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Mounting Opposition to Obama’s Consumer Finance Regulator

It was already discussed in our previous two posts, “Fed Tasked to Oversee Systematic Risks in the Financial Industry” and “Arguments over the Fed’s Additional Powers” that there were a lot of oppositions to Obama’s consumer finance regulation plans. However, it seems that it wasn’t the end of the story. Faced with massive opposition already, the proposal to bring all consumer financial-related products under one regulator became further unpopular.

Aside from the frown it received from Congress, the nation’s biggest banks are also lobbying to hinder the Consumer Financial Protection Agency (CFPA) from being created. And if this agency is established, then the financial industry wants its sweeping powers removed. Some of their most notable concerns include the regulator’s ability to force banks and brokers to offer simplified credit cards, mortgages, and exotic products.

Contrary to certain perceptions though, Obama’s proposal does not include setting prices on these financial products. It merely wants the agency to have enough teeth to prevent banks from “mis-selling” their offers. Nevertheless, Chris Stinebert, the president of the American Financial Services Association that the proposal will “yield little in the way of consumer protection and much in the way of increased costs for consumers”.

Democrats and Republicans alike have voiced their reservations about the CFPA as well. Republicans, in particular, have said that the industry does not need more bureaucracy. It was also concerned that the Federal Trade Commission might be stripped off its current authority. Other agencies will be stripped off its powers as well if the CFPA pushes through.

But Obama’s consumer protection plan is not without its supporters. For example, those who see the gaps and overlaps between regulators praise it because the agency has sweeping powers. Consumer protection is just a single aspect of the reforms planned for the financial industry.

Sites That Give Weekly Banking Deals

Everyone is looking for the best banking deals these days. They want to get value for their money and rewards for their patronage. Realizing this, financial institutions from around the country are giving incentives to attract customers. Everything from free $100 to free barbeque grills are being used as a lure so that new clients will open up various accounts with the banking institutions.

So how can you take advantage of these bank deals? Fortunately, there are a lot of blogs that points you to the right direction. It is difficult to research each and every bank to find out what they offer. The blogs listed below does the dirty work for you. All you need to do is visit to get the best banking deals in your area:

Banking Guy @ Bank Deals outlined the rates of various market money accounts, certificate of deposit, and checking accounts throughout the country. This will help the depositor determine which bank they should consider opening an account at. This week’s blog post “Bank Deals Weekly Summary for July 4, 2009” was very comprehensive. It will undoubtedly help consumers who have saved up some money and want high interest yields on them.

My Bank Tracker has a section for bank deals. One notably entry for this week was the post entitled “Irwin Union Bank is Giving Away Free HDTV and HD Camcorders”. The offer is quite unique because most banks usually just give away bags, grills, or toasters. Irwin Union Bank rewards its depositors to a whole new level.

Banking Deals recently uploaded a blog post titled, “Chase Sapphire Preferred Credit Card $250 Gift Card Bonus”. Essentially, the entry provided the full details of the requirements, features, and benefits people can expect when they sign up for the Chase Sapphire Preferred Credit Card. There are many other bank deals available throughout the site.

But while opening an account with banks nowadays have never been more attractive, it is also important to take note that it has never been more risky either. The financial industry is still not as stable as before. Depositors should choose their banks wisely to avoid heartaches later on.

Citigroup Japan: Does It Provide a Glimpse of its Worldwide Strategy?

On Friday, the regulator of Citigroup Japan ordered the bank to suspend sales activities for one month. Its retail business division cannot conduct any activity from July 15 to August 14, 2009 because it claimed that Citigroup is not doing its part in curbing money laundering. This is not the first time the banking giant encountered problems in Japan. Prior problems are mostly related to Citi’s incapability to monitor money laundering activity.

One significant event occurred in 2004 when former Chief Executive Charles Prince had bowed for seven seconds in contrition for the bank’s failures. Citigroup has also experienced legislative backlash for its high interest rates. In 2006, lawmakers passed a legislative change that caps the amount of interest rates banks can charge. From almost 30%, the amount of interest that can be charged is now capped at 18%.

It was triggered to some extent, by the number of suicides that occurred in the country because of debt problems. The same legislation permitted consumers to get refund claims from financing institutions. Citigroup shrank its CitiFinancial operations which included unsecured loans and auto loans.

Profits from Japan have always been volatile. During the first quarter of 2009, Citi’s consumer finance unit suffered from a $36 million loss though this is actually an improvement from the $86 million in losses it generated the previous year. Overall revenue fell to $162 million. In Asia including Japan, Citigroup’s earnings totaled $1.6 billion during the first quarter.
The suspension that will be imposed on Citibank might only last one month, but the occurrence of legal problems again and again is hurting the bank. Citigroup Inc. is still trying to recover from the US financial crisis that forced it to accept government bailout. The company is still stressing that its competitive advantage lies in its global presence. Asia is still promising to the banking giant despite its current troubles. Other US banks have minimal presence in the area.

So, how does the Japan market relate to the US market? In some ways, Japan provides a glimpse of what Citigroup wants itself to become. Ridding non-core business operations such as consumer finance and brokerage; instead becoming more like a traditional banking institution.

Financial Reforms: What It Means to the Banking Industry

A proposal for a complete regulatory overhaul is expected to be revealed this Wednesday and the Obama administration is expecting stiff resistance to certain aspects of the proposal from banking companies. Almost all areas related to banking operations will be touched by the proposed legislation; ranging from how consumers are charged on credit card debts to how exotic financial instruments are packaged.

The outcome of Obama’s proposed financial reorganization will have a large impact on how banks operate in the future. Varying interest on different segments of the economy, from business to consumers to the government needs to be ironed out. Talks about regulatory problems will likely dominate the discussions in Capitol Hill for the succeeding months.

At the center of the regulatory plan is the “white paper” as it is referred to by the administration. In essence, it aims to provide the Federal Reserve more oversight power when it comes to dealing with the largest players. The government wants the Fed to gain the authority to break-up important companies – similar to how FDIC operates failed banks – once it becomes a threat to the overall economy. In addition, the Obama administration also wants to create a new watchdog that will scrutinize consumer products more thoroughly.

Certain lawmakers want to consolidate power to a single regulatory agency but the president does not intend to pursue this route. Instead, the administration will allow several agencies to continue their operations. In fact, the only agency that will be abolished is the Office of Thrift Supervision. If the proposed consumer agency pushes through, the number of oversight institutions in the financial industry will remain the same.

Treasury Secretary Timothy Geithner is scheduled to appear before the Senate and House panels. Many expect him to be criticized and called to answer how regulators can create a process that will not simply bailout finance companies on the brink of collapse. Lawmakers also want more responsibility on the part of the banks. The issue of giving more authority to the Federal Reserve will also be a thorny issue given its past failures and culture of secrecy.