AUGUSTA, Maine — President Obama is scheduled to unveil his proposals to overhaul financial regulation this week, and members of Maine’s congressional delegation are watching closely, hoping for changes they believe are necessary.
“Reform is long overdue, long overdue,” said Sen. Olympia Snowe, R-Maine. “I have been urging stricter oversight and control of unregulated markets like derivatives.”
Derivatives are financial contracts, whose value is derived from the value of something else, such as a mortgage or stock.
“We know that the unregulated, unchecked instruments like derivatives gambled on mortgage-backed securities put us on the precipice of this economic crisis,” she said.
Snowe has sponsored or co-sponsored several bills that would require greater oversight of financial markets and require more disclosure of risky investments. She said the Obama proposals to reduce the number of oversight agencies and bolster the authority of the remaining agencies should be seriously considered.
“We need to be looking at all the options,” she said.
“You buy a toaster and you know it’s going to make toast,” said 1st District Rep. Chellie Pingree, D-Maine. “But you buy a credit card, and you’ve got to read 17 pages of small print and you don’t even know that you will get what you need in the end.”
She likes the idea of having one person as a “czar” to oversee all of the areas of financial regulation. Now the Federal Reserve, the Federal Deposit Insurance Corp., the Office of Thrift Supervision, the Comptroller of the Currency, the Securities and Exchange Commission and Commodity Futures Trading Commission all oversee and regulate different aspects of the financial market place. She said what is important for her is to improve oversight, whatever regulatory structure that may take.
“I think we have to think much more about consumers,” Pingree said. “If we had, we might not have had this mess.”
She said the president should use the broad public support for tougher regulation of finances to get a new system through Congress this year.
“We have done some work on credit cards, but it is just a start,” she said.
Sen. Susan Collins, R-Maine, was state commissioner of business and professional regulation during the administration of Gov. John McKernan. She believes it would be a mistake to pre-empt state banking oversight but agrees greater federal oversight is needed.
She has introduced legislation that would create a federal council to oversee all of the various agencies. She said there needs to be an agency charged with making sure another financial crisis, such as the one that triggered the current recession, does not happen.
“There was no one regulator that was responsible for identifying systemic risk,” she said, “We have had too many financial instruments that fell between the gaps and were not regulated by anyone. We can’t let that happen again.”
Second District Rep. Mike Michaud, D-Maine, said he agrees with the president that there needs to be improved oversight, but also agrees with Collins that pre-empting all state regulation of financial institutions would be a mistake.
“I served 22 years in the Maine Legislature,” he said. “States tend to be more proactive in these areas and come up with some of the best ideas for dealing with regulation of the industry.”
Michaud said a person with a complaint is more likely to get help from a state regulatory agency than from a huge federal bureaucracy. But, he said, greater financial oversight is needed at the federal level with so many banks and other financial institutions operating across state lines and national boundaries.
“I think we have to have the level of really strong regulation and oversight so we never get into this situation again,” he said.
Snowe acknowledged there likely would be some turf wars among committees in the Senate and the House over jurisdiction.
Some public sparring is already under way before details of the president’s proposal have been released. For example, one idea was to merge the Securities and Exchange Commission and the Commodity Futures Trading Commission. But different congressional committees have jurisdiction over those agencies and already have objected to the idea.
“We should be looking at all ideas to improve oversight,” Collins said. “We must not let the unregulated markets again threaten our economy.”