The Banking Committee took less than an hour to pass the bill — along a party-line vote of 13 to 10 — and send it to the chamber floor. The quick process is an indication that Republicans, who’ve introduced hundreds of amendments designed to dilute the reforms, plan to stage their fight on the Senate floor, where they’ll likely have more cover from conservative-leaning Democrats who’ve historically protected the banking industry.

A Banking Committee summary of the legislation follows the jump.

Consumer Protections with Authority and Independence: Creates a new independent watchdog, housed at the Federal Reserve, with the authority to ensure American consumers get the clear, accurate information they need to shop for mortgages, credit cards, and other financial products, and protect them from hidden fees, abusive terms, and deceptive practices.

Ends Too Big to Fail Bailouts: Ends the possibility that taxpayers will be asked to write a check to bail out financial firms that threaten the economy by: creating a safe way to liquidate failed financial firms; imposing tough new capital and leverage requirements that make it undesirable to get too big; updating the Fed’s authority to allow system-wide support but no longer prop up individual firms; and establishing rigorous standards and supervision to protect the economy and American consumers, investors and businesses.

Advanced Warning System: Creates a council to identify and address systemic risks posed by large, complex companies, products, and activities before they threaten the stability of the economy.

Transparency & Accountability for Exotic Instruments: Eliminates loopholes that allow risky and abusive practices to go on unnoticed and unregulated – including loopholes for over-the-counter derivatives, asset- backed securities, hedge funds, mortgage brokers and payday lenders.

Federal Bank Supervision: Streamlines bank supervision to create clarity and accountability. Protects the dual banking system that supports community banks.

Executive Compensation and Corporate Governance: Provides shareholders with a say on pay and corporate affairs with a non-binding vote on executive compensation.

Protects Investors: Provides tough new rules for transparency and accountability for credit rating agencies to protect investors and businesses.

Enforces Regulations on the Books: Strengthens oversight and empowers regulators to aggressively pursue financial fraud, conflicts of interest and manipulation of the system that benefit special interests at the expense of American families and businesses.

President Obama’s economic team is now open to housing the consumer regulator inside another agency, such as the Treasury Department, though they still prefer a stand-alone agency. In either case, they are insisting on a regulator with political autonomy and real teeth so it can effectively enforce rules designed to protect consumers of mortgages, credit cards and other financial products.

Politically, this was probably inevitable. Republicans are unanimously opposed to a new stand-alone agency, arguing that it would represent just another lumbering bureaucracy incapable of tying its own shoes. They fear it would become the EPA of the finance world (i.e., that it would hinder companies’ ability to do exactly what they want). They aren’t going to vote for such a plan, particularly since Sen. Bob Corker (Tenn.) — the Republican leading the negotiations with Banking Committee Chairman Chris Dodd (D-Conn.) — is as adamantly opposed as the rest of his caucus.

Translation: The banks may be unpopular, and they may be the reason that the global economy collapsed, but their influence over lawmakers still ensures that they’ll get most of what they want on Capitol Hill.

“What you don’t want to have in my opinion is a consumer protection agency that’s free standing,” Corker said. “Nor do you want one that is inside another entity but acts as if it’s freestanding.”

What does that leave? Corker said he was looking at ways to carve out a consumer protection unit within the new bank regulator proposed by Dodd, Bloomberg reports.

Add the CFPA to the long list of “things Democrats want that they won’t get.”

The president still believes it is a great priority to have the independent authority to ensure that consumers in this reform are protected from the type of loans that we’ve seen happen that have led to massive foreclosure, the types of tricks with credit cards that we had seen in the past. …  So the president continues to be a very strong supporter of that function of the reform bill that we sent to Congress.

Pressed about whether it should be a standalone agency, Gibbs hedged a bit, saying it would have to have “independent authority.” The question remains: Will any Republicans — notably Sen. Bob Corker (R-Tenn.), who has taken the GOP lead on negotiations — get on board?

While I still hope that we will ultimately have a consensus package, it is time to move the process forward.

I have instructed my staff to begin drafting legislation to present to the committee later this month.

There’s been a great deal of speculation about whether the retiring Dodd would use his newfound freedom to go populist with his financial reform plans in a way that he might not have been if he’d sought re-election. That is, would the Connecticut Democratic insist on the creation of a consumer financial protection agency — as House Democrats, President Obama and consumer advocates are hoping for? Or would he scrap that plan in the name of getting Shelby on board — as he hinted at last month?

