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Consumers need protection from Fed fix

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Scott Jagow: Treasury Secretary Paulson’s plan grabbed the headlines yesterday. We have some idea how his proposals might affect Wall Street, but what about Main Street? Jeremy Hobson takes a look.


Jeremy Hobson: When he announced the proposal, Treasury Secretary Henry Paulson said the ultimate beneficiaries wouldn’t be bankers and stock brokers,
but rather ordinary working Americans.

Peter Wallison: We’d like to believe that, but there isn’t very much evidence of that.

That’s Peter Wallison, a senior fellow at the American Enterprise Institute. He says while more efficient regulation could cut costs for financial institutions, consumers probably wouldn’t see the savings.

But, says Jared Bernstein at the Economic Policy Institute:

Jared Bernstein: You won’t really feel them in your life today or tomorrow, but if they work, they will help to prevent the very kind of downturn we’re facing right now.

In the short term, Bernstein says, it could become more difficult to obtain a mortgage, if the feds wrest control from state mortgage regulators.

Bernstein: That’s not necessarily a bad thing, because one of the fallouts of the current crisis is that a lot of folks got way in over their heads.

That’s one reason some critics of Paulson’s plan say stronger consumer protection — and not just rearranging the regulators — is what’s really needed.

In Washington, I’m Jeremy Hobson for Marketplace.

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