“As ranking member of the Agriculture Subcommittee that oversees the U.S. Commodity Futures Trading Commission, I have a responsibility to ensure speculators are not exploiting oil supply fears to make big profits,” Boswell said in a prepared statement.

“The CFTC determined in 2008 that Wall Street speculators were increasing their positions in energy markets to capitalize off of political unrest in heavy oil-producing nations. Energy prices drive up the cost of goods across the board — from input costs on the farm to the food on the kitchen table. I am calling for a hearing to make sure that Wall Street and Big Oil are not purposely driving up prices once again to make a quick buck on the backs of the middle class and small business owners who are hit the hardest when the price of gas skyrockets.”

Boswell and U.S. Rep. Peter Welch of Vermont co-authored a letter to Agriculture Committee Chairman Frank Lucas (R-Okla.) and General Farm Commodities and Risk Management Subcommittee Chairman Mike Conaway (R-Texas). Both GOP leadership members represent states that hold a special interest in the oil industry’s success, but Boswell remained optimistic that his request would be given serious consideration.

“The Agriculture Committee has a history of investigating oil speculation when gas prices reach record levels, regardless of what party is in charge,” he said. “It is my hope that Committee leadership will take the issue of rising gas prices seriously, as well as our hearing request, and allow daylight to be shed on this important issue.”

In addition to Boswell and Welch, the letter to leadership was also signed by Democratic U.S. Reps. Tim Walz of Minnesota, Terri Sewell of Alabama, James McGovern of Massachusetts, Bill Owens of New York, Joe Courtney of Connecticut and Larry Kissell of North Carolina.

The full text of the letter appears below:

Dear Chairmen Lucas and Conaway:

We are writing to request the Committee conduct a hearing to examine the recent rise in energy prices, particularly for oil and gasoline. The American public wants reassurance that these high prices are completely attributable to market forces and not due to speculation or manipulation in the futures or spot markets for energy.

The Agriculture Committee, which has jurisdiction over the Commodity Futures Trading Commission, has a long history of examining rises in energy prices and how they impact the agricultural sector. Since 2006, the Committee has held three hearings on this issue, under both Republican and Democrat majorities, which only further demonstrates the bipartisan commitment of the Committee to examine drastic price fluctuations in the price of oil.

In the last four months, oil prices have risen to date by 25% and we have not yet reached the summer peak season when oil and gasoline prices experience further increases. On March 31st, the House Committee on Natural Resources held its own hearing looking into rising gasoline prices. At that hearing, witnesses including Mr. William P. Graves on behalf of the American Trucking Association and Mr. Michael J. Fox, Executive Director of the Gasoline & Automotive Service Dealers of America raised concerns about continuing speculation in today’s energy markets.

Given the increase in energy prices and continued concern about speculation in energy markets, we believe it is appropriate and imperative that our Committee conduct its own hearing into energy prices and bring in representatives from the CFTC and the Department of Energy who can give us their views regarding what is occurring in the energy markets. We look forward to working with you to bring such a hearing to fruition in the immediate future.

Sincerely,

Rep. Leonard Boswell (IA-03)
Rep. Peter Welch (VT)
Rep. Tim Walz (MN-01)
Rep. Terri Sewell (AL-07)
Del. Gregorio Kilili Camacho Sablan (Northern Mariana Islands)
Rep. James McGovern (MA-03)
Rep. Bill Owens (NY-23)
Rep. Joe Courtney (CT-02)
Rep. Larry Kissell (NC-08)

Labels must also specify species’ country of origin, the manufacturer and other information for consumers. The measure was introduced by Rep. Jim Moran (D-Va.).

The Truth in Fur Labeling Act, which President Obama signed into law last December, was designed to address the illegal dog and cat fur trade. Before this bill, there existed a loophole in the Fur Products Labeling Act of 1951 which allowed garment labels to exempt the species and origin of small amounts of fur.

“This loophole has been exploited to pawn off dog, cat, and other animal fur as an artificial fiber,” Moran said in a press statement. “Many Americans choose not to purchase fur products, preferring instead ‘faux’ fur as a substitute. Consumers with allergies or ethical objections to fur, or those who may have concerns about the use of certain species for fur production, will now be protected from deceptive advertising and able to make educated purchasing decisions.”

