"For the past several months we have been questioning ourselves on whether we could have done more," Lydia B. Parnes, the FTC's director of the Bureau of Consumer Protection told a panel of the Senate Commerce Committee today. She said staff is being shifted to help the agency devote more attention to the financial area.
The FTC doesn't regulate federally chartered banks that make mortgage loans, but it does regulate advertising and marketing by mortgage brokers and companies that advertise aid to borrowers.
Sen. Byron Dorgan, D-N.D., has offered legislation to expand the FTC's authority to the banking and telecommunications areas, give it new ability to issue fines and make it easier for the FTC to issue regulations. He complained today at the hearing that much of the-sub prime woes stem from regulators failure to regulate.
"Something is dreadfully wrong and nobody is here to fix it," he said. Mr. Dorgan's legislation would also increase the size of the FTC staff and give state attorneys general new authority to act on its behalf.
Ms. Parnes said that the FTC would welcome the additional authority, but noted that the agency has already stepped up its scrutiny of the financial services industry and has 12 investigations underway. "Deceptive mortgage advertising is an area where we are actively pursuing enforcement," she said.
Other senators, consumer groups and Connecticut Attorney General Richard Blumenthal also complained. Mr. Blumenthal said that federal regulators have not only failed to regulate but stepped in to prevent state regulators from acting.
Ira Rheingold, executive director of the National Association of Consumer Advocates, said the sub-prime market problems are an outgrowth of structural problems in which the incentive is to close loans, even ones that aren't viable. "What most people don't understand is how really screwed up the mortgage market really is," he said. "The incentives are completely perverse. It's a product of incredible greed."
Bill Himpler, exec VP of the American Financial Service Association, questioned whether the legislation went too far and would lead to FTC rules that weren't thoroughly vetted. He warned that having state attorneys general enforce FTC rules could lead to 50 different interpretations of what is permitted.