Sun editorial:

Put focus on consumers

Congress should remember who was really hurt in the nation’s financial meltdown

Friday, May 22, 2009 | 2:09 a.m.

President Barack Obama’s administration is considering a plan to revamp oversight of the financial industry with a new emphasis on consumer protection.

The proposal is based on the recommendations of Elizabeth Warren, a Harvard Law professor. Warren, who leads a federal panel overseeing the Wall Street bailout, has called for the creation of an agency like the Consumer Product Safety Commission to be the government’s watchdog over consumer finance.

In a 2007 essay in Democracy magazine, Warren noted the irony of the way the federal government protects people: A man who buys a toaster with a credit card can be assured the toaster won’t catch fire, but he can’t be assured that the rates on the credit card won’t change, even if he abides by the terms of his agreement.

“Why are consumers safe when they purchase tangible consumer products with cash, but when they sign up for routine financial products like mortgages and credit cards they are left at the mercy of their creditors?” Warren wrote.

Good question. It has been only within the past few months that there has been serious discussion about turning some of the attention of financial regulation toward consumer protection. Bills introduced in Congress in late March would create a commission similar to the one Warren proposed, and key administration officials, including Treasury Secretary Timothy Geithner and Lawrence Summers, director of the National Economic Council, have met this week to discuss similar plans.

Upon learning of the administration’s discussions, critics have started lining up. Securities and Exchange Commission Chairwoman Mary Schapiro, fearing her agency would lose power, said the proposal would weaken investor protections. That is a premature conclusion. The plans are still being formed, but it is clear that Congress and the administration should consider Warren’s proposal.

Consumers have largely been lost in the aftermath of Wall Street’s meltdown, yet they are the ones who feel the most pain. Their protection should be at the heart of any new regulation.