Obama Backs Financial Product Safety Commission Concept

President Barack Obama offered support for the idea behind the Financial Product Safety Commission during his conversation with Jay Leno Thursday night.

A bill to create the commission was announced in both chambers of Congress last week, backed by two of the top three Democrats in the Senate, Dick Durbin (Ill.) and Chuck Schumer. The House bill is cosponsored by Reps. Brad Miller (D-Calif.) and Bill Delahunt (D-Mass.).

The idea for the bill comes from Elizabeth Warren, who heads the commission overseeing the disbursement of bailout funds. A consumer who buys a toaster expects it to be reasonably safe, she argues, and the same should be true of financial products.

"As Elizabeth Warren, who came up with this idea, says, no one suggests that the buyer is to blame for a toaster that catches on fire or a toy for your child that is contaminated with lead," said Sen. Chris Dodd (D-Conn.) in a recent speech. "Should it be any different for the borrower who takes out a mortgage or signs up for a credit card?"

Obama used the same terms in making his case. "When you buy a toaster, if it explodes in your face, there's a law that says your toasters need to be safe. But when you get a credit card or a mortgage, there's no law on the books that says if that explodes in your face financially, somehow you're going to be protected. So this is the need for getting back to some common sense regulation," he said.

Schumer, in a statement to the Huffington Post, said he was pleased by Obama's remark.

"The lack of oversight of financial products has been a huge hole in the regulatory structure," he said. "We're glad President Obama sees it the same way."

UPDATE: Or is there a toaster law? Matt Shudtz isn't so sure.

But is there really a law that says your toasters must be safe? Well, not exactly. You are protected by the protection of last resort -- the right to sue in a civil court for damages if you are injured. But it shouldn't have to come to that; there should be some sort of protection enforced by government. Yet for thousands of consumer products -- including toasters -- the Consumer Product Safety Commission (CPSC) has not crafted a mandatory safety standard. The agency essentially relies on manufacturers to police themselves.