a professor of law at Wayne State University. Next to him is Mr. Prentiss Cox, who is an associate clinical professor of law at the University of Minnesota, and sitting to 

Mr. Cox is Ms. Rachel E. Barkow, and Ms. Barkow is a professor 

of law at New York University School of Law. And last but not 

least, the gentleman with the smile next to her is Mr. Chris 

Stinebert. Mr. Stinebert is the president and CEO of American Financial Services Association. Again, we want to thank you and welcome you to this committee hearing. 

It is the practice of this committee that we swear in the witnesses, so would you please rise and raise your right hand? 

[Witnesses sworn.] 

Mr. RUSH. Let the record reflect that all the witnesses responded 

in the affirmative. 

Now it is my privilege to recognize you for 5 minutes for an opening statement, so Ms. Hillebrand, we will start with you. 

TESTIMONY OF GAIL HILLEBRAND, SENIOR ATTORNEY AND 

MANAGER, FINANCIAL SERVICES CAMPAIGN, CONSUMERS 

UNION; STEPHEN CALKINS, ESQ., ASSOCIATE VICE PRESIDENT FOR ACADEMIC PERSONNEL AND PROFESSOR OF 

LAW, WAYNE STATE UNIVERSITY; PRENTISS COX, ASSOCIATE 

CLINICAL PROFESSOR OF LAW, UNIVERSITY OF MINNESOTA; 

RACHEL E. BARKOW, PROFESSOR OF LAW, NEW YORK UNIVERSITY SCHOOL OF LAW; AND CHRIS STINEBERT, PRESIDENT AND CEO, AMERICAN FINANCIAL SERVICES ASSOCIATION 

TESTIMONY OF GAIL HILLEBRAND 

Ms. HILLEBRAND. Thank you, Chairman Rush, Ranking Member 

Radanovich and members of the committee, you know Consumers 

Union as the nonprofit publisher of Consumer Reports but our misVerDate Mar 15 2010 05:51 Aug 02, 2012 Jkt 74090 PO 00000 Frm 000086 Fmt 06633 Sfmt 06633 E:\HR\OC\A090.XXX A090

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sion is to inform, protect and empower consumers, and that is the 

role in which I appear before you today. My written testimony was 

joined by six national consumer organizations. 

Consumer groups want and consumers in the United States need 

a strong consumer financial protection agency, a robust Federal 

Trade Commission and a strong role for States in consumer protection in financial services. We believe that those goals are entirely 

consistent with one another. The goal is a better financial services 

marketplace and better government in financial services oversight. 

We have to face it, the current system doesn’t work. It is not delivering products or encouraging products that are understandable to 

consumers who use them or that meet the reasonable expectations 

created in the sales process. Instead we have gotcha banking. We 

have multiple regulators by type of providers, even when those providers are competing directly for the very same consumer. We have 

long delays for regulatory action and we don’t have much of open 

public enforcement except by the FTC. And finally, we have abusive features in products that are squeezing their way through the 

holes in the existing law and the existing regulatory scheme. 

I believe the job of government is to serve the people. We are not 

here to talk about more government, we are here to talk about better government in financial services oversight. Today our system 

isn’t designed to do the job. It is spread out over six or more agencies with a hodgepodge of rules and statutes, and how much enforcement a provider receives depends in part on who its regulator 

is. That is just not a system designed to match the realities of today’s market. We want to give the federal government a different 

and new job in the financial services marketplace, and that is to 

promote a fair as well as an efficient financial services market to 

watch for the market to prevent harms as they start to develop. 

I come from the great State of California, where the option ARM 

and some of the other products that have gone so terribly sideways 

were pioneered, and you can only wonder if someone had been 

watching those markets more closely whether that would have 

spread around the country. 

The mandate of the CFPA is the right mandate. It is to promote 

transparency, simplicity, fairness with accountability and access, 

and note I say ‘‘promote.’’ It is a different job from what the federal 

government has had before, and with the CFPA we have the opportunity for an agency who has an obligation to get information, to 

learn about the market, to watch that market and then to make 

a conscious decision about what needs to be regulated and what 

doesn’t and which regulatory tools to use and then to apply those 

tools evenly no matter who is providing the product. With the 

CFPA, we could get one agency to watch over the market, fasteracting responses, one agency that is responsible to you and to me 

when things gone wrong, and one place for your constituents to go 

instead of the alphabet soup they have now of trying to figure out 

who to complain to and who to get relief from. 

The CFPA model is one federal rulemaker but multiple enforcers, 

and that brings me to the incredibly important continuing role of 

the FTC. I would like to disclose, Mr. Chairman, I was once a summer law intern at the Bureau of Competition at the FTC, longer 

ago than could possibly be relevant for today, but I want to disclose 


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that. The FTC keeps its enforcement authority. It keeps its section 

5 authority with a simple, regardless of the topic, financial services 

or not, with a simple consultation that can be at the staff-to-staff 

level. It keeps its authority with respect to all the statutes it now 

has with that referral process, and I think it is very important to 

note that is a refer and wait process but they are not waiting for 

a yes or no. If the CFPA does not take on a case the FTC thinks 

needs to be brought, it can still bring that case. The CFPA cannot 

say no. We have made a recommendation to you in the written testimony that the statute should allow the CFPA to waive that notice 

or to shorten it by individual case by type or category of case and 

by agency so that they can work these things out where there is 

commonly, for example, the telemarketer case with the EFTA 

claim. And we also are recommending to you that the FTC be given 

the authority to be a secondary regulator with respect to enforcing 

the CFPA rules, not writing them but enforcing them. 

The FTC does lose jurisdiction to write unfair and deceptive acts 

and practices rules in financial services but that has not been a 

role they have been able to use widely in the last couple decades 

since the credit practice rule which went into effect in the 1980s. 

They keep all of their enforcement, and of course, it will be made 

stronger with the aiding and abetting enforcement. We believe this 

is the only way to put all the competing products under the same 

set of rules. I have some examples but I will hold them for the 

Q&A because I am conscious of your time, and I do want to say 

that I think it is very important what the FTC does right now in 

the recession. It is very important what the FTC will continue to 

do after the transfer of authority in those cases where there is 

overlapping enforcement and it will be extremely important what 

the FTC does with its additional authority. 

There are a lot of things the FTC can do right now to help consumers who are suffering from the recession including cleaning up 

the problem with credit-reporting errors, the work it is now beginning to do under the new authority you gave it in mortgage modification and foreclosure, debt collection and debt settlement. All 

those things will remain extremely important. I would be happy to 

take questions. Thank you. 

[The prepared statement of Ms. Hillebrand follows:] 


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Mr. RUSH. Thank you very much. 

Mr. Calkins, you are recognized for 5 minutes. 

TESTIMONY OF STEPHEN CALKINS 

Mr. CALKINS. Thank you. Chairman Rush, Ranking Member 

Radanovich, members of the subcommittee, thank you for inviting 

me here to testify about this important matter. 

