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New US consumer body needs broad mandate

Securities regulators are famous for fighting the last war and not paying enough attention to the newest financial products that Wall Street banks are pushing.

The Securities and Exchange Commission, for instance, was still doling out fines for mutual fund market timing — a 2003 offense — up until last year. Yet the regulator played ostrich as the banks kicked it into overdrive in churning out risky mortgage-backed securities.

That’s why the new Consumer Financial Protection Agency the Obama administration wants to create must have a broad mandate and not be narrowly focused on mortgage abuse. But disturbingly, too much of the early discussion surrounding the proposed agency appears focused mainly on stamping out past excesses in the mortgage market.

Now there’s no disputing the need for a regulator to force banks to write mortgage documents in plain English.