Geithner may borrow from financial agencies to staff new consumer bureau

Employees at seven federal agencies will soon receive notice that they could have a new employer this time next year: the Consumer Financial Protection Bureau.

Treasury Secretary Timothy F. Geithner is expected to discuss the issue Thursday afternoon during a meeting with heads of the relevant agencies, including Federal Reserve Chairman Ben S. Bernanke, Federal Deposit Insurance Corp. Chairman Sheila Bair and outgoing Comptroller of the Currency John C. Dugan.

The new consumer watchdog, which will be housed in the Fed, is a cornerstone of the huge financial overhaul package signed into law by President Obama last week.

In the lead-up to the financial crisis, seven regulators shared responsibility for looking out for consumers of mortgages, credit cards and other loans, but none treated that role as a top priority. Meanwhile, home loans grew riskier and more complex, credit card interest rates and banking fees swelled, and non-bank lenders -- such as mortgage brokers and auto finance companies -- operated virtually without oversight.

The new consumer regulator will have broad power to write and enforce rules, in an effort to protect borrowers from lending abuses. It is likely to have hundreds of employees and an initial budget of about $500 million, though it remains uncertain how much of its staff will come from other agencies.

Geithner is expected to send a letter to employees at the affected agencies within days, informing them that they could be sent to the new bureau.

"Certain employees at your agency that work on consumer protection may be asked to transfer" to the bureau, reads a draft of the letter. "This process will involve extensive consultation between Treasury and your agency before any decisions about transfer are made."

The financial bill mandates that officials set a transfer date for the consumer protection duties within 60 days, and that the new regulator be up and running within a year.

Administration officials have said the president plans to appoint an inaugural director of the bureau soon. But until the Senate confirms a nominee, the legislation leaves it to Geithner and the Treasury to construct a framework for the new regulator.

Already, dozens of Treasury employees are focused on that task, working to set up elements as weighty as separate offices to deal with issues affecting women, minorities, military families and senior citizens, and as mundane as securing office space, phones and computers.

Other regulators scheduled to attend Thursday's meeting include Federal Trade Commission Chairman Jon Leibowitz, Office of Thrift Supervision Acting Director John Bowman, National Credit Union Administration Chairman Debbie Matz, and Housing and Urban Development Secretary Shaun Donovan.