The proposed legislation would effect sweeping changes in the 

Federal Trade Commission. The key to the bill is in the definitions 

and they are written extremely broadly. Applying those definitions 

and working your way through the bill, you find that the bill would 

transfer out of the Federal Trade Commission much of the work 

that the Federal Trade Commission now does, giving those responsibilities to the new agency and giving it the exclusive authority to 

prescribe role and issue guidance with respect to much of what the 

Bureau of Consumer Protection does. 

If you take the FTC’s most recent annual report for 2009 and 

turn to consumer protection and start reading what they have 

done, subprime credit, mortgage servicing, foreclosure rescue, fair 

lending, mortgage advertising, debt collection, payday lending, Operation Clean Sweep, Operation Telephony, the Sumtasia marketing case, payment systems, the Naovi case, Nationwide Connections case, global marketing case and so on and so forth, prepaid 

phone calls, on matter after matter after matter of what they have 

been doing, I read the bill as saying that all of that would be transferred to the new agency. In short, we would have major change. 

Indeed, if you read the bill carefully you would find that even some 

of the antitrust responsibility of the Commission would be transferred. I assume that is a mistake but that is how it is currently 

written. 

Now, why have this sweeping change in what the Federal Trade 

Commission does? It might make sense if the Federal Trade Commission was a bad agency that was doing bad work, but as you all 

have spoken so eloquently this morning, the Federal Trade Commission is a good agency that has been doing good work. It has a 

unique bipartisan structure. It combines consumer protection and 

competition to bring the best from both perspectives to bear on 

problems and it has been doing important work for consumers including in the world of credit for a very, very long time. Transferring responsibility from the Federal Trade Commission to another 

agency obviously creates some pretty significant risks, and my recommendation to you is to proceed with great caution, to weigh 

those risks to decide whether they are really worth running and 

certainly if they are to work very hard to try to minimize those 

risks because the bill as written would make major changes and 

you need to be very careful to make sure that all of this makes 

sense. 

Thanks very much, and I am happy to answer questions when 

the time comes. 

[The prepared statement of Mr. Calkins follows:] 


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Mr. RUSH. Thank you. 

Mr. Cox, you are recognized for 5 minutes. 

TESTIMONY OF PRENTISS COX 

Mr. COX. Thank you, Mr. Chairman and Ranking Member 

Radanovich. 

Abuses of consumer finance products were a disaster for millions 

of consumers before anyone recognized them because we had a financial crisis, a disaster. We heard previous testimony about someone committing suicide. I have sat with people whose families committed suicide after I worked with them who had heart attacks 

from the stress. Millions of people experienced this. 

Our federal regulatory system did not respond to this. It was 

dominated completely by the thinking and needs of the lenders and 

sellers and not by what was happening on the ground. It is often 

said that no one could have seen this. The people who were working with the victims of subprime lending and were talking to people who reflected the experience of those people as well as the others who were subject to the abuses of consumer finance products 

absolutely knew what was going on and were screaming at the top 

of our lungs. No one was listening. It was predictable and it was 

preventable. 

The Consumer Financial Protection Agency as proposed offers 

the first hope in generations, certainly in my adult lifetime working 

on these issues, for an agency with sufficient power and focus on 

consumer protection issues to seriously address these problems. It 

gets it right in terms of its model. It sets up a unified rulemaking 

process. It is not about whether the FTC was good or bad. It is 

about the fragmentation of authority and the lack of perspective 

and a unified rulemaker. It gets it right and setting the floor and 

allowing innovation where innovation should occur, which is in the 

state regulatory system, and it couples that with an open enforcement system. It allows the enforcement of those clear, unified rules 

to occur in multiple places, and there are two reasons you want 

that. The first is that you compare the proper enforcement agency 

with the problem at hand. If you have got a problem that just occurs in Indiana, the Indiana attorney general is the right place to 

do it. It simply won’t get taken care of if you allow a federal agency. Conversely, if the Indiana attorney general turns up a problem 

that appears to be nationwide, that can highlight the need for the 

agency. Secondly, agencies like the FTC and state attorneys general often will bring violations of rules ancillary—which is what 

Chairman Leibowitz was saying—ancillary to other investigations 

because these things don’t come up in little neat silos. So an open 

public enforcement model, which is what this bill has, by allowing 

the Federal Trade Commission and other federal agencies to enforce the rules and state attorneys general to enforce the rules enhances enforcement. 

I will make two quick comments, one about the details of the enforcement mechanisms and the other about the rulemaking investigative authority. The open enforcement mechanisms in the bill 

are excellent; however, I agree completely with Chairman 

Leibowitz that the 120 days’ restriction on the FTC is way too cumbersome. It needs to be streamlined and made more efficient. SecVerDate Mar 15 2010 05:51 Aug 02, 2012 Jkt 74090 PO 00000 Frm 000126 Fmt 06633 Sfmt 06633 E:\HR\OC\A090.XXX A090

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ondly, and this is, I think, a very important point in the bill as currently constructed—the FTC is given the authority to enforce extant federal consumer credit laws but not the regulations passed by 

the CFPA. The CFPA regulations over time will become much more 

important than the extant consumer credit regulations. It is really 

critical that the FTC get the authority to enforce the regulations 

that are passed by the CFPA. 

There is also a consulting power in there, a requirement, and 

that is correct and I hope that on an informal basis the agency 

takes account of the fact that the FTC, which enforces UDAP, unfair and deceptive acts and practices laws, gains a particular type 

of experience and understanding that is vital to setting those rules. 

Secondly, state AGs have authority but mechanisms for remedies 

need to be clarified because right now the section 1055 powers— 

it is unclear whether those are bootstrapped into the AG enforcement. 

Finally, in its rulemaking authority, the new CFPA desperately 

needs detailed and express and clear investigatory powers. Otherwise the data that is brought to bear in what the rules are will be 

data held by the industry that the CFPA simply doesn’t have access to, so it is critical that the CFPA have that investigative power 

so that they can get the rules right the first time. 

I really appreciate the opportunity to be at this historic hearing 

and wish the Congress great luck in making this project work. 

[The prepared statement of Mr. Cox follows:] 


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Mr. RUSH. Thank you very much. 

Ms. Barkow. 

TESTIMONY OF RACHEL E. BARKOW 

Ms. BARKOW. Thank you, Mr. Chairman, Ranking Member 

Radanovich and members of the subcommittee. Thank you for inviting me to testify before you today. I am honored to have the opportunity to discuss this piece of legislation. 

The linchpin of the Consumer Financial Protection Agency Act is 

of course the agency it creates, so whether this Act will succeed or 

fail in its mission to protect consumers will depend entirely on 

whether the agency it creates will succeed or fail. I therefore analyzed the structure and powers of the proposed CFPA to determine 

if it has been designed in the most effective way to achieve its stated statutory mission. I take no position on the merits of that mission or whether there is a need for a new agency to regulate this 

field. Rather, my focus is on whether the CFPA has been designed 

as effectively as it can be to achieve that mission. In that regard, 

I would like to make six brief suggestions and observations about 

the design of the CFPA and this legislation. 

