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September 27th, 2009

“Plain Vanilla” Products Have Melted



In an attempt to garner greater Democratic support, the Obama Administration has proposed some significant changes to their pending financial legislation. What began as a “sweeping” financial reform is quickly turning into a more narrowly-focused bill.

In what the Wall Street Journal classified as a “softening” of the bill, the proposed changes could eliminate some of the reform’s more prominent, yet high-criticized features:

House Financial Services Committee Chairman Barney Frank (D., Mass.) told lawmakers the plan would no longer require banks to offer customers “plain vanilla” versions of products such as mortgages and credit cards, one of the more populist components of the White House’s proposal that had become a lightening rod of criticism from conservative Democrats, Republicans and business groups.

He also said he would limit the types of companies that could face scrutiny by a proposed Consumer Financial Protection Agency [CFPA] by excluding real-estate brokers, accountants, retailers and others that aren’t banks or financial-services companies. Rep. Frank said he felt that in some areas the White House had “overdrafted” the bill.

Despite the regressions, the Journal reports that “many lawmakers” still wish to see the CFPA “scrapped or further limited.”

Questions, Concerns

Since the financial bill is still in its infancy stages — last week we reported that House Financial Services Committee Chairman Barney Frank said the bill wouldn’t likely begin to receive earnest debate until at least mid-October — a host of questions and uncertainties remain (to see just some of them, be sure to read “Proposed financial protection agency has friends and foes,” an article from The Hill).

Will states be able to interpret and/or enforce consumer-protection laws on their own?

What will the Federal Reserve’s role be — will they be the new banking regulator?

According to Mr. Frank this week (as reported in the Journal), debate of the reform will begin on the House floor in November.

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HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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