So this new agency will change that, building on credit card reforms I signed into law a few weeks ago with the help of many of the members of Congress who are here today. This agency will have the power to set standards so that companies compete by offering innovative products that consumers actually want — and actually understand. Consumers will be provided information that is simple, transparent, and accurate. You’ll be able to compare products and see what’s best for you. The most unfair practices will be banned. Those ridiculous contracts with pages of fine print that no one can figure out — those things will be a thing of the past. And enforcement will be the rule, not the exception.
For example, this agency will be empowered to set new rules for home mortgage lending, so that the bad practices that led to the home mortgage crisis will be stamped out. Mortgage brokers will be held to higher standards. Exotic mortgages that hide exploding costs will no longer be the norm. Home mortgage disclosures will be reasonable, clearly written, and concise. And we’re going to level the playing field so that non-banks that offer home loans are held to the same standards as banks that offer similar services, so that lenders aren’t competing to lower standards, but rather are competing to meet a higher bar on behalf of consumers.
The mission of this new agency must also be reflected in the work we do throughout the government. There are other agencies, like the Federal Trade Commission, charged with protecting consumers, and we must ensure that those agencies have the resources and the state-of-the-art tools to stop unfair and deceptive practices as well.
Third, we’re proposing a series of changes designed to promote free and fair markets by closing gaps and overlaps in our regulatory system — including gaps that exist not just within but between nations.
We’ve seen that structural deficiencies allow some companies to shop for the regulator of their choice — and others, like hedge funds, to operate outside of the regulatory system altogether. We’ve seen the development of financial instruments, like many derivatives, that are so complex as to defy efforts to assess their actual value. And we’ve seen a system that allowed lenders to profit by providing loans to borrowers who would never repay, because the lender offloaded the loan and the consequences to somebody else.
And that’s why, as part of these reforms, we will dismantle the Office of Thrift Supervision and close loopholes that have allowed important institutions to cherry-pick among banking rules. We will offer only one federal banking charter, regulated by a strengthened federal supervisor. We’ll raise capital requirements for all depository institutions. Hedge fund advisors will be required to register with the SEC.
We’re also proposing comprehensive regulation of credit default swaps and other derivatives that have threatened the entire financial system. And we will require the originator of a loan to retain an economic interest in that loan, so that the lender — and not just the holder of a security, for example — has an interest in ensuring that a loan is actually paid back. By setting common-sense rules, these kinds of financial instruments can play a constructive, rather than destructive role.