Financial Reform with an Independent Consumer Protection Agency

March 6, 2010

By Padmini Arhant

The Wall Street bailout season commenced in 2008 and continued into 2009. Those corporations allied with the oligarchs not only survived but their CEO’s are thriving amid difficult economic times and some states experiencing a double-digit unemployment.

As stated earlier in numerous articles on the economy and the financial sector, the speculators’ reckless conduct together with greed led to the status quo. The sub-prime mortgage and credit card lending practices targeting the vulnerable population contributed to the housing market decline and the alarming bankruptcies.

In addition, the credit crunch has forced many small businesses to lay off employees and left the self-employed in a dire situation. The private sector have also been affected in the liquidity crisis triggering the 9.7 percent national unemployment rate and much higher when consolidated with the under employed statistics.

Evidently, a rigorous financial reform is necessary to revive the economy and avert future meltdown.

Although, an international consensus was reached during the G-20 meetings in 2009 at London and Pittsburgh to implement strong financial regulations, the domestic agenda in the United States is faltering due to the usual Senate gridlock and the lack of enthusiasm to push the issue forward.

However, the House of Congress is way ahead of Senate in passing legislations on many issues, reflecting the Speaker Nancy Pelosi and the House of Representatives’ commitment.

On the other hand, the Senate majority leader Harry Reid has a tough battle convincing the opposition, sworn to filibuster the legislations on any reform.

The Republican Senators and the democrat opponents believe in the market economy free of regulations and refuse to acknowledge the economic adversity brought upon by deregulations in the recent decades.

Failure to act now would be catastrophic for the global financial market and the economy.

There is no guarantee that the U.S economy and the rest of the world would not be subject to a similar scenario in the future with the hedge fund managers and the investment banks such as the Goldman Sachs…

Having set a precedence in wild speculations, high-risk exposure and fast track profiteering at the expense of millions of borrowers, investors and national economies like P.I.G.S, an acronym for Portugal, Iceland/Ireland, Greece and Spain, all of whom are currently dealing with insolvency.

Finance sector being the cradle of the economy, the benign symptoms would prompt the government bailouts of the default institutions. Thus, history repeating itself with the exponentially rising national debt remaining the constant factor in the non-regulatory environment.

Another attention worthy issue in this context is the establishment of an Independent Consumer Protection Agency.

Agency’s function would be fairly common and that being,

Protecting the consumer rights as the borrowers,

Creating awareness on the industry’s unethical practices apart from,

Preventing the banks in the systemic abuse of customers through inflated finance charges and interest rates on personal loans, credit card etc.

Further, it could also provide arbitration service to the borrower and the lender on financial disputes, thereby mitigating legal expenses for both parties.

Not surprisingly, there is resistance to the Independent Consumer Protection Agency.

As witnessed in the health care bill, the lobbyists are relentlessly engaged in ensuring the demise of the financial reform and the consumer protection agency.

The White House being suggested to nominate the Treasury Department in handling the Consumer Protection Agency affairs as opposed to a non-partisan and an independent committee, poses a conflict of interest stemming from the Treasury Department’s liaison with the financial institutions.

Likewise, the Federal Reserve maintaining control over the Consumer Protection Agency against the banking sector is an unrealistic expectation based on the Federal Reserve’s performance in the sub-prime mortgage debacle and the executives’ close ties with the finance sector.

Therefore, the consumer protection agency ought to be independent and focused on safeguarding consumer interest.

Financial reform cannot be delayed or relinquished especially with the Wall Street’s compulsive disorder to indulge in short term gains by acquiring toxic assets only to be transformed into a burgeoning liability.

Alternatively, the watered down legislation could fulfill a formality and not serve the purpose.

Hence, the requirement for a meaningful financial reform is absolutely vital to rein in on predatory traditions.

Finally, the U.S. economic recovery could be expedited through a robust financial regulation that would instantaneously restore the investor and consumer confidence.

Thank you.

Padmini Arhant

Radio Show Schedule

January 22, 2009

I will be doing a live radio show for 120 minutes from 2.00P.M to 4.00P.M. (PST) on the following days:

January 23, 2009 Friday from 2.00 – 4.00 P.M (PST) to accommodate listeners from all time zones.

