Sen. Dodd may drop push for consumer financial protection agency
Saturday, January 16, 2010
Senate banking committee Chairman Sen. Christopher J. Dodd (D-Conn.) has discussed jettisoning plans for a standalone Consumer Financial Protection Agency, as part of an effort to secure bipartisan support for legislation to reform financial regulation, said people familiar with the matter.
One possibility raised during recent talks between Dodd's staff and Republican counterparts would be to assign new consumer protection powers to another agency. Such a compromise might offer an opportunity for Dodd to preserve the goal of expanding safeguards while appeasing Republicans who have chafed at any suggestion of a new agency.
"If there's a bipartisan deal, that's likely how it's going to come out," said one Democratic aide, who was not authorized to speak on the record about the discussions.
President Obama proposed last June the creation of an agency to protect consumers against abuses in mortgages, credit cards and other forms of lending.
People on both sides have said the negotiations remain in the early stages. Though Dodd and the committee's ranking Republican, Sen. Richard C. Shelby (R-Ala.), said in December that they hoped to reach a deal on a broader package of financial reforms by the time the Senate reconvened in January, no final agreement is in sight, the sources said.
If Dodd abandoned a standalone consumer agency, this would mark a departure from the Obama administration's blueprint. He already has proposed stripping the Federal Reserve of all regulatory responsibilities, rejecting an administration proposal to expand the Fed's role. Such a concession on consumer protection also would differ from a bill passed recently by the House, which included the creation of a consumer regulator.
But Dodd, who announced this month he would not seek re-election in the fall, is eager to complete a bill and leave a lasting stamp on a landmark piece of financial regulation. A compromise on consumer protection might increase the chances of passing a sweeping reform package -- which includes measures to oversee financial derivatives, instill safeguards against systemic risks and streamline banking regulation -- before the election campaign heats up ahead of congressional polls in November.
It's not clear how dropping the idea of a separate agency would eliminate the differences between the two sides. The fundamental goal of consumer advocates is to separate consumer protection from banking regulation, giving consumer regulators autonomy to write and enforce laws even over the objection of banking regulators. The industry, conversely, wants banking regulators to retain both responsibilities. If the Senate takes a different approach, both sides said the details would determine whether they can live with the compromise.
Neither Dodd's nor Shelby's staffs would comment on the negotiations, saying only that no resolution had been reached.
Banking industry representatives, who have long argued that a separate agency would create an unnecessary bureaucracy and stifle financial innovation, said that they were pleased to see the Senate reconsidering the idea of a standalone new regulator.
"What's important is that we have reasonable reform that's in the best interest of the banking industry and the customer," said Richard Hunt, president of the Consumer Bankers Association. "That can be achieved by taking the current regulatory agencies and enhancing their consumer protection divisions."
Meanwhile, consumer advocates reacted by insisting that Dodd hold firm on the push for a new agency.