My first recommendation and the most important is to add a provision to this Act that would limit the CFPA board’s membership 

to no more than three members of the same political party. Unlike 

virtually all other legislation that governs multi-member independent regulatory agencies including the FTC, the SEC and the 

Consumer Products Safety Commission, the CFPA Act as it is currently written does not require political balance among the agency’s membership. There is a wealth of empirical studies that are 

demonstrating that a group comprised solely of ideologically likeminded people tends towards extreme decision making. Without a 

provision in the CFPA Act requiring partisan balance, the CFPA is 

likely to change positions from one extreme to another with each 

new presidential administration. This is unhealthy for the regulation of any market and certainly the consumer financial products 

market. A political balance requirement can serve as a stabilizing 

force. In addition, a political balance requirement can lead to dissenting opinions, which is valuable for alerting Congress and the 

public if the agency goes in an extreme direction one way or the 

other. 

Second, I suggest amending the Act’s requirement that the CFPA 

consult with all federal banking agencies and any other relevant 

agency before passing rules to make sure those rules will be consistent with the prudential market or systemic objectives of the 

agencies being consulted. Because this consultation requirement 

sweeps so broadly covering every conceivable agency regulating-related field and anything of any importance to those agencies, this 

process is likely to dramatically delay the promulgation of CFPA 

rules. This is precisely the kind of requirement that aids industry 

participants in tying of agency rules for years. So unless Congress 

is of the view that the delay in legal uncertainty is outweighed by 

the benefits of this provision, I suggest making clear that consultation is at the discretion of the CFPA and not subject to judicial review. 


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Third, I advise modifying the statute of limitations provision in 

the Act to begin running from the time the CFPA discovers a violation, not from the time a violation has occurred. Because violations 

by sophisticated business interests are not discovered for years in 

many cases, this provision is—as it is currently written—might 

hamper the CFPA in its enforcement efforts. 

Fourth, I recommend including a limitation on the ability of 

CFPA board members to practice before the CFPA for a period of 

time after their service on the board is expired. This kind of restriction would limit the negative effects that are often caused by having a revolving door between agencies and the industries that they 

regulate. 

Fifth, I just would like to highlight a protection in the Act that 

I think is going to be critical to achieving the Act’s law enforcement 

objectives, and that is section 1042 of the Act which allows the 

state attorneys general to enforce provisions. The state AGs have 

demonstrated in many areas that they can be effective law enforcement partners, and I think this is particularly true in the area of 

consumer protection where agency capture is a significant risk. 

Finally, I would like to alert the subcommittee’s attention to the 

fact that it is unclear from this Act as it is currently written 

whether the CFPA will be subject to Presidential directives and 

oversight including review by the Office of Information and Regulatory Affairs, known as OIRA. There is language in the Act that 

suggests this is actually going to be an executive agency and will 

be subject to this kind of oversight. Congress may intend for the 

CFPA to be part of the President’s oversight process but if not, the 

Act would need to be rewritten to make clear that the CFPA is an 

independent regulatory agency for purposes of OIRA review. I take 

no position on whether or not the agency should be subject to this 

type of review but because it is a fundamental question, I note for 

you that it is currently unclear in the legislation. 

Thank you again for allowing me to testify and share my 

thoughts on this proposed legislation, and I would be happy to answer questions when we are all done speaking. 

[The prepared statement of Ms. Barkow follows:] 


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Mr. RUSH. Mr. Stinebert. 

TESTIMONY OF CHRIS STINEBERT 

Mr. STINEBERT. Thank you, Mr. Chairman, and thank you for 

this opportunity to speak with you today. I am very glad to hear 

that this is kind of a first step and hopefully which will be a long 

process because as many have expressed here today, there are certainly some concerns about this issue and we hope that there will 

continue to be somewhat of a cautious approach as we go forward. 

The American Financial Services Association has been around for 

almost 100 years and we represent about 30 percent of all consumer credit in the United States with members in the mortgage, 

credit card, auto and personal installment loans. First and foremost, AFSA supports strong financial consumer protection regulation. Just because we have concerns going forward about the current agency does not mean that the industry and that the association is not committed to strong consumer protection regulation regarding financial services. We believe that consistent enforcement 

of existing consumer protections laws by government regulators 

would have greatly lessened the harmful impact that the current 

crisis has on consumers and certainly our economy. Many AFSA 

members are regulated primarily at the State level and subject to 

a patchwork of requirements. We firmly believe that consumer protection should be uniform in every State. Therefore, AFSA supports 

strong national consumer protection standards that allow the members to meet their consumer protection obligation in an efficient 

and cost-effective manner. 

In addition, strong national consumer protection standards will 

provide a benefit to consumers only to the extent that they are consistent with sound potential regulation. Consumer protections that 

threaten the safety and soundness of financial service providers 

offer really no protection at all. We believe consumers will be better 

served by a regulatory structure where prudential and consumer 

protection regulations are housed within a single regulator. Congress tried to separate these two intertwining functions with the 

GSEs. When it became apparent that this situation was unavoidable, Congress brought the two regulatory functions back under a 

single regulator and for good reason. We urge Congress to support 

regulatory structure that does not separate safety and soundness 

from consumer protection. 

The authority proposed to be vested in the new agency is breathtaking in both its scope and its effect. It would cover many entities 

and persons who have little or no involvement in the activities 

leading to the current economic crisis. Without any demonstrated 

need, many unsuspecting persons will be swept into a web of scrutiny and reporting requirements that yield little in the way of consumer protection but much in the way of increased cost for consumers. Attorneys, accountants, consumer reporting agencies, auto 

dealers, title companies among others will find themselves subject 

to review with no evidence that they behaved unfairly. Financial 

service providers will find it increasingly difficult to plan for risk 

as virtually any practice or product other than prescribed standard 

plain vanilla products could be labeled as unfair or abusive. Innovation will be discouraged. 


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Given the vast scope of the proposed agency’s authority, its funding needs are also staggering. The proposal seeks to fund the CFPA 

by assessing fees on persons and entities it regulates while including many that would not expect to be covered currently. There is 

no doubt that any assessment on financial service products will be 

passed on eventually to consumers. That direct unavoidable result 

will be an increase in the cost and availability of credit. 

Most AFSA members are regulated by the FTC, which has a 

proven record of enhancing consumer protection. It has addressed 

the economic crisis in two ways, first by using the enforcement authority to pursue bad actors in the financial services industry, and 

second, by setting federal policy through guidance and public comment. Numerous examples are listed in our written testimony. 

