In her first major speech as a member of the Obama administration, middle-class advocate Elizabeth Warren reached out to the heads of the nation's biggest financial institutions, borrowing one of their ideas in an effort to usher in a cooperative relationship that could protect consumers as well as foster competitive markets.

Warren, a champion of consumers and a darling of progressives, spoke to a gathering of executives Wednesday whose companies form the Financial Services Roundtable, a Washington trade group representing firms like Bank of America, JPMorgan Chase, BlackRock and State Farm.

The speech, filled with references to Warren's upbringing in Oklahoma and her vigorous advocacy on behalf of families, didn't shy away from reminding lenders that their core constituency -- their customers -- are fed up with the pages of fine print and hidden fees that are often forced upon them.

But Warren also asked the lenders to work with her to create a new system of regulation designed to protect consumers -- one that relies on lenders to be proactive when offering products, rather than reactive when it comes to complying with regulation.

The Harvard Law professor, who now works for Obama and Treasury Secretary Timothy Geithner, acknowledged the burden excessive regulation places on lenders, however. She offered lenders a chance at their long-held regulatory dream: an approach focused on core principles instead of a mountain of specific rules.

"Instead of creating a regulatory thicket of 'thou shalt nots,' and instead of using ever-more-complex disclosures that drive up costs for lenders and provide little help for consumers, let's measure our success with simple questions," Warren said in her prepared remarks. "Instead of layering on regulations that don't fully protect consumers, a better approach would focus on how to give consumers the power to make the right choices for their families -- and, at the same time, to ease the regulatory burden for the lenders."

The approach was at the top of the Roundtable's agenda when former Treasury Secretary Hank Paulson tried to reform financial regulation beginning in 2007. In a Nov. 7 presentation that year, the Roundtable offered this method of regulation as their preferred approach to redesigning the way in which they are overseen.

"At its core, this is a pretty simple idea that builds on the basic principles your industry laid down through this group," Warren told the assembled executives. Referencing what may be at the top of her agenda -- reforming credit card agreements -- Warren said that she was "here with all of you tonight because I want to be part of a discussion about how we can make the idea of a short, easy-to-read agreement a reality."

The idea of a principles-based approach, which is one that calls for companies to comply with basic principles rather than a multitude of specific and sometimes-outdated rules, was espoused by the Bush administration and the financial lobby.

During its 2007 presentation, the Roundtable listed as its top guiding principle "fair treatment for consumers." Warren reminded them of that on Wednesday.

"The principle is easy," she explained. "Just as you said, customers should be able to understand the deal, assess the costs and risks, and compare one [credit] card to another."

Referencing their "remarkable chance," Warren said they could "rethink our approach to regulating financial services" and "seize the opportunity to do something unexpected -- and exceptional."

For an ardent consumer champion long critical of the financial services industry and its love of "tricks and traps," the regulatory sea change from rules to principles would indeed be unexpected.

When it comes to credit-card agreements, Warren said the early feedback she's received from credit-card issuers "suggests that industry is eager for simplification too."

"Some bankers have told me that a simple contract is exactly what they want too," Warren said. "I believe there are people in this room who are ready to run with this idea."

But the move to a principles-based regime won't be easy. The U.S. has long focused on forcing financial firms to comply with specific rules, be it in banking or securities. The result has been an endless stream of disclosures designed at least in part to protect firms from litigation. But the effect has been endless confusion. Changing that culture will take time.

Also, a principles-based approach isn't guaranteed to be effective.

The chief executive of Britain's financial regulator, Hector Sants of the Financial Services Authority, said in a March 2009 speech that "the limitations of a pure principles-based regime have to be recognized."

Sants went on to warn bankers of a more "intrusive and direct style of supervision" than they had been used to.

"I continue to believe the majority of market participants are decent people," Sants said. "However, a principles-based approach does not work with individuals who have no principles."

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