In Senate, a Renewed Effort to Reach a Consensus on Financial Regulation

[Cees Binkhorst]

REPLY TO: D66 at nic.surfnet.nl

Er is dus géén schijn van kans op een overeenkomst tussen Republikeinen
en Democraten.
Obama gaat óf de geschiedenis in als een zeer zwakke president óf hij
komt tot zinnen en doet het met alleen de democraten en neemt genoegen
met elke republikeinse stem die hij kan krijgen.
Zelfs dán is hij er nog niet, want Mrs. Pelosi (democraat) heeft als
voorzitter van het Huis van Afgevaardigden een profiel dat als
onafhankelijk kan worden bestempeld.

Groet / Cees

March 1, 2010
In Senate, a Renewed Effort to Reach a Consensus on Financial Regulation
http://www.nytimes.com/2010/03/01/business/economy/01regulate.html
By SEWELL CHAN

WASHINGTON — When Christopher J. Dodd announced in January that he would
not seek a sixth term in the Senate, he called reform of financial
regulation, along with health care, “the two most important issues of
our time,” and pledged to spend his last year in Congress “fully
focused” on his legislative duties.

But as Mr. Dodd, chairman of the Senate Banking Committee, prepares a
proposal to overhaul financial regulation, to be released possibly as
early as this week, he is finding that complete focus may not be enough.

Details of part of his plan became public in news reports on Friday. The
most hotly disputed elements — the creation of a consumer protection
agency to watch for deceptive and abusive terms on mortgages, credit
cards, payday loans and other financial products — are a reminder of how
intense lobbying and partisan gridlock threaten to significantly weaken
what the Obama administration has called a top priority.

“The financial services lobby and particularly the big banks are driving
the agenda right now,” Travis B. Plunkett, legislative director of the
Consumer Federation of America, said. “They are the ones gaining ground.
Their strategy is clear: death by a thousand cuts.”

As part of a regulatory overhaul adopted in December, the House voted to
create a freestanding Consumer Financial Protection Agency. Since then,
the financial services industry has been largely unified in trying to
reduce the proposed agency’s independence, as well as the scope of its
powers.

The lobbying effort has been so fierce that the Treasury secretary,
Timothy F. Geithner, called a meeting on Thursday with representatives
of the United States Chamber of Commerce, the American Bankers
Association and six other groups, at which he warned that failure to
pass a regulatory overhaul could destabilize the markets.

Mr. Dodd, a Connecticut Democrat, met on Saturday and Sunday with a
banking committee member, Bob Corker, Republican of Tennessee, in hopes
of coming up with a “consensus package” that would have at least some
Republican support, Kirstin Brost, a spokeswoman for Mr. Dodd, said. He
was not available to comment on his plan, she said.

While Mr. Dodd has indicated a willingness to give ground on several
aspects of the consumer proposal, those concessions have not been enough
to gain the backing of Richard C. Shelby of Alabama, the senior
Republican on the committee.

The concessions are documented in a two-page summary of Mr. Dodd’s
latest consumer proposal, which was provided to reporters on Friday
without Mr. Dodd’s permission.

Rather than a stand-alone agency, Mr. Dodd proposed creating a Bureau of
Financial Protection within the Treasury Department. The bureau would
have an independent director, appointed by the president, and a budget
financed by fees from large banks and other lenders.

Opponents of the consumer agency say that it would interfere with the
duty of regulators to ensure the “safety and soundness” of banks,
savings and loan associations, and credit unions.

To address those concerns, the Dodd proposal would require the bureau to
consult with other regulators before issuing rules, and to make public
any objections raised by those regulators, along with an explanation of
how the bureau addressed the concerns or why it went ahead anyway.

The other regulators also could appeal the bureau’s proposed rules to a
new interagency council, led by the Treasury secretary, whose job would
be to detect risks to the financial system. The council could veto the
rule or send it back to the bureau to be rewritten.

Heather Booth, executive director of Americans for Financial Reform, a
coalition of groups that support the consumer agency, said that true
independence would mean that the agency was “not subject to veto by the
regulators whose failures got us into trouble in the first place.”

The Dodd proposal would also give the new bureau fewer enforcement
powers than consumer advocates had hoped for. The bureau would be able
to examine banks and credit unions with more than $10 billion in assets,
but smaller banks would be largely exempt unless investigators found
that their regulators were not “acting properly.”

Consumer advocates have voiced particular alarm at unfair practices by
companies not covered by banking rules, like mortgage servicers, credit
counseling agencies, debt collectors and payday lenders.

Under the Dodd proposal, the bureau would have enforcement authority
over nonbank mortgage companies, but would have to petition another
body, the Federal Financial Institutions Examination Council, for
authority over other nonbank financial companies.

“This clearly is a reduction in the enforcement powers in the House
bill, and that provision had already been weakened from the
administration’s proposal,” Michael D. Calhoun, president of the Center
for Responsible Lending, said.

Mr. Calhoun said that federal supervision should go beyond banks, adding
that other financial companies were “increasingly thwarting state
regulation by going to the Internet to offer their services.” He added:
“The only way you can have effective regulation there is to regulate the
products, not the providers of the products.”

Another concern of consumer advocates is the extent to which states
could set tougher standards on consumer financial products than the ones
set by federal regulators. The Dodd proposal mirrors the House language,
which some advocates had hoped to modify to give states more leeway to
adopt stricter standards.

So far, the Obama administration has affirmed its support for a consumer
agency but deferred to Mr. Dodd to work out the details.

Camden R. Fine, president of the Independent Community Bankers of
America, was part of the meeting with Mr. Geithner on Thursday. “It was
clearly an appeal to the major financial trade groups to get behind a
bill and work toward the resolution of the differences that remain,” Mr.
Fine said.

He went on: “One of the big points he made was on consumer protection,
and that there were certain principles that would have to be present to
be acceptable to the administration.”

Mr. Fine said the latest Dodd proposal was “better than having a
separate freestanding agency,” but he added: “We have grave concerns
about this entity being housed in Treasury. Treasury is, after all, a
political arm of any administration.”

Lauren K. Saunders, a lawyer at the National Consumer Law Center, said
advocates feared that in the effort to reach a compromise, the agency’s
power would be so watered down as to be ineffectual. “We’re completely
outgunned,” she said. “Despite the millions of consumers who are
affected, the money and the resources of the banking industry clearly
overwhelm us. Even in this crisis, it’s hard for our voice to be heard.”

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