According to the release, in recent years, investigators from the Humane Society of the United States discovered that major U.S. retailers were unknowingly selling falsely labeled dog fur on clothing. Investigators found that 96 percent of the fur-trimmed jackets examined contained parts of domestic dog, wolf or raccoon dog — these were either mislabeled or missing a label altogether.

The Federal Trade Commission won’t enforce policy for clothes purchased prior to March 18, 2011. Read the FTC’s ruling here.

In the past, Warren has lambasted banks for purposefully creating opaque, obscure products to make a buck off of customers. (Her infamous phrase for some financial products? “Tricks and traps.”) But this time, in one of her first official appearances as a member of the administration, she took a conciliatory tone.

She continued to use the folksy cant she has picked up in the last few weeks. “My first public meeting after [my current] appointment was with bankers — bankers from Oklahoma, where I grew up, where my grandmother drove a wagon in the land rush, and where I learned to sing Boomer Sooner before I learned Old MacDonald,” she said to open her remarks. (Did she always talk like this?)

Then, the tone went conciliatory. “We are not working on the theory that all the men and all the women connected with finance, either as workers or investors, are to be regarded as guilty of some undefined crime,” she said, according to prepared remarks. “On the contrary, we hold that business based on good will should be encouraged.”

Warren pressed for a principles-based, rather than rules-based approach — describing questions like “Can a customer easily understand what this product does?” as more important than “Should we ban companies from selling redundant insurance for certain title problems?”

Nevertheless, the old attitude did shine through. “[C]redit agreements have gotten long and complicated. In fact, there’s a new epithet: fine print. I understand that some of you call it ‘mice type.’ Where I come from, nobody calls fine print, hidden fees and surprise penalties ‘negotiated contract terms’ or ‘innovations.’”

She continued: “On a polite day, my brothers in Oklahoma call that kind of stuff ‘garbage.’ They don’t care if it is there because regulators required it, because the companies’ lawyers were trying to ward off lawsuits, or because it was a good place to hide another new fee. They simply see a world in which the financial institutions they do business with are not on their side. Every surprise hidden in the fine print is a bad surprise.

“Instead of seeing banks as their friends — as I did when I put my babysitting money in a savings account at Penn Square National Bank so my brothers didn’t borrow it out of my sock drawer — too many Americans see dealing with banks like handling snakes — do it long enough and you’ll get bit.”

And there it is: conciliatory but wary, soft enough to charm banks and stringent enough to please the progressives that fought to make sure Warren had the role.

Elizabeth Warren will help set up the Consumer Financial Protection Bureau. (Flickr/david_shankbone)

This morning, President Barack Obama plans to officially announce that Elizabeth Warren — Harvard Law professor and the current head of the Congressional Oversight Panel over the Troubled Asset Relief Program — will head the Consumer Financial Protection Bureau.

[Congress1] Well, sort of. After months of will-he-or-won’t-he speculation by journalists, bankers, lobbyists  and consumer-protection advocates, this week, it leaked that Obama plans to name Warren to an advisory role helping the administration build the new agency, the much-touted agency created in the financial-regulation reform law to protect the everyday purchasers of small financial products. Today, Obama plans to confirm the leak. Warren will not, as progressives wanted, lead the bureau. She will instead act as its midwife or architect, helping to set it up before perhaps staying to run it or perhaps leaving that work to someone else.

This decision, first reported by Jake Tapper of ABC News on Wednesday night, lead not to applause from the left and condemnation from the right, as expected — but to a kind of collective “huh?” Within 24 hours of the leak, various heavyweights in the financial and political press had declared the appointment: “creative,” “strange,” “confusing,” “curious,” “made-up,” “incomplete” and “tenuous.”

Even the key senators who crafted the CFPB reacted with baffled surprise. On Thursday, Talking Points Memo tracked them down and asked them whether they had any idea what the appointment meant. Sen. Chris Dodd (D-Conn.) responded, simply, “No.” Sen. Bernie Sanders (I-Vt.) said, “The answer is no. And that is not insignificant.” And Sen. Bob Corker (R-Tenn.) responded, “We ought to see. It appears to me that exactly the things that many of us thought were going to happen have happened. We’ll see. Maybe there are some details here that we’re missing” — really, a long-winded way of saying “no.”

