Lawmaker pitches Consumer Financial Protection Agency counteroffer
Senate Banking Committee ranking member Richard Shelby, R-Ala., has made a counteroffer to a proposed Consumer Financial Protection Agency, calling for a new consumer protection division within the FDIC and with rules subject to approval by the agency's board.
The Shelby proposal would create a presidentially appointed director with a five-year term, with the authority to write consumer protection rules. It also would have supervision over all state-regulated depository institutions and some large state-chartered nondepository mortgage issuers. But the director would have to report to the FDIC chairman, and all rules would have to be approved by the FDIC board, which has the Comptroller of the Currency and the head of the Office of Thrift Supervision as two of its five members.
"This is a good-faith proposal, and we take it seriously," said Travis Plunkett, legislative director for the Consumer Federation of America. But he added the proposal still "gives far too much power to regulators who have failed to protect consumers."
Shelby also has offered up another proposal that would create a Financial Products Consumer Protection Council to issue consumer rules, even though a similar proposal was rejected in a House floor vote.
The Shelby proposal stands as a marker against one offered last week by Senate Banking Committee Chairman Christopher Dodd, D-Conn. Dodd unveiled his revised CFPA proposal in a bid to pick up support from Sen. Bob Corker, R-Tenn., who has been the primary GOP negotiator in talks. The two met this weekend to try to reach a compromise on the issue, which is bitterly opposed by the banking industry.
The issue is the biggest hurdle in an effort to move a bipartisan package that would revamp the nation's financial regulatory structure. Dodd originally proposed a stand-alone agency with rule-writing, inspection and enforcement powers over home mortgages, credit cards and other financial products. But his revised proposal would place a Bureau of Financial Protection inside the Treasury, giving it rule-writing powers. It would not have examination or enforcement authority for banks with less than $10 billion in assets. A bank regulator could appeal a BFP decision to a proposed systemic-risk council comprised of regulators that would be created under the reform package.
But Republicans, according to sources, have rejected the revised Dodd draft. On his left flank, the Dodd bid angered consumer activists who have been arguing for the retiring senator to hold firm in talks.
"We are for an independent agency that is strong with real teeth," said Heather Booth, executive director for Americans for Financial Reform, a group of consumer and labor activists.
But consumer groups said they were not drawing a line in the sand with the revised Dodd proposal. Instead, they ask that the original CFPA plan be offered an up-or-down vote, either in committee or the Senate floor.
"It's very troubling, and we are seeking to strengthen it. And if the Republicans reject it, we will look for votes on the floor if we have to. We will look for votes in the committee if we have to," said Ed Mierzwinski, consumer program director for U.S. Public Interest Research Group.
On another front, financial trade groups are concerned over talks on how far to strip the Federal Reserve's oversight over banks. Dodd had originally proposed that such supervision powers of the Fed and the FDIC be taken away, then backed off on the latter. But there were signs over the weekend that the Fed's powers could still be in danger, according to one source, even though panel member Sen. Evan Bayh, D-Ind., expressed his support last week for a robust central bank.
Banks argue that the Fed must maintain a supervisory role to help carry out in its monetary policy, especially during a financial crisis.