The document outlines key proposals and recommendations for financial regulatory reform contained in reports released by the Obama Administration in June and August 2009. It summarizes the causes of the financial crisis, including inadequate consumer and investor protections, insufficient oversight of financial firms, poor oversight of markets, and lack of mechanisms for resolving failed firms. The proposals aim to establish a new Consumer Financial Protection Agency, increase oversight of financial firms and markets, implement new rules for winding down failed firms, and enhance international coordination of standards. If enacted, the reforms are intended to protect consumers, investors, and taxpayers and prevent future crises.

1. Financial Regulatory Reform: A New Foundation The Time for Action & Overview of Recommendations October 14, 2009

3. Between last October and December alone, families lost $5 trillion in household wealth

4. Fighting financial panic has required the government to make substantial commitments of taxpayer money2

6. In August, the Administration sent detailed financial reform legislation to the Hill

7. The Administration’s proposal will:

8. Ensure that future mistakes by a few will not cause so much harm to so many

9. Increase financial stability for the system and for individual families and businesses

10. Protect the American economy and taxpayers3

12. Tomorrow the Committee will be marking up the bill to enact the Consumer Financial Protection Agency, one of the most important reforms4

14. Insufficient Supervision of Financial Firms

15. Poor Oversight of Important Markets

16. No Mechanism for Winding Down a Failed Financial Firm

17. Uncoordinated International Standards5

18. The Financial Reform Proposals Directly Address the Causes of the Crisis Reforms will Protect Consumers, Investors & Taxpayers Causes Inadequate consumer & investor protection Key Financial Reform Proposals Creation of a Consumer Financial Protection Agency Strengthened investor protection 6

19. Financial Reform Will Protect Consumers of Financial Products Overview Multiple regulators… One regulator for banks and non-banks… CFPA No federal supervisor for non-bank sector… Banks and non-banks 7

21. Eliminate abusive credit card practices

22. Protect consumers from deceptive mortgage lending8

26. Signing someone up for an expensive overdraft program without his or her consent

28. Give consumers a real choice as to whether or not to join costly overdraft programs

29. Create clear disclosures on the costs of payday loans and stop abusive practices10

31. The Financial Reform Proposals Directly Address the Causes of the Crisis Reform will Protect Consumers, Investors & Taxpayers Causes Key Financial Reform Proposals Insufficient supervision of financial firms Financial Services Oversight Council to oversee whole system One supervisor with final responsibility for all of the largest and most interconnected financial firms Stronger regulation of derivatives, securitization practices, and credit rating agencies Poor oversight of important markets 12

32. The Financial Reform Proposals Directly Address the Causes of the Crisis Reform will Protect Consumers, Investors & Taxpayers Causes Key Financial Reform Proposals No mechanism for winding down a failed financial firm Explicit resolution authority for all institutions that could threaten the financial system; taxpayers get their money back in the future Energetic international coordination to achieve stronger requirements across the board Uncoordinated international standards 13

33. What Financial Reform Means to Me? 14

34. New Consumer Protections Karen Cappuccio, Hellertown, PA Karen Cappuccio (age 31) is a Transportation Security Association supervisor at Lehigh Valley Airport. When she refinanced in November 2006, the broker promised her a low fixed rate loan but instead gave her two more expensive loans-a large adjustable rate first loan and a second smaller loan. Her lender altered her asset and income information. These techniques were often used by brokers to qualify borrowers for higher loan amounts than they could otherwise qualify for. The broker subjected her to a late-night closing and did not give her the closing documents at the time of closing. She sued and won a jury verdict for violations of Pennsylvania's Unfair Trade Practices Act. The CFPA would have the mandate to design clear and simple mortgage disclosures so that borrowers can know exactly what loans they are getting. The CFPA could also restrict coercive sales tactics. Clear Rules of the Road 15

35. New Consumer Protections Susan Chapman, Staten Island, NY Susan Chapman (age 52) had an excellent payment history until she was contacted by a mortgage broker who promised to lower her monthly payments by $400 by refinancing. Though she explicitly told him that she did not want an interest-only loan, she nonetheless received an Option ARM that has raised her principal balance by $20,000. The CFPA would have the mandate to require mortgage disclosures that are clear and simple and highlight key risks so people have the information they need to make sound financial decisions. The Agency could also require mortgage brokers take reasonable care with the advice they give and the loans they offer and for the lender make sure the borrower can afford the higher Option ARM payments when the loan starts paying down the increased principal balance. Clear Rules of the Road 16

36. New Consumer Protections Maxine Given, Baltimore, MD Maxine Given (age 44) was charged $148 in overdraft fees in April 2008. Most of the fees resulted from her bank's reordering of her withdrawals that took place on the same day from largest to smallest (instead of chronological order). The overdraft was caused by a mortgage check that the bank rejected the very next day. This caused a cascade of $37 overdraft fees on three purchases from the same day, including a $37 fee based on $12.08 debit charge for lunch. She even tried to transfer money from savings, but the transfer was counted too late. The CFPA would be able to give consumers a real choice as to whether to join expensive overdraft programs. Clear Rules of the Road 17

37. New Consumer Protections Patricia Nelson, Waukesha, WI Patricia Nelson (age 64) is a retired nursing home aid. Her only income is a $783 monthly disability check. In December 2007, because she had developed health problems, she borrowed $550 from payday lenders to pay to move closer to her daughters. She could barely afford the monthly interest payments and rolled the loans over 22 times. She had paid over $2,700 in interest and not one penny towards the principal when a "good Samaritan" paid off the loans. The CFPA would be able to design clear disclosures of the costs of payday loans and stop abusive payday practices. Clear Rules of the Road 18

39. It’s about restoring responsibility and accountability to our financial system and providing Americans with the confidence that there is a system in a place that works for and protects them – not just big banks, hedge funds and their lobbyists.19

42. We’ll strengthen oversight and aggressively pursue financial fraud, conflicts of interest and manipulation of the system that benefits the special interests at the expense of American families and business.

43. To make sure that no financial institution is ever capable of bringing down the economy, we’ll put in place tough new capital requirements, rigorous standards and supervision that protects the economy and American consumers, investors and businesses.21