Dodd Releases Revised Regulatory Reform Bill
Senate Banking Committee Chairman Chris Dodd (D-CT) released revised legislation this week to reform the financial system, but without the bipartisan agreement he had hoped to achieve. CFA applauded the decision to move forward which sets the stage for a mark-up of the bill next week.
In breaking off bipartisan negotiations, Chairman Dodd cited time constraints and the need to move forward if Congress is to succeed in passing legislation this year. The bill as introduced reflects many of the agreements reached as a result of those bipartisan negotiations, but did not go as far as Republicans on the Committee had wanted in weakening the proposed Consumer Financial Protection Agency.
Administration Releases Broadband Plan
The Federal Communications Commission delivered its National Broadband Plan to Congress this week, outlining “an ambitious agenda” that represents “a good starting point for responding to the challenge confronting the U.S. communications network,” according to a statement released by CFA Research Director Mark Cooper.
Foodborne Illness Victims Lobby for FDA Reform
Twenty families whose lives have been severely disrupted by foodborne illness came to Washington, D.C. in March to lobby Congress to pass comprehensive food safety legislation. The families, many of whom have lost loved ones to foodborne illness and others who are suffering the long-term complications of such illness, joined with members of the Make Our Food Safe Coalition to urge passage of S. 510, the FDA Food Safety Modernization Act.
While the families put a human face on the issue, the Make Our Food Safe Coalition, of which CFA is a member, issued a report on the economic costs of foodborne illness. More information on coalition activities and food safety issues is available here.
The bill, which would require FDA to develop a preventive approach to food safety, establish standards for reducing pathogen contamination, increase inspection frequency at food processing plants, and implement strategies to ensure the safety of food imports, has been stalled in the Senate after unanimously passing the Senate Health, Education, Labor and Pensions Committee last November. The House passed a companion bill last July.
“The Senate must pass S. 510 as soon as possible,” said Chris Waldrop, Director of CFA’s Food Policy Institute. “Other families should not have to go through the same terrible ordeal that these families have had to endure. It is past time for the Senate to act.”
Federal Housing Programs Undergo Adjustments
The Federal Housing Finance Agency has proposed new affordable housing goals for Fannie Mae and Freddie Mac in 2010, the first time such goals have been proposed since the companies were taken into conservatorship in September.
The proposal establishes new levels for both single family and multifamily housing investments and a new two-part test to determine if the companies are meeting the goals. The first prong of the test would measure their progress against the stated goals; the second would compare their performance to that of the primary mortgage market during the same period. This is meant to address situations in which the actual market conditions during a year may be significantly different from those assumed in setting the goal.
The comment period ends April 12.
In the meantime, congressional scrutiny of the mortgage finance companies is increasing, with the House Financial Services Committee scheduled to hold a hearing next week on the future of the secondary mortgage market featuring Treasury Secretary Timothy Geithner.
“Since Fannie Mae and Freddie Mac were forced into conservatorship in September 2008, the future of the secondary mortgage market has been open for a more robust discussion than at any time in several generations,” said Barry Zigas, CFA Director of Housing Policy. “Any future structure for housing finance must be able to insure a number of key policy objectives. These include continued access to affordable, long-term fixed-rate mortgages that consumers can prepay without cost; access to mortgage finance by all sectors of the economy and through lenders and credit unions of any size; standardization that will help lower costs for consumers; and the ability to spread innovation rapidly through the mortgage finance system. We hope the Administration will emphasize these important points in its testimony.”
In January, the Department of Housing and Urban Development made a number of significant changes in the FHA single family mortgage insurance programs, including increased insurance premiums and tighter underwriting standards, in an effort to improve its financial condition while maintaining the affordability of the program.
The agency increased the mortgage insurance premium charged when a loan is made from 2.175 percent of the loan amount to 2.25 percent, set the minimum down payment for an FHA loan at 3.5 percent and at 10 percent for borrowers with credit scores lower than 580, and reduced the level of allowable seller concessions from 6 percent to 3 percent. In addition, the agency announced it will seek legislation to enable it to vary the amount of the monthly mortgage insurance premium that can be charged, a number now set by law.
The changes are particularly significant given the leading role FHA is now playing in mortgage finance. Since the crisis, its share of new mortgage loans has jumped from about 3 percent to nearly 30 percent, as other, private mortgage insurers have been unwilling to provide low-cost coverage for low down payment mortgages.
“FHA remains a very important source of financing for consumers who cannot afford a large down payment to buy a home,” Zigas said. “It is critical that FHA’s financial condition remain strong so that it can continue to play a vital role. The announced changes are a prudent step and strike a good balance between some higher charges and updated and stronger protections from shoddy or unscrupulous lenders endangering the entire system.”
Organizations Promote Automatic Savings during America Saves Week
Hundreds of organizations from throughout the country participated during the last week of February in the fourth annual America Saves Week. Coordinated by CFA’s America Saves campaign and the American Savings Education Council (ASEC), the week focused particular attention on the need for and effectiveness of automatic savings plans.
CFA, the Financial Services Roundtable, and the Employee Benefit Research Institute released new data in February showing that most low- and moderate-income families don’t have emergency savings accounts. The groups announced a commitment to promote automatic saving.
Those efforts are particularly timely in light of new research which shows that the lingering recession has eroded savings practices. According to a survey released by America Saves and ASEC, the percentage of Americans with a savings plan that includes specific goals dropped from 62 percent in 2008 to 55 percent in 2010, while those that have a spending plan that includes saving declined from 49 percent to 46 percent, and those who save for retirement at work fell from 55 percent to 49 percent.
“These declining percentages may largely reflect job loss and other income reductions by some who now have more restricted savings options,” said Stephen Brobeck, executive director of the Consumer Federation of America and a founder of America Saves. “However, they don’t bode well for the financial future of many Americans.”
Congressional and Administration Leaders Address Consumer Assembly
Leading figures from the administration, Congress, states and consumer organizations addressed CFA’s annual Consumer Assembly last week on topics related to the theme “Challenges and Opportunities in a Year of Recession and Political Change.”
Administration officials addressing the conference included CPSC Chairman Inez Tenenbaum, Federal Trade Commission Chairman Jon Leibowitz, and Federal Housing Administration Commissioner David Stevens. Attendees also heard from leading congressional consumer supporters Sen. Jack Reed (D-RI) and Sen. Robert Menendez (D-NJ).
Other keynote speakers included: Illinois Attorney General Lisa Madigan, Norm Ornstein, Resident Scholar with the American Enterprise Institute for Public Policy Research, Scott Keeter, Director of Survey Research with the Pew Research Center, Stephen Labaton, former New York Times Senior Writer and Principal with Georgetown Policy Advisors, Consumers Union President Jim Guest, and Ira Reingold, Executive Director of the National Association of Consumer Advocates.