Mishkin Says Fed Must Quit Consumer Protection

Surrendering Consumer Protection Powers

Summary: Frederic Mishkin said that the Fed must quit being a consumer protection regulator because the demands of these tasks are fundamentally different compared to systemic regulation. Moreover, they will be exposed to unwelcome political pressure.

In a major financial regulation shakeup, the White House wants the Fed to be systemic regulators while handling consumer protection powers for a new agency.

A Fed Board governor who will step down in August, Frederick Mishkin, said, “If Federal Reserve will be asked to become a systemic regulator, then it should give up its role as a regulator of consumer protection.” This will be his testimony to domestic monetary policy House subcommittee that will be delivered on Thursday. An advance copy of his remarks has just been made available. He further said, “Political pressure on systemic regulator just because politicians are not happy with its consumer regulator role may interfere with the independence of the Fed.”

The creation of a new consumer protection agency is opposed by other regulators, the financial industry, and even the Fed, who doesn’t want to give up its powers. Consumer advocates and politicians have criticized the Fed for not defending the consumers from predatory lending. These people say that because of this, there was a collapse of subprime mortgage sector at last year’s market meltdown.

There was perceived reluctance to regulate, and much of this is being blamed on Alan Greenspan, former Fed Chairman who retired in 2006. His replacement was Ben Bernanke, who told Congress that Fed has become more aggressive in the last two years although it has been slow to invoke its powers in consumer protection.

Mishkin Says Fed Must Quit Consumer Protection

Surrendering Consumer Protection Powers

Similar Articles

COMMENT

Recent Articles

Recent Business News

Popular News