But in conclusion, AFSA believes that the FTC has done an excellent job in enforcing consumer protection law and is best suited 

to continue that role going forward. We believe the Administration’s goal can be achieved with adjustments to the current regulatory structure and the result will be more efficient, less costly 

and certainly more effective. To that end, we have two specific suggestions. One, make current and future consumer protection rules 

apply to all financial services providers. Congress should ensure 

that all federal consumer protection laws and regulations apply 

with equal force to all providers of financial services with respect 

to similar cases of products and services. These laws should include 

strong national standards that preempt State laws and permit all 

Americans to enjoy a consistent level of service and access with respect to financial products and services. We have heard again and 

again today as you have 50 different States that can meet or exceed the current laws that this is not simplification. We are just 

going to wind up with 51, as you stated, Mr. Chairman, different 

rules that these people are going to have to follow. 

And number two, pursue a regulatory structure that does not 

separate financial products and services from the viability of the 

companies that offer them. All prudential agencies should work together to coordinate consumer protection regulation for financial 

products and services with the goal that regulations be preemptive, 

consistent and uniform. If we don’t have that, we are not going to 

make any headway. Thank you for your time. 

[The prepared statement of Mr. Stinebert follows:] 


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Mr. RUSH. The Chair thanks the witnesses and the Chair now 

recognizes himself for 5 minutes for questioning. 

According to the Administration’s proposal, the States will be 

able to enforce the statutes and rules being transferred to the new 

agency right away. In contrast, the FTC will be required to provide 

the CFPA with notice of a proposed action and has been stated earlier wait 120 days for the CFPA to determine if it would take the 

case before it takes any action. This applies to the very rules and 

laws currently enforced by the FTC. 

Mr. Calkins, in your testimony you suggest that this 4-month 

delay will prevent the FTC from ever investigating or taking action 

in these areas. Can you explain and expound upon that, please? 

Mr. CALKINS. When I read the bill, I sat and tried to think about 

what life would be like under the new legislation and the 120-day 

rule, what would the FTC do, and as I thought about it and I read 

the bill, I read where the bill says ‘‘all consumer financial protection functions of the Federal Trade Commission are transferred to 

the other agency.’’ So who at the FTC is going to be doing the work 

to find that there is a violation that they wish to use the 120-day 

rule to develop. Maybe the FTC will go out and develop new resources to do this. Does that make sense? And I don’t think that 

makes sense because the whole point of the bill, it appears, is to 

transfer a large part of what the FTC does to this new agency. Let 

us talk about the 120-day rules. Well, we have experience with the 

FTC and the Department of Justice where the FTC can ask the 

Justice Department to bring a civil penalty action for it, 45 days 

there. The reality is that the FTC, although I am not sure they 

would admit it, goes out of its way to avoid using that authority. 

It is a lot more effective and efficient for the Commission to go directly to court, bring an action, take action against a wrongdoer, 

stop a fraud, stop some harm, get relief and so they use the authority they can use by themselves, and time and again they don’t go 

to the Department of Justice. I think that 120-day authority will 

be very rarely used in the new world. It is really there in case we 

have a new agency that is so opposed to enforcing these rules than 

an FTC might come along and try to develop some sort of alternative world as a backstop, but I think that the world that I see 

would have the FTC using this authority very, very rarely and I 

just do not think that is the vision contemplated by the bill as written. 

Mr. RUSH. Does any other witness want to chime in here? I am 

hearing skepticism on the part of the other witnesses. Ms. Barkow, 

are you skeptical of this backdrop rule? 

Ms. BARKOW. It does seem like 120 days would be the equivalent 

of a lifetime in this kind of an industry where you are talking 

about the—— 

Mr. RUSH. Well, if it was 60 days, would that make a real difference? 

Ms. BARKOW. Well, that I leave to the FTC to decide but the fact 

that they are worried about the 120 days I think speaks volumes 

about the fact that it is probably going to be a significant issue. 

Mr. RUSH. Does anyone else want to chime in here on this? 

Mr. STINEBERT. Well, I think if you look at some of the discussion 

that occurred earlier and they were talking about the number of 


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days, but perhaps more importantly look at the actual structure. If 

they have taken so many of the personnel, the team has been 

taken from the FTC and is now part of the new agency and yet 

they are supposed to maintain the backstop or the backup in these 

areas, but the team is gone, and as Mr. Calkins suggested, all they 

can do is go out and rehire new experts that are supposed to be 

the backup. It doesn’t sound like a very good system to me. 

Mr. RUSH. Ms. Hillebrand? 

Ms. HILLEBRAND. Yes. Thank you, Mr. Chairman. Under the one 

rule writing many enforcers model, we want it to be as easy as possible for the FTC to bring the cases in its existing jurisdiction as 

well as to enforce the CFPA rules. If the Commission recommends 

a shorter time period, we would want you to look at that very seriously. We think a waiver process also could help here. The Commission and the CFPA could agree that for this kind of case we 

don’t need to know in advance and for these other cases we need 

a shorter period. 

Mr. RUSH. The Chair’s time is concluded. The Chair recognizes 

the ranking member, Mr. Radanovich. 

Mr. RADANOVICH. Thank you, Mr. Chairman. 

Mr. Calkins, the proposed legislation defines a covered entity to 

include those who provide tax planning, financial and other related 

advisory services or provide educational courses and instruction 

materials to consumers. PBS often runs such programming on TV 

for their audiences as do financial cable stations and radio stations. 

Would these entities be covered persons under the proposed legislation, in your opinion? 

Mr. CALKINS. Certainly there is a risk that they would be covered persons. Certainly the Commission would have to think about 

whether it was required to transfer responsibility for all those and 

then, very important, even if they are not covered entities today, 

the new agency has authority to define for itself additional activities that it would have jurisdiction over, and so even if the FTC 

didn’t have to transfer authority today, they might have to transfer 

authority a year from now when the definitions got changed. 

Mr. RADANOVICH. Thank you, Mr. Calkins. I want you to comment on a prior statement about the FTC’s bipartisanship in the 

way it conducts its activities and how that is good. Can you elaborate on that and how the lack of bipartisanship might hinder the 

CFPA’s ability to effectively carry out what is now the FTC’s mission? 

Mr. CALKINS. Well, the FTC I think has over the years developed 

credibility with Congress, with the States, with international observers because it operates in a bipartisan way. The commissioners 

try to work by consensus. They try to take the actions that make 

the most sense. When somebody wants to go out on a limb and be 

really wild and crazy to the left or the right, there is someone from 

the other side to pull them back in. As noted before, Ms. Barkow, 

when you have people going too far, dissents can be filed, and it 

succeeds in developing a shared understanding of the sensible way 

to proceed and then as presidents come and go there exists some 

continuity and that continuity I think adds credibility to the agency’s operations and really has made it into a more effective agency. 

Mr. RADANOVICH. All right. Thank you. 


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Ms. Barkow, would you care to respond to that question as well? 

