According to an article in the Star-Telegram, moderate House Democrats are drafting a proposal that would shield big banks from potentially tougher state regulations of credit cards, mortgages and savings accounts.
The article said:
“…their proposal, spearheaded by Illinois Democratic Rep. Melissa Bean, isn’t sitting well with consumer advocates who say banks shouldn’t be allowed to skirt state regulations if the restrictions don’t suit them.”
Under the plan created by President Obama and Congressman Barney Frank, lenders would face credit card, mortgage and savings account regulations by both state and federal regulators. If the new proposal is passed, banks would only need to abide by the federal rules set by the new Consumer Financial Protection Agency. Under current law, state regulating bodies would have the power to impose even tougher rules regulating credit cards, mortgages and savings accounts.
Already the new legislation governing credit cards, mortgages and savings has been weakened. Congressman Frank as agreed to drop a requirement that would obligate every bank to offer customers “plain vanilla” – low-risk, standardized – products such as 30-year fixed-rate mortgages approved by the government. But the risky part about this weakening of the legislation is that it could be potentially creating loopholes for banks to recreate the foreclosure and credit crisis we’re trying to fight our way out of.