Letter to Sen. Chambliss and Sen. Isakson on S. 3217

In Open Letter on May 10, 2010 at 1:09 AM

May 10, 2010

Senator Saxby Chambliss
416 Russell Senate Office Building
Washington, DC 20510

Senator Johnny Isakson
120 Russell Senate Office Building
Washington, DC 20510

Dear Senator Chambliss & Senator Isakson:

Please consider passage of any amendment and/or overall legislation regarding establishment of independent status for the proposed Consumer Financial Protection Agency (CFPA). Additionally, please consider passage of the assistive amendment and/or legislation creating the nationally-chartered, non-profit Financial Consumers’ Association (FCA).

Consumer protection groups and prominent individuals are recognizing the need for such remedial legislative action promoting a more strengthened, rules-based approach toward financial regulatory reform. For instance, organizations including U.S. Public Interest Research Groups (PIRG) and Common Cause have expressed the need for corrective individual protection-centered legislation steered in the public interest. Individual advocates have included the ranks of Clark Howard and Ralph Nader, both consumer advocates, encouraging corrective measures on the regional and national levels, respectively.

For further measure aimed at constraining Atlanta metropolitan housing bubbles that may arise in the future, Atlanta would benefit from any amendment and/or overall legislation that would look into requiring mortgage lending organizations to check prudential lending criterions – an effective “micro-prudential regulation” complement to “macro-prudential regulation” objectives, already being promoted by federal regulatory policy-makers. Citizens in Cobb County, for instance, have voiced disagreement with having to pay punitive tax levels as a result of living in houses they have lived in for many years just because people around them have decided to engage in “flip-that-house” arrangements during the current housing bubble; these same house-flipping actions, as encouraged by poor underwriting standards of mortgage lenders, directly end up driving up tax levels of surrounding residences through hyper-osmosis.

Enforcement and allocation of appropriate Federal Bureau of Investigation (FBI), Georgia Bureau of Investigation (GBI) and Department of Justice (DOJ) anti-mortgage fraud resources would additionally be particularly welcome in order to prevent repeat epidemics in the concentrated areas of Liar’s loans originations and so-called NINJA credit advances having been advanced over this most recent time period.

Re-interpretation of GSE-organizational status, i.e., promotion of the national home ownership rate through secondary-housing market securitization, and GSE-conservatorship-status, i.e., government subsidization of GSE controlled ownership and livelihood, ought additionally be considered concerning any amendment and/or overall legislation proposed within S. 3217 — example, being that proposed by Sen. John McCain (AZ) currently.

In additional respect regarding enforcement and, in particular, accountability, please consider passage of any amendment and/or overall legislation that would assign requirement for the Board of Governors of the Federal Reserve to appoint a Governor responsible for Supervision and Regulation of regulated entities under purview of Federal Reserve examination authority – former Federal Reserve Chair Paul Volcker’s recommendation.

Regarding primary broker-dealers, securitization and credit ratings agency status as relates to growth in securitized bond markets, please also consider passage of any amendment and/or overall legislation providing establishment of federal inquiry into setting rules-based measurement and monitorization of conflict of interest relationships pertaining to Moody’s, Fitch and S&P, financial reporting period-ending repurchase agreement transactions, e.g., the Repo 105-variety accounting arrangement popularized by Lehman Brothers, and fiduciary responsibilities pertaining to structured securities underwriting relationships.

Lastly, please consider passage of any amendment and/or overall legislation providing for implementation or public inquiry of the so-called “net capital rule” regarding leverage requirements for broker-dealer entities – former Securities and Exchange Commission (SEC) Director Lee Pickard’s recommendation.

Establishment of an independent, government-appointed organization with mixed composition of academic and professional financial experts in charge of surveying financial market concentrations and best/worst practices in the world of personal and institutional finance would provide a broad prudentially diffusive organization facilitating public interest and systemic risk curtailment. For example, financial firm growth restrictions policy and/or outright product constriction limitations of profit-seeking opportunities in the life settlements securitizations market and capital contingent convertible bonds, i.e., “CoCo” bonds, market represent risk landscapes that could be more thoroughly explored and considered by such an organization.

Regarding welfare/utility analyses, financial firm concentration testing and stress-testing quantification of off-balance sheet associations and their potential impacts on publicly-regulated entities and their balance sheets provide two additionally important subjects that would benefit from the fruition of such an independently-structured organization. Adoption of Federal Deposit Insurance Corporation (FDIC)-variety disclosure of query-enabled balance sheet and financial institution call report informational data from all examiner-involved financial regulatory organizations would be helpful in diffusing information more symmetrically to the public.


James Breedlove


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