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Advocate: Financial Reform Will Protect AZ Consumers

June 23, 2010

PHOENIX - Right now, there is no single federal agency looking out for the interests of financial product consumers. That will change, however, if Congress can agree on financial reform legislation. House and Senate negotiators are working this week to reconcile their different versions of financial reform into a single bill.

Gary Kalman, of the watchdog group U.S. PIRG, says combining oversight responsibilities, now scattered among several federal departments, into a single agency will benefit consumers.

"Arizonans can expect to see much better disclosure, so they know what they're getting themselves into when they go into a mortgage. They can expect more honesty and straightforward information about the products they're getting."

Kalman says financial reform will reduce the need for future federal bailouts by providing new oversight for the $600 trillion derivatives market, including requiring banks to keep more capital on deposit.

"People may not know, but they've heard of derivatives, which are these bets that Wall Street firms make in the trillions of dollars, and when they go south, it turns out that taxpayers are on the hook."

Kalman wants financial reform to re-create what he describes as the wall between commercial banking and investment banking that was dismantled in the 1990s.

"We don't want a single entity to be able to gamble with some money – if they lose, then take the deposits – and then turn to the taxpayers and get bailed out."

Wall Street bankers have been fighting financial reform, saying it will increase both costs and red tape. Kalman says Wall Street firms have spent $1 million dollars lobbying each member of Congress - more than a half-billion dollars in all - in attempts to weaken the final bill.

Doug Ramsey, Public News Service - AZ