The news that Senate Banking Committee Chairman Chris Dodd (D-CT) is retiring has thrown some light back onto financial regulatory reform, which is slowly being molded by that committee’s members. While the committee is nearing agreement on some issues — such as the proper regulatory role for the Federal Reserve — the “key stumbling block” remains the Consumer Financial Protection Agency (CFPA).
During the House regulatory reform debate, Rep. Walt Minnick (D-ID) proposed an amendment that would have gutted the CFPA by turning it into a loose council within the existing regulatory framework. The Minnick proposal would make the CFPA into a conflicted, ineffectual body (Rep. Barney Frank (D-MA) called it “the bureaucratic version of the Christmas song”), which is exactly what the financial services industry would love to see. And the proposal was only narrowly defeated.
Today, Financial Services Forum president Ron Nichols said on CNBC that his organization (which represents the 18 largest financial firms in the country) is actively pushing Minnick’s plan in the Senate:
We’ve talked to a lot of senators, on both sides of the aisle, who have seen what Walt Minnick has done. He is a conservative Democrat from Idaho and he proposed an amendment to the House bill that, instead of having a CFPA, would have a council — within each regulator would have an office of consumer protection and education that would get together, talk about best practices, talk about what they’re seeing in the marketplace, in lieu of a CFPA…It would marry consumer protection with the prudential regulator.
CNBC’s Becky Quick pointed out the obvious, noting that such a council would have “no real teeth in being able to implement anything.” Indeed, look at Nichols’ description of what the council would do — “talk” about this and that, but take no action.
Of course, the biggest financial firms in the country are loath to see a CFPA with rule-making and enforcement authority come into being. And they’re joined by Senate Republicans, who as Ryan Grim noted, “consider [the CFPA] as threatening as their current arch-nemesis regulator: the Environmental Protection Agency.” “From the Republican point of view, the idea of a separate agency is still anathema,” said Sen. Robert Bennett (R-UT).
But an independent agency with rule-writing and enforcement authority is exactly what we need to even the playing field between big banks and consumers. “For reform groups, this effort will not be successful without a stand-alone consumer agency,” said Graham Steele, policy counsel with Public Citizen’s Congress Watch. “These [bank] regulators repeatedly prioritized banks’ business practices over consumers’ financial security.” And only an independent agency that is on even-footing with the bank regulators can actively ensure that such pernicious practices don’t reemerge.