Consensus became that the news leaked prematurely, before the White House had time to set out a standard description of the position and before it had time to update members on the Hill about the news. The title, for instance, seemed like a bureaucratic parody, an appellation designed to confuse. Rather than becoming CFPB administrator, a straightforward name for a straightforward job, Warren will be “Assistant to the President and Special Assistant to the Treasury Secretary on the Consumer Financial Protection Bureau” (putative acronym: APSASTCFPB). What responsibilities does that job hold? Will Warren really be calling the shots?

As of now, no one seems to know. Jonathan Cohn in The New Republic openly admitted he had little idea what to make of it: “Honestly, I’m still trying to figure out what’s about to happen — and whether those of us who like Warren for the job should be happy.” (He later reported that the job seemed to have real heft.)

The Wall Street Journal authoritatively laid out a job description: “Ms. Warren’s powers will be broad, despite her unusual title. She will recruit staff for the agency, set the policy mission and serve as the recognizable public face for a new agency the administration wants to promote,” one story said.

But the paper also ran an article called “Sidelining Liz,” arguing that she will hardly have the import once presumed, and arguing, “[This] might be good politics, but it isn’t good leadership by the Obama administration. The president who lobbied so hard for financial reform seems to be weaseling when it comes to implementing it.”

And how did the base react? Most organizations that had lobbied hard for Warren seemed understanding of the decision this week. MoveOn, for instance, got behind the Warren appointment immediately.

But other groups offered a little skepticism. The Progressive Change Campaign Committee, for instance, gave only golf claps. “This news shows that consumers have momentum and are on the verge of winning,” Stephanie Taylor, its cofounder, said in a statement. “If Elizabeth Warren is given full power to run the new consumer protection bureau and hold Wall Street accountable, it will mean real change — and voters will know that going into November’s election. If this appointment is window dressing and Tim Geithner controls the show, it would be a big disappointment and a victory for Wall Street.”

So why did Obama do it — naming Warren to a confusing new role, rather than the one that seemed her inheritance, given that the idea for the CFPB is hers? Why not make her the CFPB’s J. Edgar Hoover, as many hoped and presumed? The answer is the Senate confirmation process. This year, the upper chamber has delayed the confirmation of even non-controversial nominees. If the ambassador to Bulgaria has a 13-month wait to get her position, Warren — whose confirmation was a fight that Republicans wanted to pick — might have been held up for eons before ultimately not being confirmed.

Rep. Barney Frank (D-Mass.), one of the authors of the Dodd-Frank law, said yesterday that Warren did not want to go through that process. “She always said she didn’t want to be there as a permanent director. Some of the liberals are worried about it. It’s almost an insult to Elizabeth. She wouldn’t take this if there was the slightest impediment to her doing the job.”

Today, the administration has its first major chance to clear the air. Already, this morning, Warren has put up a post on the White House blog making the decision sound crystal clear and, frankly, sensible. “Over the past several weeks, the President and I have had extensive conversations about the vital importance of consumer financial protection,” she writes. “The President asked me, and I enthusiastically agreed, to serve as an Assistant to the President and Special Advisor to the Secretary of the Treasury on the Consumer Financial Protection Bureau. He has also asked me to take on the job to get the new CFPB started — right now. The President and I are committed to the same vision on CFPB, and I am confident that I will have the tools I need to get the job done.“

That leaves just one big question: Will she stay to run it? You might already have guessed the answer: Nobody really knows.

Frank said:

I need people to understand she’s not a zealous advocate but a very smart operator. Sometimes people think those are separate. That if you care a lot about an issue, you’re not going to be effective in putting it forward. I never had a better partner on a tough fight than I had in Elizabeth Warren. Her knowledge is great. Her compassion is great. She stands out as the person who ought to be running that agency.

He also noted:

I sympathize with President Obama. He’s been criticized by some of my liberal friends. We didn’t get a public option and other things we wanted. That wasn’t his fault. The economic recovery bill, the stimulus, it wasn’t as big as it should have been. That wasn’t his fault. He couldn’t get the votes. With regard to appointing Elizabeth Warren, that’s his decision. No one can stop him from making it. I hope he will appoint her.

And Treasury Secretary Timothy Geithner, without outright supporting Warren, had warm words for her this week as well:

She represents to a large part of the country — not just people caught up in the damage of the crisis, but people who view this system as being fundamentally broken — she represents, again, one of the most compelling advocates for reform.