Ms. BARKOW. I agree completely, and I think that the whole idea 

of an independent regulatory agency which I think is part of the 

goal in this legislation is to have that kind of consensus generating 

form of norms that transcend any particular presidential administration so that you don’t have the instability that comes with every 

new presidential administration means sweeping changes one way 

or the other. You have a stabilizing force in an agency that has 

membership from both parties. I think it has proven to be effective 

in other context and it is hard to understand why you would have 

a multi-member agency here that doesn’t have that mix of political 

views on it. I mean, why not just then have a single-member board. 

Mr. RADANOVICH. Thank you very much. 

Mr. Stinebert, I want to ask you about uncertainty in the financial markets, this massive shift of responsibility and the creation 

of a new agency on consumer protection, your bird’s eye view on 

the industry, how it would react to something like this and the 

level of uncertainty that it might bring into the markets where uncertainty is—we are trying to do everything to avoid uncertainty. 

Would you comment on that, please? 

Mr. STINEBERT. Well, some might argue that this is the perfect 

time to do something like this. I think it is absolutely the worst 

time. We are finally starting to see some stability in the financial 

markets. We are starting to see some recovery. We are starting to 

see investors come back into the marketplace, which eventually investors have to buy these loans out there. In Europe and the 

United States, we are starting to see movement back in there. This 

does introduce a whole level of uncertainty back into the whole 

arena because people are now going to stand back and wait and see 

what goes on, whether there is additional liability requirements 

and regulations on these entities. So yes, I do agree that is going 

to bring a new level of uncertainty into the marketplace at the 

worst possible time for that. 

Mr. RADANOVICH. Can you describe a scenario where the duplicative regulatory authorities allowed by this Act’s weak preemption 

provision might actually prevent consumers from access to valuable 

financial services? This is the State preemption issue where you 

would have 51 different—— 

Mr. STINEBERT. Right now it is set up as basically a floor or a 

standard that States will have the ability to exceed. Someone will 

make a judgment whether what the State is trying to do is meeting 

or exceeding. I am assuming that would be the new agency. But 

if a determination is made by them that it exceeds it, of course 

anything that they would do to exceed would be permitted. So I 

think you have seen it in many other instances. I will give you the 

most recent, the new SAFE Act. That was the licensing for residential mortgage originators. You basically have out there in the implementation of that law 50 different standards that everyone is 

trying to meet and each of them, many of them exceeding the federal guidelines. So people that are regulated at the State level will 

have to register in multiple States as originators are going to have 

to follow very, very many different laws. 

Mr. RADANOVICH. Thank you very much. Thank you, Mr. Chairman. 


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Mr. RUSH. The Chair now recognizes the gentleman from Massachusetts, Mr. Sarbanes—Maryland. I am sorry. 

Mr. SARBANES. We are trying to get to Massachusetts. We have 

one Republican left. Thank you, Mr. Chairman. I appreciate the 

hearing. 

Mr. Stinebert, you said this is absolutely the wrong time. What 

would be a good time? 

Mr. STINEBERT. Well, I think when you go back, and there is 

plenty of history to point fingers at what was the cause of the 

subprime mortgage crisis and currently economic crisis but I don’t 

think you would get anybody that would predict that whatever is 

done here today or by Congress that you can control every bubble 

that is going to occur in the future. Most economists would agree 

that yes, this bubble is a housing bubble, before it was a tech bubble, before that it was a savings and loan bubble. You cannot have 

government totally controlling financial markets unless they can 

totally control potential bubbles, unless you totally stymie innovation and all you have is a plain vanilla standard product out there, 

and I don’t think that is good for the very consumers that we are 

trying to protect here. 

Mr. SARBANES. Yes, I agree with that. I mean, I don’t think you 

can have government totally controlling every single financial dimension in the market. I don’t think you can do that. I don’t think 

this tries to do that. I think what this tries to do is provide some 

oversight and direction and rules of the road so that people stop 

driving off the road, not only because in the view of Alan Greenspan that causes the drivers to crash and hurt themselves but because they run over hundreds of thousands of innocent bystanders 

in the process. 

Let me switch back to a discussion from a few minutes ago because I think it is very relevant. As attractive as the new agency 

may be to some, and I am partial to it as it is being described, we 

still have to get from here to there, and I worry a lot because even 

if we had in place now the regulatory structure that we thought 

was necessary, it would have to be in overdrive, I would argue, to 

be on the lookout against predatory action that is lurking out 

there. But certainly in a transitional phase, predators have a lot 

of opportunities to make mischief, and I think the discussion about 

the 120 days kind of points to some of this anxiety, but I would 

like anyone who would care to, I would like to hear you respond 

to the idea of some kind of a special initiative or taskforce or consciousness that during this transition we need to be paying attention to, maybe it is a limited set of activities or potential mischief 

but there has got to be a special focus on that so that we don’t 

make the transition, say now we have got a good regulatory structure in place, but in the meantime while that happened, a lot more 

people got hurt, and I say this because there is a lot of money that 

is flowing right now, taxpayer money, into the financial infrastructure of the country and many of the same players that took advantage of people over the last few years are thinking creatively of 

ways to take advantage of them again by accessing some of these 

dollars. So speak to that issue of how we can not be caught napping during the transition. We can start with you, Ms. Hillebrand. 


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Ms. HILLEBRAND. Thank you. I believe you are asking exactly the 

right question. There will be a danger period during the transition. 

There are a couple of things, and I don’t have the whole answer. 

One is the work that the FTC does right now and continues to do 

up to that date of the transfer of rulemaking so it will be incredibly 

important. It could be up to 2 years after enactment. If these two 

titles are enacted together, the FTC will get its rulemaking improvements right away and can get some of these rules that have 

been kind of backlogged because of the limitations on its power 

moving into place. That will help certainly to put that policing into 

place. We do need to be paying attention to the new problems that 

will be developing. One that worries me in particular is a new form 

of zombie debt. You know, that is a debt where no one has got the 

paperwork, someone just has a list saying you owe this money, that 

might come out of some of these mortgage unsuccessful modifications or post kind of mortgage dispositions. So there are new 

issues, a lot of old issues. The more we can get the FTC to do now 

before the transfer, I think the better shape it will be in, but we 

will have to watch for that, yes. 

And the other thing is, there is not going to be enough enforcement resources. Moving people from where they are over from all 

the different agencies is not going to give us enough enforcement 

staff to do the whole job for the country. The FTC worked very 

hard. They said they had 100 cases over 5 years. If you talk to any 

State AG in the country, they will tell you, 100 cases, we could 

bring that in my State tomorrow. There is more need than the 

number of people that are currently in place to do consumer protection enforcement financial services at the federal level. 

Mr. SARBANES. Yes, sir. 

Mr. COX. I think you need to break your question, which is a 

great question, in two parts. One part is more scam-like activities, 

and I think this Congress effectively delegated the FTC, charged to 

go over foreclosure rescue scams where a lot of mortgage brokers 

were moving in and loan modification scams and that kind of thing. 

