A group of U.S. democratic senators introduced legislation on Tuesday that would create a new financial regulatory agency to monitor firms offering financial services to consumers and prevent these firms from using predatory or deceptive business practices.

The proposed government agency, the Financial Product Safety Commission, would also help consumers make informed decisions regarding mortgages, credit cards, retirement accounts, and other types of financial products, Reuters reports (”U.S. Lawmakers Propose Financial Products Watchdog,” March 10, 2009).

“This will be a new regulator that will focus like a laser on financial products and financial products alone,” said Sen. Charles Schumer, D-N.Y., during a press conference Tuesday. “The Federal Reserve was supposed to do this, but they were asleep at the switch.”

Sen. Dick Durbin, D-Ill. argues a financial safety commission is needed because the nation’s current financial regulatory system has broken down and has “diminished consumer protections and eroded consumer confidence” (”Durbin’s Big Idea: Consumer Oriented Financial Product Safety Commission,” Chicago Sun-Times, March 10, 2009).

The safety commission would enforce the same types of consumer protections for financial products that are currently being enforced by the Food and Drug Administration for prescription drugs, by the Environmental Protection Agency for drinking water, and by the Consumer Product Safety Commission for children’s toys, Gannett reports. The agency would have rule-making authority but would coordinate enforcement with other federal regulators that oversee consumer financial products.

Elizabeth Warren, chairwoman of the congressional panel responsible for tracking the distribution of the Troubled Asset Relief Program’s $700 billion, first pushed for the creation of the financial safety commission two years ago. Had the banking and lending industry been forced to employ proper safeguards before the economic crisis, she says, the proliferation of excessively risky financial products that has contributed to the global economic meltdown would’ve been prevented.

“Consumer financial products were at the front end of the destabilization of the American system,” Warren said at a news conference. “When you have good safety standards, you have a floor, and the competition is then consumer-friendly competition.”

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