Here are the summarized provisions impacting homeowners and consumers, via the Consumer Financial Protection Agency. For homeowners:

• Require Lenders Ensure a Borrower’s Ability to Repay: Establishes a simple federal standard for all home loans: institutions must ensure that borrowers can repay the loans they are sold.
• Prohibit Unfair Lending Practices: Prohibits the financial incentives for subprime loans that encourage lenders to steer borrowers into more costly loans, including the bonuses known as “yield spread premiums” that lenders pay to brokers to inflate the cost of loans. Prohibits pre-payment penalties that trapped so many borrowers into unaffordable loans.
  
• Establishes Penalties for Irresponsible Lending: Lenders and mortgage brokers who don’t comply with new standards will be held accountable by consumers for as high as three-years of interest payments and damages plus attorney’s fees (if any). Protects borrowers against foreclosure for violations of these standards.
• Expands Consumer Protections for High-Cost Mortgages: Expands the protections available under federal rules on high-cost loans — lowering the interest rate and the points and fee triggers that define high cost loans.
• Requires Additional Disclosures for Consumers on Mortgages: Lenders must disclose the maximum a consumer could pay on a variable rate mortgage, with a warning that payments will vary based on interest rate changes.
• Housing Counseling: Establishes an Office of Housing Counseling within HUD to boost homeownership and rental housing counseling.

And for the Consumer Financial Protection Agency:

• Independent Rule Writing: Able to autonomously write rules for consumer protections governing all financial institutions — banks and non-banks — offering consumer financial services or products.
• Examination and Enforcement: Authority to examine and enforce regulations for banks and credit unions with assets of over $10 billion and all mortgage-related businesses (lenders, servicers, mortgage brokers, and foreclosure scam operators), payday lenders, and student lenders as well as other non-bank financial companies that are large, such as debt collectors and consumer reporting agencies. Banks and Credit Unions with assets of $10 billion or less will be examined for consumer complaints by the appropriate regulator.
• Able to Act Fast: With this Bureau on the lookout for bad deals and schemes, consumers won’t have to wait for Congress to pass a law to be protected from bad business practices.
• Educates: Creates a new Office of Financial Literacy.
• Consumer Hotline: Creates a national consumer complaint hotline so consumers will have, for the first time, a single toll-free number to report problems with financial products and services.
• Accountability: Makes one office accountable for consumer protections. With many agencies sharing responsibility, it’s hard to know who is responsible for what, and easy for emerging problems that haven’t historically fallen under anyone’s purview, to fall through the cracks.

That said, there are major loopholes regarding consumer protection — among the most glaring, the exemption for auto dealers. And dozens of little-noticed provisions that might improve the lives of regular folks. For instance, the $3 billion to help unemployed homeowners squeaked in, on page 2261 of 2315.

Sen. Chris Dodd (D-Conn.) (EPA/ZUMApress.com)

Last week, the Senate passed a sweeping overhaul of the regulation of banks and financial institutions. The bill, authored by Sen. Chris Dodd (D-Conn.), does not just focus on Wall Street firms, changing leverage limits and capital requirements. It focuses on Main Street banks and lenders as well. The bill empowers a new oversight council to create and enforce rules specifically on behalf of regular consumers: the Consumer Financial Protection Agency, housed in the Federal Reserve in the Senate bill and an independent federal agency in the House bill, which now need to be merged.

[Economy1]By and large, consumer watchdogs — some of the bill’s fiercest critics and biggest supporters — were happy with the final Dodd legislation. “We are pleased the Senate has passed this momentous bill that will rein in big banks’ reckless behavior and bring transparency to our financial system and protect consumers,” Heather Booth, the consumer advocate and director of the Americans for Financial Reform, said in a statement. “[This bill] ensures the financial system operates to support needs of working families, promotes business growth and economic mobility rather than the interests of the speculators who view the economy as a huge casino.”

But as the Dodd bill heads to conference committee — where members of Congress will reconcile the Senate financial regulatory reform proposal with the House’s bill, passed last year — consumer advocates have identified loopholes and weak points where a merged bill could be watered down, leaving American workers and families overpaying for financial services or otherwise vulnerable. Consumer advocates primarily cite the purview of the CFPA — the companies it will be able to regulate, and the extent to which it will be able to enforce rules — as the primary yardstick of real reform.

