The Obama administration is actively considering creation of a regulatory commission to protect consumers of financial products in an effort to crack down on some of the abuses that helped trigger the current financial crisis, according to administration and industry officials.
These officials said that the administration has been exploring such an approach in meetings over the past few days with executives of the financial services industry.
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There was also a discussion of the proposal at a dinner Tuesday night at the Treasury Department attended by Treasury Secretary Timothy Geithner and Lawrence Summers, director of the president’s National Economic Council.
An administration official who confirmed that the dinner had taken place said that no final decisions had been reached. The meeting was first reported by The Washington Post on its Web site.
However, an industry official said that the administration supported the concept that has already been introduced in legislation by several senators but may offer its own approach to the issue.
The officials who spoke Tuesday night did so on condition that their names not be used because the administration is not ready to unveil a proposal.
The proposals the administration is considering would centralize the enforcement of laws that protect consumers of financial products, such as credit cards, mortgages and mutual funds — an effort that currently is spread across a number of federal agencies.
A leading proponent of such an approach has been Harvard professor Elizabeth Warren, who is currently serving as the head of the Congressional Oversight Panel for the government’s $700 billion financial rescue effort.
Warren argued in a 2007 article that the government needed to do a better job of protecting homeowners who take out mortgages and consumers of other increasingly complex financial products.
Sens. Richard Durbin, D-Ill., Charles Schumer, D-N.Y., and Edward Kennedy, D-Mass., introduced legislation earlier this year that would create a commission like the one proposed by Warren.
Some industry groups have already expressed opposition to the plan.
The Financial Services Roundtable, which represents some of the biggest institutions in the country, has argued that it would be a mistake to separate the regulation of financial products from the regulators who oversee the institutions selling those products.
It was unclear whether the administration will propose creating a new federal agency to house the commission or placing the commission under an existing agency.
The proposal could set off a turf war among current federal agencies such as the Securities and Exchange Commission and the various bank regulatory agencies.
The administration is expected to unveil its proposal in the next few weeks as it pushes ahead with a sweeping effort to overhaul the government’s financial regulatory system.
Geithner has said that extensive changes are needed to make sure that the current financial crisis, the worst in seven decades, is never repeated.
Under the current system, regulation of financial products is split between a wide range of state and federal agencies, including the Federal Reserve, the SEC and the Federal Trade Commission.
Under one possible approach, some federal banking agencies might combined and some powers over consumer products might be consolidated into a new body.
The administration has already put forward some broad principles for financial regulatory overhaul, including creation of new powers to allow authorities to take over major financial institutions that represent a threat to the system.
