Evidently, Sen. Bob Corker (R-TN), who was leading Republican negotiations on financial regulatory reform until a few weeks ago, would really like to keep working toward a deal with Senate Banking Committee Chairman Chris Dodd (D-CT). Speaking at Vanderbilt’s Owen Graduate School of Management yesterday, he said that he would like to move the clock back three weeks, and pick up where he and Dodd left off before the bill passed out of committee (on a party line vote).
However, were Dodd to take Corker up on his offer, here’s what Corker plans to push for:
“I don’t want an overzealous consumer protection agency,” Corker said. “We need balance. Right now in the bill, there’s too much independence and too little coordination between the regulators and the consumer protection side.”
This week Corker pleaded with Dodd and the Democrats to refrain from bringing their bill to the floor and daring Republicans to vote against it. But if weakening Dodd’s proposed Bureau of Consumer Financial Protection is Corker’s goal, Dodd would do better to stay away.
After all, Dodd’s bill is already a departure from a completely independent Consumer Financial Protection Agency (CFPA) — which was included in the Obama administration’s regulatory reform plan and the reform bill passed by the House last year — because it would be housed in the Federal Reserve and could be overridden by a two-thirds vote of the proposed Financial Stability Oversight Council (FSOC). Since the FSOC will be largely composed of bank regulators, there will be ample opportunity for them to make their case. The legislation also explicitly directs the Bureau (in section 1015) to work with the regulators when designing new regulators.
Plus, Corker’s entire argument is based off of the faulty premise that consumer protection and bank safety and soundness are in some kind of conflict. But a bevy of former regulators have come forward to say that they don’t know of a single instance in which consumer protection and the soundness of banks were in tension.
“I would love to see one regulator provide a concrete example where safety and soundness and consumer protection are in conflict and it caused some difficulty. I can’t think of one,” said Kevin Jacques, a former official at the Office of the Comptroller of the Currency (OCC). Just yesterday, the OCC flipped its long-standing opposition to an independent consumer agency, saying that “it’s unlikely there will be any meaningful conflicts between safety and soundness and consumer protection.”
Under Dodd’s current proposal, the Bureau has barely enough independence to fend off the pernicious influence of the Fed’s regulators. Watering the bill down in order to appease Corker is an unacceptable outcome. Instead, Dodd should do just what Corker doesn’t want him to: bring a bill to the floor and force the Republicans to side with either consumers or banks.