Travis Plunkett, the legislative director of the Consumer Federation of America, points to investor protections as the “big hole” remaining in the bill. “The House legislation is stronger on making sure that financial professionals are responsible for the advice they give,” he says. But the CFA is also focusing on ensuring a strong, independent CFPA comes from the conference committee process. He named a loophole in the Senate bill regarding the CFPA’s ability to monitor small non-bank lenders, like payday lenders, as problematic. “We’d like to see the House language triumph there,” he said, noting that the difference would amount to millions for low-income Americans.

The Center for Responsible Lending, a nonpartisan research group, cites whether auto lenders are under the CFPA’s oversight as an issue to watch. The Center estimates that consumers spend $20 billion more a year on their car loans because they borrow through dealerships — whose contracts can be usurious and difficult to understand — rather than banks or credit unions. Kathleen Day, a spokesperson for the organization, notes that the House bill exempts auto lenders from CFPA regulation and that car companies are lobbying hard to keep it that way in the final legislation.

Sen. Sam Brownback (R-Kans.) attempted to push the same exemption into the Senate bill, but the Senate ultimately did not vote on his amendment. Today, the Senate plans to take a nonbinding “sense of Congress” vote on the measure. “It isn’t binding, but these things are taken into account in conference committee,” Day says. “Currently, the Senate bill is better than the House bill on that, so we don’t want to see a shift there.” Plus, it is a point of hard lobbying. Last year, Ford Motor Company alone made more than $1 billion through its financing arm.

Day also says the CRL hopes Congress removes a Senate provision allowing small non-bank companies to preview and comment on CFPA rules “before they see the light of day.” “That’s behind the scenes, and would lead to the kind of cozy relationships between regulated companies and regulators that led to this crisis in the first place.”

Consumer watchdogs also cite preemption — the ability of the federal government to quash strong local rules — as a major issue to watch as the bills are merged. “It [is] really in the weeds,” Day says, “and a hard one to tamper with, but important.”

Mike Konczal, a fellow at the Roosevelt Institute and specialist in banking regulation, explains that reformers want states to retain the ability to create and enforce strong consumer-protection standards within their borders — and had to fight for the provision in both the House and Senate. “The New Democrats [in the House] could have probably killed the CFPA or at least turned it into a toothless panel,” he says. “But they let it go and then pushed hard [for] pre-emption, which would allow the Office of the Comptroller of Currency” — a primary government banking regulator — “to break state consumer protection laws.”

Therefore, preserving the ability to police consumer protection at the local level remains a priority for advocacy groups in Washington.

1. OK, Consumer Protection Rules are Fine… Just Don’t Enforce Them. The current bill would apply the same rules to providers of consumer financial services or products, whether the provider is a bank or a non-bank financial provider.  The bill would also allow State Attorneys General to enforce those rules.  Lobbyists are pushing hard to amend the bill so that Attorneys General lose their enforcement authority.
2. Letting Non-Banks Play by a Weaker Set of Rules. We know this is coming, so keep an eye out: attempts to give car dealers that make car loans and other major providers of financial services a big exemption from the consumer protection rules.
3. If You Can’t Kill Consumer Protection Now, Starve it to Death Later. One of the keys to effective consumer protection is having a consumer financial protection bureau that is independent. And one of the keys to independence is having an independent source of funding. So be prepared for attempts to take away the bureau’s source of funds.
4. Preventing States from Protecting Their Own Citizens. Under the current bill, the Bureau of Consumer Financial Protection would set minimum standards for the consumer finance market, but states would still be allowed to adopt additional protections. In other words, federal consumer protections would set a floor, not a ceiling. There’s likely to be a fight about that provision.
5. Removing the Derivatives Trading Requirement to Protect Wall Street Profits. Under the current bill, standard derivatives would have to be traded on exchanges or other electronic trading platforms. Expect amendments to eliminate this trading requirement.
6. Stretching the Derivatives “End-User” Exemption into a Hedge Fund Loophole. Be on the lookout for attempts to stretch this exemption.
7. Creating an “AIG Loophole.” Rest assured, there are large “non-banks” out there who would rather not be scrutinized quite so closely.
8. Who Needs to Know What’s Happening at Insurance Companies? Insurance is regulated by the states, not the federal government — and this bill doesn’t change that.  But this bill would give the Treasury Department the ability to collect information from insurance companies so that it can help identify emerging risks before they blow up the financial system — like AIG.
9. Letting Firms Make Loans Without Skin in the Game. It’s cheaper for mortgage lenders and Wall Street to be in the mortgage business if they don’t have to worry about the borrower’s ability to pay — but it’s a lot more costly for Americans to perpetuate the same system that helped cause the housing crash.
10. Preserving “Too Big to Fail” While Pretending to Kill It. The key to preventing future bailouts is to end the problem of “Too Big to Fail.”  And the only way to do that is to make sure that we can shut down big financial firms in a swift, orderly way if they’re on the brink of failure.

