In Fight on CFPA, Less May Prove to Be More

American Banker
June 2, 2010
Kaper, Stacy
P. 1

House and Senate lawmakers will work on a compromise financial regulatory reform bill in the coming days, and it remains to be seen whether a stand-alone consumer protection agency will result. Some proponents of the House version calling for an independent agency also support the Senate's approach to consumer protection, which would create an autonomous unit within the Federal Reserve. Although consumer groups support a stand-alone entity, they take issue with the House's strategy for funding the agency, as it would involve an appropriations process. They also worry that the agency's power would be weakened under the governance structure in the House bill, which calls for a presidentially appointed director during the first two years before transitioning to a commission structure. Under the Senate bill, the watchdog would be funded by the central bank and governed by a presidentially appointed independent director. However, consumer groups are concerned about placing the agency within the Fed. According to Center for Responsible Lending President Mike Calhoun, "As a freestanding agency, there is more of a barrier to attempts in the future to rein it in. Everybody may now think of it as in the Fed but largely independent of the Fed, but years from now, maybe people will say, 'Well, it's in the Fed, so maybe we should give the Fed more control over it.'" Observers expect Rep. Luis Gutierrez (D-Ill.) and Sens. Charles Schumer (D-N.Y.) and Jack Reed (D-R.I.) to push for a stand-alone agency.
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