In recent years, as lawmakers worked to drastically overhaul the financial protections afforded to consumers when they deal with banks, some have been vocal in their opposition to these reforms, saying they are damaging to business and therefore bad for the economy.
However, U.S. Secretary of the Treasury Timothy Geithner recently issued a statement in which he said that those who oppose financial reform would likely do more damage to the economy than good. In recent weeks, this has become one of the focuses in the hotly-contested race to become the Republican nominee for president, with several candidates saying they would repeal the Dodd-Frank Wall Street Reform and Consumer Protection Act.
But Geithner notes that because many lawmakers are now writing rules and regulations for the financial industry within the framework of the existing bill, repealing it entirely, or even reversing some aspects of it, might cause significant economic problems for both consumers and businesses alike because of the amount of uncertainty it would create across the board.
“The direction of reform is clear, and as we finalize the remaining elements, we will be able to provide businesses, investors, and consumers with more clarity and certainty,” Geithner said. “Those who are still working to delay and weaken reforms will only increase uncertainty and damage our efforts to get the rest of the world to adopt a level playing field.”
Geithner also praised the work of the new federal Consumer Financial Protection Bureau, which itself has come under significant fire from Republicans, but which he says is making strides in improving disclosures between lenders and consumers. In addition, many consumers are already working with the agency to settle disputes with financial institutions as they relate to mortgages or credit cards. Geithner believes the new authorities granted to the government as a result of the CFPB’s existence will benefit consumers going forward.
He also pointed to signs that at least some aspects of the reform are actually helping to promote business. For example, he noted that banks participating in the Small Business Lending Fund have increased lending to smaller, private companies by $3.5 billion in the last several months, up 10 percent from baseline levels.
The CFPB has been operating with full regulatory power since July, and has worked to develop disclosure forms for mortgage and credit card lending agreements that are easier for consumers to understand.