Of these, the consumer financial protection provisions seem to be most under fire by Republicans — despite how insane that political calculus seems.

First, the similarities. There are many. Both bills create systemic regulators to keep watch over risky firms. Both ensure that taxpayers will never be on the hook for Wall Street bailouts again by creating some form of resolution authority – Democrats by taxing banks for a $50 billion liquidation fund, to be used in the event that a systemically important bank needs to be shut down; Republicans by requiring that the Federal Deposit Insurance Co. get back any government money spent in the process of liquidation. Both require hedge funds to answer to a regulator: in the Democrats’ case, the Securities and Exchange Commission; in the Republicans’, a new oversight committee. Both vaguely hold that credit ratings agencies will receive bolstered oversight, but in both cases, the ratings agencies’ fundamental business models do not change. Both provide weak proposals to institute some form of the Volcker Rule, banning proprietary trading at many banking institutions. Both improve Fed oversight, though without a strong requirement for an audit of the Fed’s books. Both create a powerful consumer financial protection agency with rulemaking authority, though only in the Democrats’ version would the CFPA have the ability to oversee firms like payday lenders. Both make derivatives a regulated product, Democrats by requiring that derivatives used by financial firms to speculate go through clearinghouses; Republicans by giving a regulator authority to say if they should. Both make the president of the Federal Reserve Bank of New York a presidential appointee.

The Republican proposal deals with two things that the Democratic proposal does not touch. First, the Republicans take on the government-sponsored entities Fannie Mae and Freddie Mac — bailed out during the collapse of the housing bubble. Democratic staffers say that figuring out how to handle the GSEs and re-regulating the trillion-dollar market in government-backed mortgage finance requires its own bill. They have just started researching what they want to accomplish and how best to achieve it. Republicans, in fewer than 400 words, take the massive market on. They create a special regulator and indicate that no further taxpayer money should be at risk.

Second, the Republicans create new loan-underwriting standards, saying, “Anyone who securitizes a residential mortgage loan that does not meet new statutory minimum underwriting rules promulgated by federal prudential banking regulator will be required to retain at least a 5 percent economic interest in the trust.”

The Dems’ bill more qualitatively gives more oversight to the Fed to make discretionary decisions, such as to require big banks or firms to post more collateral. The Republicans’ bill does not give more oversight to the Fed — which many Republicans believe overstepped significantly in the last crisis, as noted in the proposal — and does not indicate when or whether the government would force banks to keep more cash.

The Republicans’ consumer financial oversights are significantly weaker than the Democrats’. The Republican-suggested Council for Consumer Financial Protection — the analog of the Democrats’ CFPA — includes the head of the Federal Reserve, the comptroller of the currency, the head of the FDIC and three “consumer protection experts.” It does not say how those consumer protection experts will be picked. Nor does the Republican proposal specify how its CFPA would be funded or where it would be housed. (Controversially, Dodd’s bill places it in the Fed.) And the Republicans’ version of the CFPA does not have as broad oversight or as strong and clear a mandate.

Here are side-by-side explanations of the most important provisions in the two bills:

Resolution Authority

Dodd: The bill requires the Treasury Department, FDIC and Federal Reserve to agree to liquidate a firm. Three bankruptcy judges must agree with their decision. The biggest financial firms will fund a $50 billion pool that the government will use in the process of liquidation to ensure taxpayers do not foot the bill. The bill allows the FDIC to borrow from Treasury in the process, but only if it “expects to be repaid from the assets of the company being liquidated.” The assets are sold off at the government’s discretion. Taxpayers get repaid first. The firm’s management is fired and shareholders are wiped out.

