Financial services lobbyists are upping the pressure on Senate Banking, Housing and Urban Affairs Chairman Chris Dodd (D-Conn.) and Sen. Bob Corker (Tenn.), a key Republican on the panel, to limit the scope of a proposed consumer protection agency.
While several provisions of a sweeping financial services reform bill still remain in flux, banks and big-business groups are putting their focus on the consumer-protection details.
After several drafts of the proposed Consumer Financial Protection Agency circulated downtown — with different iterations coming from Dodd, Corker and Republican Sens. Richard Shelby (Ala.), ranking member of the Banking panel, and Judd Gregg (N.H.) — Dodd signaled Friday on the Senate floor that he is still committed to creating an office that has “the independence and the authority that it needs to get the job done to take care of consumers.”
With Dodd in Connecticut over the weekend, limited progress was made during staff discussions. Still, Dodd is expected to roll out a bill as early as the end of this week, but that could slip until the following week, according to financial services lobbyists.
The negotiations on consumer protections are focusing on how much power and autonomy the new agency will receive. Specifically, the financial services industry and banks are lobbying for the Federal Reserve or the Treasury Department to have veto power over rule-making.
But consumer advocates say they want consumer protection to be independent to ensure it won’t be mired in the same problems the Fed had during the financial crisis.
So far, it appears that banks are winning the day against an independent regulator, including strong investor protections and transparency in the derivatives market, said Travis Plunkett of the Consumer Federation of America.
“If reforms in these key areas continue to water down, we will move to opposition,” Plunkett said. “In our minds, it would be a mistake to enact legislation that has the appearance of reform without providing the reality. It would just be a giant effort to mislead the public.”
David Arkush, director of Public Citizen’s Congress Watch, said he believes it’s a nonstarter to give the Treasury or the Fed veto power over the consumer protection agency.
“I don’t think this is the time for Democrats or for anyone to be compromising on weak reform,” Arkush said. “I think that the Democrats on the Banking Committee ought to push for a strong bill, and if that has to be a partisan bill, then that’s the case.”
Heather Booth of Americans for Financial Reform agreed that it’s important to have strong consumer protections.
Booth said there would be an “outpouring of anger from the public” if Dodd’s bill doesn’t address consumer protection in a meaningful way.
But on the other side of the consumer groups, it’s not just the financial services industry that is pushing back against reforms.
The U.S. Chamber of Commerce, along with the National Association of Manufacturers, Industrial Energy Consumers of America, National Petrochemical & Refiners Association and Fertilizer Institute, last week formed the Main Street Industry Alliance to push Dodd to narrowly write the language to keep nonfinancial companies out of the new regulations.
NAM’s Dorothy Coleman said the alliance is waiting to make its next move until after language is circulated.
The chamber has also independently lobbied against several provisions in the financial overhaul, spending millions of dollars against a stand-alone consumer protection agency. The chamber has supported an alternative framework in which a council would report quarterly to Congress and the Treasury Department.
The insurance industry also stepped out front and center. The largest property casualty insurance companies in the country are lobbying to be left out of the final package. Eleven CEOs formed the Property & Casualty Leaders Coalition to make the case that the insurance industry wasn’t responsible for the financial crisis and shouldn’t have to pay into the fund for future crises.