Guest Blogger Arone Silverman

With the announcement of his plan for a new Consumer Financial Protection Agency (CFPA), President Obama was met with a lot of disapproval from the Federal Reserve. The Fed doesn’t want to see its powers delegated somewhere else even though they haven’t been very effective regulating the economy. The new agency would be the watchdog for consumers and supplant the Fed's authority to set rules for mortgages and credit cards.

Here is a smattering of what the good guys have to say:

From Caveat Emptor

If you buy a sports car, you are not likely to accept a station wagon when you go to pick up your new car. But that happens all the time with financial products, because most consumers would not know the difference between the paperwork for a teaser-rate mortgage with a balloon payment and the paperwork for a clean, 30-year fixed mortgage. The market does not work when good products are indistinguishable from bad ones. The CFPA will be able to do so.

Huff Post
"The financial industry is sharpening its knives, and the question is, will Congress be able to withstand a sustained assault?" asked Travis Plunkett, the legislative director of the Consumer Federation of America.

The BizJournal
If only someone in government had been looking out for consumers, the subprime mortgage mess might never have happened.

There are also many critics and many who oppose this type of agency.

From the "other guys":

Walletblog.com
We oppose the creation of the Consumer Financial Protection Agency, not just because it isn't needed but because it is actually dangerous to the economy.

The Wonk Room

Creating such a regulatory authority “is not a silver bullet for enhanced consumer protection,” said David Hirschmann, president of the Chamber’s Center for Capital Markets Competitiveness. “In fact, it may be a lead balloon.”

Last week, the Chamber rolled out a $100 million campaign to “defend and advance economic freedom.” The Chamber’s press office wouldn’t talk to me because it’s “not entertaining calls from bloggers at this time,” but I’d sure like to know if any of that $100 million is going towards lobbying against this new agency.

Banks “are really dumbfounded by the scope of this agency,” Edward L. Yingling, the president of the American Bankers Association, told The Times. “It’s not like the current regulators don’t have all the authority they need. You don’t have to blow up the system.”

Don’t have to blow up the system? You’re right Ed, the system already blew up. That’s why we need a better regulators whose job is to protect us. Who do the banks think caused the financial meltdown?

Elizabeth Warren, Chair of the Congressional Oversight Panel, argues that by helping consumers, the agency helps the economy.

“This crisis started one mortgage at a time,” said Ms. Warren, who, as the chairwoman of the Congressional panel that oversees government spending on the financial bailout, has the ear of many lawmakers. “The bad products that were sold household by household not only destabilized families. When they were sliced and diced and passed along through mortgage-backed securities, they magnified risk throughout the economy.”

The agency would most likely be harder on banks that push high-risk products, Ms. Warren told The Times. But it may benefit banks that offer more consumer-friendly products that are “lost in the storm of advertising” for riskier products, she said.

The banks are going to fight this proposal for a strong effective consumer watchdog agency. They’ve had too many chances to abuse consumers and now they don’t want to give it up. Ultimately, this agency will be able to reduce a lot of the risk that has pushed America out of our homes and into bankruptcy. This is better government, not more government. Do you think that banks need better regulation?

Find out more about the Consumer Financial Protection Agency