Twenty years ago this summer, Congress passed a law with the fine-sounding title of Financial Institutions Reform, Recovery and Enforcement Act of 1989. This was the federal government's answer to the savings and loan debacle, a law that would protect Americans from ever again having to suffer a sudden, devastating loss of assets because of regulatory failure.
Oh, well, back to the drawing board.
Amid today's Great Recession, President Barack Obama and his economic advisors have come up with yet another overhaul of the financial system. Like the 1989 law, it promises to protect future savers, investors and homeowners from being ripped off by greedy financial manipulators.
Let's get real. No law can offer an iron-clad guarantee against economic collapse. But clearly, better regulation might have saved millions of American households a lot of pain. Smarter regulation can make it harder for financial predators to succeed. That's why it's vitally important for Congress and Mr. Obama to get this right.
• The best part of the plan is the creation of a Consumer Financial Protection Agency that would limit or forbid many of the worst bank practices still allowed under law. That includes excessive and surprise overdraft fees and outrageous credit card interest rates. In retrospect, it's amazing that while there are a host of agencies to regulate Wall Street, investment banks, etc., no single agency has the primary task of looking out for the little guy. No reform will be complete if it does not create an agency tasked with protecting consumers from fraud and predatory lending practices.
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