Category: Current Events

Topic: Corporate Bailout


What should financial institutions do with the taxpayers’ bailout?

Why have they not utilized those funds to stimulate economy?

What is public demand from them and the legislators?


January 30, 2009, 120 minutes 2.00P.M – 4.00P.M

Category: Current Events

Topic: Economy and Health Care

What should the new administration do for you and the economy?

How do we fix the Health Care system?


Podcast live :

Guest Call-in-number: (646) 727 -3778

I invite you all to participate in the public forum and share your concerns, ideas and knowledge.

Your comments and thoughts are welcome in the political discourse.

Let us keep democracy alive and help our new President Barack Obama and Vice President Joe Biden in rebuilding our nation.

Look forward to the session.

Thank you.

Padmini Arhant

P.S. My apologies for not being able to schedule a convenient time on January 21, 2009. I am aiming to provide as much time as possible through whatever avenues available in getting us back on our feet.

Your participation is a huge encouragement and always appreciated – Thank you again.


October 7, 2008

The stock market performance particularly on October 6 and 7, 2008 is a strong indication of the lack of effective measures to address the problems that triggered the financial crisis and subsequently the economic meltdown. The tumbling of the stocks due to aggressive selling day after day is from panic and deep concern among investors across the globe.

The “Treasury” has secured the financial package for the “rescue” plan as an instant relief to the current crisis. However, in preparation to relieve the financial institutions from “bad debts” and “toxic assets”, it has failed to look beyond the “Corporate” horizon. The immediate priority is to lift the nation from the burgeoning “housing market” crisis i.e. “foreclosures” and provide relief to the “homeowners”.

The Congress must act now on bipartisan basis to implement “Moratorium” on the “foreclosures”, and vigorously re-enact the “Bankruptcy provision” to relieve homeowners across the nation. It should not be at the discretion of the financial institutions that are primarily responsible for the mortgage crisis to resolve on their own terms and conditions. As stated earlier, the “foreclosures” are the result of the multi-tiered structures in the financial and real estate industry engaging in unethical practices and reckless conduct with no oversight.

If the “rescue” package does not involve the solutions to the problems of the current economic and stock market turbulence, the entire effort by the Congress is futile. Therefore, it is necessary for government intervention to relieve all homeowners dealing with “foreclosures” and delinquency on their mortgage payments due to the sudden increase in interest rates initially offered as “teaser” rates on the subprime mortgage loans.

The urgent and direct focus on the “housing market” is the only prudent economic strategy available to revive the “housing sector”, one of the structural foundations of the economy. The consistent decline of “home values” is a major factor for the “economic stress” with a ripple effect on the entire financial and commercial sectors.

The “housing” and “energy” industry are fundamental components of the economic infrastructure. Hence, the rescue plan must address the “cause” of the current financial crisis i.e. the “foreclosures” besides facilitating financial liquidity in the commercial sector to stimulate economic growth and development. In terms of the economic stimulus package under consideration, the “energy” subsidies would highly benefit the economy and ease the burden on the “main street” anticipating high “energy” costs in winter.

The impending purchase of the mortgage-backed securities under the “rescue” plan must follow the guidelines to benefit the investor i.e. the taxpayers in both the short and long run. It is important to address effectively any concern by experts such as “The HOPE for Homeowners Act needs to pay less than 36.5 % of the face value of the subprime mortgage backed securities. If more is paid the government loses money in the long run and owners of the securities profit now” and any loopholes that might hamper the deal in the investor i.e. taxpayer’s favor must be eliminated as a safety measure.

The consensus on the legislation of the bill “HOPE” for The Homeowners Act, 2008 is promising and expected to provide relief to an estimated 400,000 families. It is important to follow through the process and ensure transformation of “HOPE” into reality for “homeowners” severely hit in the “housing” market crisis due to massive “foreclosures”.

“Congress” and the financial institutions could reverse the current stock market decline through diligence and prudent economic strategy combined with robust fiscal policy and financial measures to boost investor confidence. Meanwhile, domestic and foreign investors must restrain short selling in the wake of current crisis that is contributing to the pandemonium in the stock market.

The stock market turmoil will cease upon following all of the above measures with no further procrastination to protect the interests of all i.e. the “main street”, the “wall street” and the global market.

Thank you.

Padmini Arhant