That kind of activity the existing authority clearly is sufficient to 

regulate and the additional authorities recently give them help. 

You break that from more traditional and large-scale sale of products such as mortgages, et cetera, and I think in that area the 

credit markets are so beaten down that I think that this agency 

would be up and running effectively to get ahead of the new products that would be—— 

Mr. SARBANES. OK. That is helpful. Thank you very much. 

Mr. RUSH. The Chair will extend to the members additional time 

for one additional question, and the Chair would recognize himself 

for one additional question. 

I want to get back to this area of concurrent enforcement, and, 

you know, are there any risks or downsides to consumers or industry with this whole idea of concurrent enforcement between two 

agencies? Can you predict or look into a crystal ball and tell us 

what you see in terms of downsides or harm to the industry or to 

consumers regarding this whole area of concurrent enforcement? 

Anybody want to jump in? Mr. Stinebert? 

Mr. STINEBERT. Well, I will give it a try and go first. One of the 

whole things that I think the agency being proposed is supposed 


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to do is have single-source responsibility. Then you take enforcement and you break that among current enforcement agencies and 

then you have a new agency that is supposed to share some type 

of dual enforcement. It doesn’t sound practical to me. We think 

that enforcement should continue to stay with the existing agencies. Now, to your question, Congressman, about the timing and 

you mentioned the speed limit and the people watching the people 

going down the road, I think that—I don’t think anybody would 

deny that the regulations or the speed limits were in place but up 

until several years ago that perhaps the regulations were in place 

but the enforcement and the oversight was not. But I think if you 

look today in all of these agencies whether it be the FTC or the 

other agencies in Washington, I think everybody has their radar 

guns out and are certainly looking at consumer protection issues as 

well as credit and lending issues in general. I don’t think there has 

ever been a focus in this area like there is today, and so to that 

respect, I think that going back to your question, Mr. Chairman, 

I think that it is very important, I think most important, that there 

be continued responsibility between safety and soundness and the 

viability of those companies and consumer protection, and I think 

it is unwise to separate those two entirely. We have gone through 

a good example with the GSEs of trying to do that and finding out 

why that doesn’t work, and it would be very simple if that agency 

that is just concerned about consumer protection can make everything so safe that is not really good for the companies offering 

those products or for the consumers themselves. There is always 

going to be risk in this industry. That defines what it is. And I 

don’t think you an eliminate that entirely. 

Mr. RUSH. Ms. Barkow. 

Ms. BARKOW. I think it is a really good question and I would say 

that I think it is not so much of a risk as long as the rules of the 

game as clear, so as long as you have the one agency that is setting 

the rules and what it is that companies have to do, the fact that 

there would be multiple enforcers of those rules is less disconcerting because you have clear standards and everyone would 

know what they are and you would have essentially this kind of 

more cops on the beat analogy and so that is why you could have 

state AGs helping out, you could have the FTC helping out. You 

would just be getting more manpower. But the rules would be 

clear. So really the success of it would depend upon what kind of 

rules end of being produced from this process, and I guess I would 

just state, that is why it works to have, for example, all the States 

can police Medicare fraud, for example, and it is not a risk because 

everybody knows what they are looking for and so it would just be 

really important for the agency that is created to have clear rules, 

and if they see an enforcement action that looks like it is not really 

in the spirit of those rules, the act as it is written, for example, if 

the state AG brings it, the CFPA could intervene and they could 

step into that action and make clear that that is a bad interpretation of their rule or it is a bad enforcement action. So I think it 

is oK to have multiple law enforcers and in fact probably necessary 

because there just aren’t enough resources for all the fraud that is 

out there. 

Mr. RUSH. Ms. Hillebrand. 


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Ms. HILLEBRAND. Thank you, Mr. Chairman. I had to think for 

a moment about your question to remember that there already are 

six concurrent enforcing authorities. It is just that the banking 

agencies haven’t used that open public enforcement model to bring 

cases with the vigor and approach that the FTC has used. So we 

already do have concurrent enforcement and the downside has been 

that many of the agencies other than the FTC that have enforcement authorities also have other obligations that tie them very 

close to the industry that they regulate. At least with the concurrent enforcement authority with the CFPA and the FTC, we won’t 

have that problem and I think that is a good step forward. 

Mr. RUSH. Mr. Calkins. 

Mr. CALKINS. Mr. Chairman, I think that concurrent enforcement 

authority could work if done carefully but I worry that there is too 

much attention to the FTC as an enforcer. I prepared for this over 

the weekend when the Web site was down so I was reduced to the 

documents that I happened already to own. I owned a 2004 annual 

report that happened to be in my files. I opened it up to consumer 

protection where the FTC has a good list of the range of activities 

in which the agency engages and that is part of what makes it a 

success. Consumer protection policy, one, research and reports; two, 

hearings and workshops; three, advocacy; four, amicus briefs; five, 

consumer and business education and outreach. The FTC is not 

just a cop on the beat. It is an agency that has economists, that 

does competition, that does consumer protection and uses a whole 

range of tools to develop expertise, to identify problems and to craft 

solutions, and if a huge part of what the FTC does as a matter of 

subject matter is transferred out and if the new agency has the exclusive authority to give guidance in this way, then we have lost 

a very great deal of what the FTC does and I think that the consumers would be the worse for it. 

Mr. RUSH. Mr. Cox. 

Mr. COX. Chairman Rush, I think ultimately the industry will 

make two arguments about he concurrent authority and the problems with it. The first is, it is too much enforcement, but as Ms. 

Hillebrand said, and as someone who spent years making priority 

lists, your list is way longer than you will ever get to and the problem with this bubble bursting was not too much enforcement. The 

second problem which is more subtle or real is an inconsistency in 

enforcement policy, and Ms. Barkow appropriately says that this 

rulemaking authority, if it is clear, if the rules are clear enough, 

certainly will solve the problem, and I would further say that the 

CFPA is given the sufficient authority to make sure the is happening in a uniform way. 

But there is a second response to the inconsistency, which is unlike rulemaking where I agree you want a unified rulemaker, when 

it comes to enforcement, this is where regulatory competition actually works because you are competing to be a better enforcer as opposed to competing for a race to the bottom so that people will 

charter with you, which was a serious problem in creating this situation. And when you compete to do better, you are aware that if 

you don’t do it and somebody else enforces your rule in a situation 

that you might get embarrassed, Madoff, SEC, you know, that 

when you have competitive enforcement you have a market that esVerDate Mar 15 2010 05:51 Aug 02, 2012 Jkt 74090 PO 00000 Frm 000177 Fmt 06633 Sfmt 06633 E:\HR\OC\A090.XXX A090

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sentially forces public entities to be aware of that. That actually 

works, and when it comes to UDAP authority, I just want to say, 

it is so important. The state attorneys general, and I am patting 

myself on the back here because I was part of a small group who 

did this. We were the only ones out there screaming about and 

bringing these cases. The FTC was saying it is great because they 

were going after different actors but did one case where we got half 

a billion dollars back to people with subprime mortgages followed 

by another case where there was $300 million and I thought that 

was too little and I had left by then. I mean, this was a problem 

that if you were on the ground you saw it. I mean, it was visceral. 

