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Treasury Adviser:Small Institutions Should Back Consumer Agency

By Kristina Peterson, Of DOW JONES NEWSWIRES

WASHINGTON -(Dow Jones)- Senior U.S. Treasury Department adviser Gene Sperling urged small financial institutions on Friday to lobby louder in the current debate over establishing a consumer financial protection agency.

"The voices of those who represent the largest financial interests have not been shy and those who advocate for the smallest financial interests need to be just as non-shy," said Sperling, counselor to Treasury Secretary Timothy Geithner, at a Friday conference on the under-banked population.

On Thursday the House Financial Services Committee approved the creation of a new agency dedicated to protecting consumers from lax regulation and abusive practices. The banking industry, joined by the U.S. Chamber of Commerce, has vigorously opposed concentrating oversight in a new agency. Currently, regulation of banks and other financial institutions is spread across a broad swath of agencies including the U.S. Federal Reserve, the Federal Deposit Insurance Corp., the Office of Thrift and Supervision and others.

"This is a chance for the first time to have a federal regulatory agency where people wake up in the morning every day with one thing in mind – how to protect the financial interests of consumers and consumer products," Sperling said. "Let's not let this moment pass."

Sperling also trumpeted the administration's announcement this week that community development financial institutions will now be able to borrow money under the Troubled Asset Relief Fund. Previously the institutions could borrow money under the capital purchasing program at 5% financing for the first five years, after which the rate would jump to 9%. Now they will be able to borrow money at 2% financing for eight years, Sperling said. For the first time, credit unions will also be eligible, he said.

Sperling said the community institutions were more amenable to government oversight and cooperation than the private companies that have at times bristled at terms of their bailouts.

"In my nine months at Treasury, never was there a group of financial institutions willing to commit that for every dollar of capital they got, they would lend more, and be happy to be accountable for it than the community development financial institutions," he said.

Sperling also noted that the Treasury Department is open to incorporating innovative financial products and strategies. Already 600,000 people receive Social Security payments on prepaid debit cards and the administration is interested in expanding that population, he said.

- By Kristina Peterson, Dow Jones Newswires; 202-862-6619; Kristina.peterson@ dowjones.com

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  10-23-091406ET
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