Republican: Like in the Democrats’ bill, the Treasury Department, FDIC and Federal Reserve together determine that a firm needs liquidation to start the process. The Treasury secretary consults with the president to ensure that he or she agrees that breaking up and selling off the company will help preserve financial stability. Then, the Treasury secretary petitions the D.C. courts to authorize the FDIC as the company’s receiver before the company is liquidated by the government. The proposal notes: “The FDIC would have to recoup from creditors any amounts that a creditor had received in excess of what it would have received in bankruptcy. This gives the FDIC the flexibility to advance funds to creditors to prevent or mitigate a systemic crisis, but then ensures the FDIC is not bailing out creditors.”

The Federal Reserve

Dodd: The bill allows for the Federal Reserve’s lender-of-last-resort authority and expands Federal Reserve oversight of big banks and other financial firms. It provides for stronger congressional oversight of the Fed itself and makes the president of the Federal Reserve Bank of New York a presidential appointee.

Republican: The bill also makes the president of the Federal Reserve Bank of New York a presidential appointee. It does not expand the institution’s regulatory powers. If anything, it limits them, adding an oversight measure so that the Fed and Treasury determine “where and when emergency actions…constitute credit channeling” so that the Fed cannot pick “winners and losers” in the event of the financial crisis. It is unclear how it limits which banks the Fed supervises.

Consumer Financial Protection Agency

Dodd: The bill creates a Consumer Financial Protection agency paid for by the Fed. It has oversight over banks with assets more than $10 billion, big shadow-banking institutions, any mortgage-related businesses, credit card companies, and payday lenders. It can impose consumer-protection measures.

Republican: The bill creates a Council for Consumer Financial Protection comprising three independent experts, the head of the FDIC, the Comptroller of the currency and the head of the Fed. It has “primary supervision and enforcement authority” over large banks, non-bank mortgage-originators and other entities. Small community banks and thrifts remain overseen by their primary prudential regulators.

Systemic Regulation

Dodd: The bill creates a new Financial Stability Oversight Council to “focus on identifying, monitoring and addressing systemic risks posed by large, complex financial firms as well as products and activities that spread risk across firms. It will make recommendations to regulators for increasingly stringent rules on companies that grow large and complex enough to pose a threat to the financial stability of the United States.” The Fed can force big companies to raise new capital.

Republican: The proposal says the new Council for Consumer Financial Protection will have systemic oversight. It also says that there were “failings of regulation and oversight by the Federal Reserve in the recent crisis” and therefore it creates a director of regulation at the Fed, a presidential appointee. He or she is “required to testify annually and report to Congress and the public concerning Fed supervision and regulation of” big and systemically important financial institutions and risks.

Today, the OCC’s deputy comptroller for public affairs Robert Garsson jumped off the train of government officials suggesting that protecting consumers’ rights would be bad for the economy. Acknowledging that the OCC had played a role in the blocking the president’s plan to create a consumer protection agency independent of other government agencies, Garsson acknowledged the stupidity of the idea that an informed, protected consumer base was bad for an economy made up of those consumers.

“It’s unlikely there will be any meaningful conflicts between safety and soundness and consumer protection,” Garsson said. “The potential for conflicts is very rare.”

That’s right, a government official finally acknowledged that protecting consumers from predatory companies or deliberately non-transparent contracts and relationships might be good for the soundness of an economy still recovering from a tailspin caused by fraud, a lack of consumer understanding, non-transparent markets and financial instruments so complex that even traders didn’t understand them.

Garsson continued.

“It’s hard to say in the abstract what sort of conflicts could arise, though I don’t think there will actually be many instances in which there is a genuine conflict,” he wrote.”But where a conflict does arise, I don’t think that a consumer protection regulator should be allowed to prescribe a standard that reduces the safety and soundness of an institution. And I’m not talking about consumer protection provisions that simply reduce a bank’s profitability — that’s not something I would characterize as conflicting with safety and soundness, and a statutory provision could say so.”

That’s right, someone in the government acknowledged that a bank’s profitability wasn’t the sole standard for safety and soundness of the economy! That is some change to believe in.