03/18/2010 05:12 am ET Updated May 25, 2011

A Consumer Financial Protection Agency, Or Jiminy Cricket?

When it comes to the stuff inside our houses like the TV or the jewelry, having public protection against thieves is a no-brainer. No one suggests that we don't need laws against stealing, and that it should just be left to individual conscience. But when it comes to stealing the whole house, that's exactly what some people seem to think.

Take some recent comments by Edward Yingling, president and CEO of the American Bankers Association, whose members represent more than 95 percent of the industry's $13.3 trillion in assets. At an Aspen Institute forum, he said it was unnecessary to have laws that prevent lenders from offering consumers mortgage products that are totally unsuitable for them. Rather, like Pinocchio's friend Jiminy Cricket, he seemed to say they must let their conscience be their guide.

Unfortunately, Jiminy Cricket has been conspicuously absent from the shoulders of the lenders who helped caused the Great Recession. Jiminy was decidedly AWOL when it came to lending to people of color. It is now well-known that people of color -- including African-Americans, Latinos, Native Americans and Asians -- were roughly three times more likely to get steered to a subprime loan, even when they were qualified for a prime, low-risk one.

It's important that consumers have the option of a "plain vanilla" product, such as the 30-year, fixed-interest mortgage, an old standby that everyone can understand and trust. Unfortunately, of the legislation now on Capitol Hill to increase financial regulation, only the president's reform plan would require the offering of such a basic product. Without it, consumers, at their peril, must try to fathom the fancy new financial products whose fine print, a recent test showed, stumped even Harvard Law School students.

While good for everyone, a government approved plain vanilla product is particularly important to those whose entire neighborhoods were stolen through obfuscation and trickery by an industry that has been especially prone to ignoring Jiminy when it comes to communities of color.

And that's why we need a strong Consumer Financial Protection Agency to replace the Rube Goldberg financial regulatory machinery that failed to protect consumers from the explosion of financial chicanery that has devastated families, communities and the national economy. Senate Banking Committee Chairman Christopher Dodd, in his recently proposed reform legislation, is right to ask that a new CFPA create a database to collect data and track complaints. Experts on the economy from communities of color gathered by the Insight Center for Community Economic Development have submitted additional language recommending that the data be broken out by race and ethnicity. This data would be an early warning system that can help prevent the discriminatory practices that escalated earlier in this decade. They suggest that including representatives of traditionally underserved communities on the Consumer Advisory Board would provide further safeguards against unfair financial marketing practices.