Since the New York Stock Exchange broke the 9,000 mark 10 days ago, the media has been displaying evidence that the economic bottom has been reached. Hardly a time for euphoria, but a welcome sign of more good news than bad. As most eyes focus on economic recovery, it is equally important that the focus remain on reforming lending practices and disclosures with regard to financial products.

Two weeks ago the Federal Reserve proposed a list of consumer protection regulations to better educate borrowers and, in the words of Fed Vice Chairman Donald Kohn, make them “more intelligent shoppers.”

As balance is sought between both protecting home-borrowers and providing financial options, the more fundamental question is what agency should be responsible for making the changes.

The fox-in-the-henhouse question has arisen since the Federal Reserve turned its back on lenders’ subprime loan practices — the initial domino in the path to recession. Even Fed Chief Ben Bernanke conceded the Fed “did not do all it should have at certain times in the past.” A better question would be, “What did they do?”

It is interesting that as the Fed is proposing new disclosures regarding conflicts of interest, as it may have conflict-of-interest and “dual agency” problems of their own. It seems a high wire task at best to oversee the banks that create loans and at the same time protect the borrowers who consume loans.

At the recent hearings, the Fed presented its late-to-the-game proposals to revamp lender practices. This effort is suspected by some to be more about keeping consumer protection under the agency’s umbrella than truly addressing borrower concerns.

Sen. Richard Shelby, R-Ala., expressed these concerns at this week’s hearing, stating, “It was the failure, I believe, of the Fed to adequately supervise” at the time of the country’s economic collapse.

With the Fed having taken little or no consumer protection actions between 1994 and 2008, President Obama and a number of Democrats are proposing to remove the consumer protection from the Fed and create a new agency responsible for evaluating all financial products.

Turf wars aside, the actions the Fed proposed for lenders seem reasonable and clearly long overdue. Among the changes are a one-page

Q-and-A explaining the risky features of a loan; streamlined, revised and more accurate cost disclosures; comparison rate charts for different loans; and barring the payment of side payments and steering by lenders.

Addressed specifically was the issue that borrowers receive the APR (annual percentage rate), defining the costs of their loan, too late in the process to shop and compare alternative offers.

As we emerge from the first major depression of this generation, it is important to seek a balance between providing adequate disclosure for would-be borrowers and maintaining legitimate financial options for them.

 Bogue is a real estate broker in Napa. He can be reached at 486-5511 or cbnapa@napanet.net.