Hardening Views Brandished in Fight Over Consumer Agency
Wednesday, September 30, 2009; 5:34 PM
For nearly four hours Wednesday, supporters and opponents of a new federal agency that would oversee mortgages, credit cards and other consumer financial products gathered on Capitol Hill to dig their trenches a little deeper.
Nearly everyone involved in the current debate -- including lawmakers, banking lobbyists, consumer advocates and federal regulators -- agrees that protecting consumers from unfair and predatory practices is essential and that the agencies responsible for that role failed during the current financial crisis. But when it comes to how to fix the problem, Wednesday's hearing of the House Financial Services Committee offered a seminar on just how messy that process will be.
By now, the battle lines are well rehearsed and clearly drawn.
Those who back the Obama administration's proposal to create a Consumer Financial Protection Agency contend that a regulator focused solely on consumer issues would help curb the abusive and deceptive financial practices that helped fuel the current economic collapse. They say it would force companies to make clearer disclosures and to adhere to basic federal standards. Meanwhile, critics claim that a new agency would add another layer of federal bureaucracy, stifle financial innovations, curtail choices for consumers, limit access to credit and create additional costs that surely would be passed down to customers.
Both sides arrived at room 2128 in the Rayburn House Office Building on Wednesday to play their part. Representatives from the National Association for the Advancement of Colored People, the Center for Responsible Lending, the Service Employees International Union and the National Council of La Raza, an organization focused on reducing poverty and discrimination, for Hispanic Americans, spoke about the necessity of a new consumer agency. Later, officials representing the Independent Community Bankers of America, the U.S. Chamber of Commerce, the American Bankers Association and the American Financial Services Association continued their months-long assault on the administration's proposal, arguing that a standalone new regulator would actually harm, not help, both the businesses and ordinary Americans.
The committee members themselves expressed what seemed to be increasingly hardening opinions. In short, Democrats see it as a necessary, wise reform. Republicans see it as little more than a "flawed proposal" and a "striking expansion of the government's role," as ranking Republican Rep. Spencer Bachus (R-Ala.) put it.
Even so, committee chairman Rep. Barney Frank (D-Mass.), said he plans to move forward quickly with a bill to create the new regulator. He added that his committee likely would hold a "markup" -- a meeting in which lawmakers amend and usually vote on legislation -- the week of Oct. 12.
Frank, an unwavering supporter of the new agency, has signaled his willingness to compromise. He recently proposed key changes to the original outline for the agency in an effort to address criticism about its broad scope and to help reach consensus. In a revised draft copy of his CFPA bill, he offered to exclude some non-financial businesses, such as auto dealers and telecom companies. He also has backed down on an initial proposal that would have required firms to offer customers certain "plain vanilla" financial products approved by the government.
But that has done little to quell critics, as industry lobbyists, current regulators and fellow legislators have continued to oppose the new agency. At Wednesday's hearing, Rep. Jeb Hensarling (R-Tex.) said that reading Frank's revised bill brought to mind one of his favorite Led Zeppelin tunes: "The Song Remains the Same."
While those on opposite sides sparred inside the hearing room Wednesday, the fight away from Capitol Hill has remained just as intense and unrelenting. The Chamber of Commerce, which is spending millions of dollars to oppose the new agency, held a conference call immediately after Wednesday's hearing to further question aspects of Frank's proposal. On Tuesday, Americans for Financial Reform held its own call to bemoan how special interests have long had a "stranglehold over Congress" and how it is essential "that Main Street's voice is heard, and not just Wall Street's," said the group's director.
Meanwhile, former Federal Reserve Chairman Alan Greenspan said in a recent interview that the administration's plan to create a new consumer protection agency was "probably the right decision." And more than 70 law school professors from around the country, who teach in consumer and banking law, sent a letter this week supporting the new agency to both the House Financial Services and Senate Banking committees.
The polarizing debate over the CFPA is likely to intensify further as Frank pushes his bill toward a vote in the House, and as the Senate undertakes its own version of financial regulatory legislation.
Asked Tuesday whether President Obama worries that his vision for the new regulator is being picked apart on Capitol Hill, White House spokesman Robert Gibbs said, "The President believes that strongly and believes that at the end of the day, we'll have a strong consumer finance protection agency working on behalf of the American people."
And if the legislation that emerges isn't strong enough?
"The President," Gibbs said, "would not sign any bill that he thought was too weak."