Financial Regulations Are Priority for Obama Administration | Prousalis & Papantonakis, P.C.

The same bill that would end the Home Valuation Code of Conduct within the next year would also increase regulations in the banking industry under the Consumer Financial Protection Agency outlined in the legislation. Backed by President Obama, who emphasized financial regulation as a domestic priority, the bill passed the House Financial Services Committee with a vote of 39-29, allowing it to move forward in the legislative process.

The vote shows there is legislative support for such reform, even as the banking industry continues to oppose it. President Obama made a statement directed at banks not interested in or complying with such reform saying, "They are doing what they always do - descending on Congress, using every bit of influence they have to maintain the status quo that has maximized their profits at the expense of American consumers, despite the fact that recently those same American consumers bailed them out as a consequence of the bad decisions that they made."

Many seem to share this opinion, asking for homeowner protection similar to the financial backup big corporations have received, such as government bailouts, in the midst of trying economic times.

Last month, Senator Chris Dodd, chairman of the Senate Banking Committee, proposed a bill that would include more financial regulations as part of a 1,136-page plan that centers on consolidating bank regulation. Dodd's bill would create an agency to assess the risks of large financial companies. This agency would have the power to write tougher capital standards and even break up companies that threatened the nation's financial stability.

Unlike the White House and House of Representatives plans that combine the four major federal supervisory agencies into three, the Senate bill combines all into one, merging the Office of the Comptroller, Office of Thrift Supervision, Federal Reserve, and Federal Deposit Insurance Cooperation into a new agency. The Federal Reserve and FDIC would ultimately lose the most control of supervising banking institutions.

The newly proposed agency would retain the fees it collects from Wall Street, which would allow for a larger budget and freedom from the constraints of Congressional funding. Leaders from both parties have sought this authority for decades, but Congress has never agreed.

Dodd's bill differs from the House and Obama administration plans, notably in the composition of the agency that regulates banks, but all parties seeking transformation in banking regulation agree that substantial change is necessary to advance the fight against predatory lending. By more closely guarding how major banks make loans for borrowers, the federal government hopes to prevent another cycle of adjustable-rate loans converting into loans with payments that consumers can't afford.

In a demonstration of just how strongly those hit hardest by the mortgage crisis feel about financial institutions, the attorneys general of several states are preparing suits against several major banks alleging fraudulent and deceptive business practices. Terry Goddard, Arizona's Attorney General along New York's Attorney General Andrew Cuomo, represent areas which saw some of the largest numbers of distressed properties in the aftermath of the housing market collapse. Both state they have tried working with banks but have grown tired of their excuses and high number of unsuccessful loan modifications. Both are currently refocusing their efforts to achieve justice for homeowners who have been victims of predatory lending.

Most recently, the Supreme Court ruled in a 5-4 decision that states could exercise their own supervision of major mortgage companies in their regions. This provides significant leverage previously unavailable to state attorneys general and goes against previous rulings by lower courts. With the prospect of consumer fraud litigation in the near future, states hit hardest by the real estate market collapse hope to reveal the truth about the creation and marketing of millions of bad loans and provide consumers with much-needed assistance.