These people were utterly out of control. The State AGs were able 

to enforce it because they had a different enforcement agenda. 

They were sitting at a different place. Regulatory competition 

works in terms of an open enforcement model. 

Mr. RUSH. The Chair now recognizes Mr. Radanovich for one 

question. 

Mr. RADANOVICH. Thanks, Mr. Chairman. I appreciate 

everybody’s testimony but Mr. Cox, what I thought I heard was 

that we need multiple agencies having to do the same job to make 

sure that the people are doing their job, and that to me a recipe 

for wasted spending. But I do want to ask you a question about, 

I believe it was Ms. Sutton who was here earlier talked about a situation where an 84-year-old woman who owned her place free and 

clear was duped into a 30-year mortgage. I would like to know 

whether or not there was family involved putting her up to that 

and that happened for reasons that wouldn’t have anything to do 

this with this current financial crisis. I happen to represent 

Stanislaus County in California. It is the epicenter of mortgages, 

the number one county in the Nation where mortgage defaults and 

foreclosures have happened. So I have a great appreciation for 

what is happening here. And you would hear tales about, one in 

particular, non-English-speaking people that were talked into a 

home that all they needed to do was come in and sign the papers. 

Once they got there, they were jammed with points and fees that 

they knew absolutely nothing about and were put into an uncomfortable situation, signed the mortgage papers, later lost the house. 

So I am curious to know after we have spent in reaction to this financial crisis anywhere between $800 billion to $1.5 trillion dollars 

to stimulate the economy. We get a rise in the unemployment rate 

that was supposed to drop with all that spending. I am a little 

leery of broad, sweeping reactions to the problems that we are in. 

So how does something like—and I would offer that to you, Mr. 

Cox, Mr. Stinebert or anybody else that wants to respond to this 

thing. How would that help the person—I am not sure about the 

Sutton case, and I want to know whether the family put her up to 

that, that poor, unfortunate, elderly person up to that situation. 

But my situation in Modesto, California, where the non-Englishspeaking person was jammed into that loan and a shyster put 

points on there and then they quickly sold the mortgage to somebody else and this guy was washing his hands and he was out of 

there. How does this broad, sweeping change that you are talking 

about prevent something like that from happening and at what 

cost any more so than what is currently on the books to prevent? 


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Mr. COX. Thank you, Ranking Member Radanovich. I will respond to that by also responding to Mr. Stinebert’s earlier comment, that we all agree that the regulation that was there was an 

enforcement problem. We don’t all agree on that, and here is—the 

problem had two parts to it if you want to break it into its grossest 

problem. The first part was the type of products that were being 

sold. They were simply way too high risk, way too complex and way 

too aggressively sold for average consumers to work through all the 

problems and understand all the costs and consequences and the 

context of these mortgages. For instance, held up at the time as the 

great financial innovation, the payment option ARM, it was sold so 

aggressively on its benefits but its risks were not clear to the average consumer, to my aunt. You know, it was the kind of thing I 

could have sold her on if I was an evil person without informing 

her of the risks. So there is a product regulation problem that existed here. The Fed, if you read the Fed’s papers during this time 

and you put them right next to the industry’s papers, you could 

change the titles and you couldn’t tell the difference. There was one 

type of thinking. That needs to change. 

The second problem was a fraud problem. The fraud problem got 

so far out of control, I have never seen anything like it. You know, 

if you were talking to the people and you saw this going on, if you 

talked to the ex-workers in these agencies, et cetera, in these companies that were selling these things, fraud was so rampant in this 

industry that, you know, that was almost a separate problem from 

the product regulation problem, and so we also had a lack of enforcement, particularly at the federal level, you know, on fraud but 

we fundamentally had a product regulation problem. I hope that 

responds. 

Mr. RADANOVICH. Mr. Stinebert. 

Mr. STINEBERT. Commenting back to Mr. Cox’s earlier discussion 

about whether we should have multiple regulators is a good thing, 

I ask you, if you are a business and you have multiple regulators, 

two and three regulators, is competition really good if you are the 

regulated entity and the costs that are involved in that. I mean, 

so the FTC is in your office one week and having your staff gather 

everything else and the next week, you know, another regulator is 

in there. I can see where there might be some contention where 

that is good but you won’t have businesses, anyone that operates 

a business, small profit or a large business having multiple regulators and enforcers coming into your offices is necessarily a good 

thing because—and all of those costs are eventually passed on to 

consumers. These do not happen in vacuums. So, yes, there are 

protections I think that need to be in place and you are absolutely 

right about that, but I do think you can overdo a process to. We 

want to have a process that protects consumers but is efficient for 

everyone involved, that it is efficient for the safety and soundness 

and the viability of the companies that are being regulated as well 

as good for the consumers that are buying their products, and I 

think that that is an important thing. 

Mr. RADANOVICH. Thank you, Mr. Chairman. 

Mr. RUSH. The Chair recognizes the chairman emeritus, Mr. Dingell. 

Mr. DINGELL. Chairman, I thank you for your courtesy. 


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This question is to Gail Hillebrand and to Professor Calkins. 

What authority will remain in the FTC to protect the consumers 

after the Administration’s plan has been adopted if it is adopted in 

its current form? 

Ms. HILLEBRAND. Thank you, Chairman Emeritus. The FTC retains all of its authority to bring section 5 enforcement subject only 

to a staff level of consultation, coordination and discussion—— 

Mr. DINGELL. But we would lose that authority? 

Ms. HILLEBRAND. The FTC retains that authority. I am going to 

give you a list of things it retains. It retains its section 5 authority. 

It retains its authority to bring cases under the statutes and rules 

for the enumerated consumer statutes. That is our alphabet soup: 

ECOA, EFTA, reg Z and so on. It retains—well, those are the big 

things that it retains. It also retains its pure fraud authority. I 

mean, there are financial services and then there are people who 

tell lies who say sign up with me and give me your Social Security 

number and your checking account number and you will never see 

me again. It retains that authority. Those folks are not selling financial services, they are selling lies, and it retains that authority, 

and we have recommended that it also be given the same kind of 

backstop authority that it now has currently and would have under 

this proposal for the existing consumer statutes with respect to enforcement of the CFPA rules. That is not yet in the proposal. 

Mr. DINGELL. Now, what would it lose? What would FTC lose? 

What consumer protection jurisdiction would it lose? 

Ms. HILLEBRAND. Yes. The FTC would lose the jurisdiction that 

has been important but difficult for it to use which is its authority 

to develop unfair and deceptive acts and practices rules in the financial services area. I am sure you are aware the last time that 

authority was used was in the credit practices rule, which came 

into effect in the mid-1980s. 

