Obama Backs Financial Product Safety Commission Concept

President Barack Obama offered support for the idea behind the Financial Product Safety Commission during his conversation with Jay Leno Thursday night.

A bill to create the commission was announced in both chambers of Congress last week, backed by two of the top three Democrats in the Senate, Dick Durbin (Ill.) and Chuck Schumer. The House bill is cosponsored by Reps. Brad Miller (D-Calif.) and Bill Delahunt (D-Mass.).

The idea for the bill comes from Elizabeth Warren, who heads the commission overseeing the disbursement of bailout funds. A consumer who buys a toaster expects it to be reasonably safe, she argues, and the same should be true of financial products.

"As Elizabeth Warren, who came up with this idea, says, no one suggests that the buyer is to blame for a toaster that catches on fire or a toy for your child that is contaminated with lead," said Sen. Chris Dodd (D-Conn.) in a recent speech. "Should it be any different for the borrower who takes out a mortgage or signs up for a credit card?"

Obama used the same terms in making his case. "When you buy a toaster, if it explodes in your face, there's a law that says your toasters need to be safe. But when you get a credit card or a mortgage, there's no law on the books that says if that explodes in your face financially, somehow you're going to be protected. So this is the need for getting back to some common sense regulation," he said.

Schumer, in a statement to the Huffington Post, said he was pleased by Obama's remark.

"The lack of oversight of financial products has been a huge hole in the regulatory structure," he said. "We're glad President Obama sees it the same way."

UPDATE: Or is there a toaster law? Matt Shudtz isn't so sure.

But is there really a law that says your toasters must be safe? Well, not exactly. You are protected by the protection of last resort -- the right to sue in a civil court for damages if you are injured. But it shouldn't have to come to that; there should be some sort of protection enforced by government. Yet for thousands of consumer products -- including toasters -- the Consumer Product Safety Commission (CPSC) has not crafted a mandatory safety standard. The agency essentially relies on manufacturers to police themselves.

Comments

[Truby]

02:20 AM on 03/22/2009

Oversight will not be all that effective in a industry of cash, unless we think that people are not greedy and can withstand the temptation to profit by or turn a blind eye to or accept donations from.......

Reform the campaign finance laws to preclude direct donations from these corporations (limit donations to voter eligible taxpayers) will help reduce the influence that resulted in this situation in the first place. More laws, rules and regulations are not necessarily the answer. The U.S. Constitution begins with "We the people" not we the corporations, point being that our government is for the people not the corporations and by allowing these large donors to effectively control our election process, we are usurping the Constitution.

Reform is needed, to our campaign finance laws.

[freedomitchy]

03:07 PM on 03/21/2009

So completely ignorant. This will cause far more trouble by effectively having the government guarantee financial investments making investors willing to do less investigation of investments, take more risks and then expect the public to cover their losses. Brilliant, backing investments and covering investment losses, bailouts by the government have worked terribly and helped to make the mess more gigantic.

[dsws]

01:57 AM on 03/22/2009

I see absolutely no suggestion that this would involve having the public cover any losses. It's not the government that pays if your toaster is subject to a recall: it's the manufacturer of the faulty toaster. The public covers losses when there's excessive systemic risk. This has nothing to do with that.

The claim about investors investigating whether they're being defrauded is also unconvincing. Investors would be better able to do their due diligence if there were a central source of information about past history of deceptive or otherwise problematic practices.

[DrToketee]

12:41 PM on 03/21/2009

The toaster analogy is not all that reassuring ... my 401K is already toast.

[freedomitchy]

05:55 PM on 03/21/2009

The toaster analogy indicates Obama fails to understand the real problem, moral hazard.

[eden4barack08]

04:41 PM on 03/20/2009

Thank you for highlighting this Ryan. The President said some great and important things yesterday, yet the masses are concentrating on minor gaffes and Geithner.

[kanester]

04:34 PM on 03/20/2009

That's about the tenth financially sound, smart idea I've heard from Elizabeth Warren today alone.

DRAFT ELIZABETH WARREN for SEC of TREASURY!

[waverly]

02:00 PM on 03/20/2009

Do 401K's fall under those financial products?

They had best restructure retirement savings to protect the saver. I suggest getting the retirement plans off of Wall Street. It should not be placed in risk products. Plus, with the millions of dollars pouring into the 401K plans to purchase stocks, the stock prices soar to unsustainable heights creating the bubbles in the market, tempting investors to play with the money as if it were their own and tempting CEOs to reward themselves with excessive salary options.

Investors should be in the market, not savers.

[YankinCanada]

03:26 PM on 03/20/2009

agreed