Mr. DINGELL. OK. Now, why should that be taken away from 

FTC? 

Ms. HILLEBRAND. If we were looking at just the FTC, there would 

be no reason to take it away, but the problem is, we need—— 

Mr. DINGELL. There is no reason to take it away? 

Ms. HILLEBRAND. No, I am not quite finished. 

Mr. DINGELL. Let us just go a wee bit further and explain to me 

why we should give it some of those goodhearted folks who led the 

fight for the repeat of Glass-Steagall who deregulated banking and 

financial services and who left us this glorious mess which we now 

have in the form of probably the biggest depression that this country has had since 1929. Now, why should we do that? 

Ms. HILLEBRAND. We need to give the authority to an agency 

that can make one set of rules that applies to the bank provider 

and the non-bank provider. If the FTC—— 

Mr. DINGELL. I have no objection to taking care of the bank regulatory agencies. Let them create them and let them do their thing. 

But why wouldn’t we want the honest men and women at FTC 

looking over their shoulder and why wouldn’t we want them looking over the shoulder of those goodhearted banks and financial 

folks and MBAs up in New York that created this mess? Now, help 

me. Why wouldn’t we want that? 


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Ms. HILLEBRAND. We definitely want oversight. We want someone who can look over no matter what kind of—— 

Mr. DINGELL. Do you like the idea of having the FTC sort of keep 

an eye on those people? 

Ms. HILLEBRAND. We like the idea of having an agency that can 

look at everybody, not just the non-bank providers, keep an eye, 

and we think the best way to—— 

Mr. DINGELL. And what about all the goodhearted banks that are 

going to be engaging in all kinds of things? They are going to be 

engaging in real estate, they are going to be engaging in issuing 

of bonds and securities. They are going to be engaged in all kinds 

of wonderful activities on derivatives which are really gambling devices. So why shouldn’t the FTC retain its continuing and ancient 

jurisdiction over keeping honest men honest and maybe occasionally catching a rascal? Now, why should we take that away from 

FTC? 

Ms. HILLEBRAND. Mr. Chairman Emeritus, I respectfully suggest—— 

Mr. DINGELL. You represent consumers. Why shouldn’t we just 

leave FTC as it is and let these other folk go about their nefarious 

business under the kind of weak-minded regulation that the Treasury has traditionally given to these institutions? 

Ms. HILLEBRAND. We are absolutely in favor of—— 

Mr. DINGELL. I will give you a good reason for that. You are 

speaking here for the consumers, and I am trying to figure out do 

you really understand the consumers’ needs or are you engaged in 

perhaps disregarding the consumers because these other folks have 

done a better job of telling you what a wonderful job they are going 

to do after they have brought about not one but two depressions? 

Ms. HILLEBRAND. I am looking at it from the point of view of the 

ordinary person who is trying to get a mortgage, and they want to 

know—I mean, the consumer doesn’t think it is—— 

Mr. DINGELL. No, no, you are giving me a wonderful answer but 

it is to the wrong question. Answer my question, please. 

Ms. HILLEBRAND. The answer is, we think—— 

Mr. DINGELL. Why should we not keep FTC in its traditional jurisdiction of protecting consumers? When I was a boy, Roosevelt 

tried to give FTC jurisdiction over the stock market, and you can’t 

imagine the outrage that this generated in New York because they 

were scared to death of the Federal Trade Commission, which is 

under the jurisdiction of the committee. We keep them honest. And 

we find that as soon as the FTC got away from this committee, 

they all of a sudden became a wholly owned subsidiary of the securities industry and the banking industry. Now, why should we 

sanctify that by stripping the consumers of the one remaining protection which they have, the FTC, in favor of giving it to a congregation of folks well known to be influenced by some of the worst 

scoundrels in our society? 

Ms. HILLEBRAND. Are you ready for my answer? We believe that 

we need to put it in one place so that the non-banks aren’t saying 

oh, don’t regulate us the banks can still do that. The banks are 

saying oh, don’t regulate us because the other guy can still do it. 

Mr. DINGELL. We don’t mind having this agency that would be 

created by the Administration’s proposal do that. What we want is 


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to have the FTC there so as to sort of watch over these people and 

let them know that there are honest men and women watching 

them so that the rascality is diminished and the consumers are 

protected. What is wrong with that? 

Ms. HILLEBRAND. I think we have the same goal and perhaps a 

different with respect about how to get there. 

Mr. DINGELL. So then are you telling me that you like the idea 

of having the FTC continue its jurisdiction while these other goodhearted folk go about their nefarious business? 

Ms. HILLEBRAND. We have endorsed full retention of FTC enforcement authority but we think—— 

Mr. DINGELL. We have talked about what FTC is going to lose 

and you are apparently advocating the losing of it. I am not of a 

view that maybe we want FTC to lose that jurisdiction and maybe 

we want FTC to be around to sort of provide a minor dampening 

of the rascality which is going to continue to occur in the financial 

services industry. Now, what is your objection to that? 

Ms. HILLEBRAND. We believe that you need—— 

Mr. DINGELL. Dear friend, in just a few words, what is your objection? 

Ms. HILLEBRAND. Put the rulemaking in one place so that it is 

very clear whose job it is, and then you can hold them accountable. 

Mr. DINGELL. They arranged that one-stop shopping when they 

moved this whole thing across the hall, and since then the whole 

financial services industry of the United States has had to be 

bailed out to the amount of $700 billion, which was congregated by 

Mr. Paulson, who came from that industry, and which has done 

nothing but enriched the same rascals that had caused trouble, and 

it has not only enriched those rascals but it has given us something 

new to think about, and that is, it has seen to it that they have 

had the funds to pay the same scoundrels who made the mess enormous bonuses amounting to as much as $165 million in one instance. Obviously, this is the product of one-stop shopping which 

I suspect you were telling me you support or maybe you want to 

tell me now you don’t support. 

Ms. HILLEBRAND. We are trying to end the ability to shop for 

your regulator by having one entity write the rules no matter what 

kind of charter and what kind of provider. That is our position. 

Mr. DINGELL. Well, I have to say, I think somebody else wrote 

your statement but I thank you for your presence, and Mr. Chairman, I thank you for your courage and ability to bring this event 

about. Thank you. 

Mr. RUSH. The Chair thanks the chairman emeritus. The Chair 

thanks the witnesses. This hearing now stands adjourned. But before we adjourn, I wanted to let you know how grateful we are for 

you to extend your time with us and spend your time with us. 

By unanimous consent, I request that members submit all questions to be sent to the witnesses for the record within seven calendar days and that witnesses will respond promptly to the questions that are submitted to them. Thank you so very much, and 

safe travel. 

[Whereupon, at 2:15 p.m., the subcommittee was adjourned.] 

[Material submitted for inclusion in the record follows:] 


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