Today’s announced doesn’t offer any answers, but Dodd’s plan to move forward without Shelby certainly leaves the advocates with more hope than moving forward with him.

Yet, according to Reuters, that’s precisely what has happened.

Geithner, Reuters says, “has expressed some skepticism behind closed doors about the broad bank limits proposed on Thursday by his boss, President Barack Obama, according to financial industry sources.”

The sources, speaking anonymously because Geithner has not spoken publicly about his reservations, said the Treasury chief is concerned the proposed limits on big banks’ trading and size could impact U.S. firms’ global competitiveness.

Some economists are already doubting the effectiveness of the proposed reforms to prevent the types of lending that led to the economic collapse. That failure is all but guaranteed if even the administration’s own finance officials aren’t on board.

]]> http://washingtonindependent.com/74537/report-geithner-already-grumbling-about-obamas-proposed-bank-reforms/feed 5 http://washingtonindependent.com/74041/dodd-to-scrap-the-consumer-protection-agency http://washingtonindependent.com/74041/dodd-to-scrap-the-consumer-protection-agency#comments Fri, 15 Jan 2010 14:45:33 +0000 Mike Lillis http://washingtonindependent.com/?p=74041 When Sen. Chris Dodd (D-Conn.), chairman of the Banking Committee, announced recently that he wouldn’t seek reelection this year, the move was strangely interpreted as a boost for Democratic proposals to rein in the finance industry — proposals that include the creation of a new consumer More...

“[The repeal] was a recipe for disaster because these banks were empowered to make large bets with depositors’ money and money they didn’t really have,” Rep. Maurice Hinchey (D-N.Y.), who sponsored the new bill, said in a statement.

When many of those bets, particularly in the housing sector, didn’t pan out, the whole deck of cards came crumbling down and U.S. taxpayers had to come to the rescue. The absence of the protections in the Glass-Steagall Act essentially turned these financial giants into quasi-government entities because they were only able to survive the recent collapse with government assistance.

Hinchey’s proposal would force the giants of Wall Street to choose whether they wanted to be commercial banks or investment houses, but they couldn’t be both. (A simple lender, for example, couldn’t also be an underwriter.) Co-sponsors include Democratic Reps. John Conyers (Mich.), Peter DeFazio (Ore.), Jay Inslee (Wash.) and John Tierney (Mass.).

The House Rules Committee will meet Tuesday to consider the proposal before it can move to the chamber floor as part of a larger tax bill the Democrats have to pass by the end of the year.

Yesterday, industry representatives held a conference call with reporters boasting about just how effective they’re fight against the proposed reforms has been. Washington Post columnist Dan Milbank today captures the essence of the industry’s reasoning:

[T]he argument most likely to prevail for the financial firms on Capitol Hill was offered by Chris Stinebert, [head of the American Financial Services Association]. “Especially now, when we’re in a very, very sensitive time, when the capital markets are just starting to recover,” he said, “introducing a high level of uncertainty in the marketplace could be very detrimental.”

Most of America, though, will have a tough time sympathizing with the alleged misfortunes of Wall Street firms, some of which are posting record profits at the same time that unemployment continues to leap.

With that in mind, Milbank offers his translation of Stineberts argument:

[T]o put it another way: Don’t regulate us now because the economy is still suffering from the mess we made because we weren’t regulated the last time. Chutzpah, it appears, is recession-proof.

“Things were a lot better for the average person in this country when we had usury caps,” Rep. Louise Slaughter (D-N.Y.), head of the House Rules Committee, said in a statement announcing her bill. “Watching how credit card companies have exploited people by increasing rates up to 30 percent and more is criminal and this bill will allow us to put an end to this practice.”

Massachusetts Democratic Reps. John Tierney  and Michael Capuano will co-sponsor the bill.

They have a tough road ahead, for several reasons. (1) Even though it was the finance industry that was primarily responsible for the recent global economic meltdown, there’s a growing reluctance on Capitol Hill to apply strict new regulations just as the banks are re-stabilizing — a circumstance the banks are already celebrating. (2) Although Congress was successful in passing sweeping credit card reforms in May, an amendment to cap interest rates at 15 percent was killed in the Senate. And (3) the banks aren’t going to allow Congress to squeeze a profit source without coming up with creative ways to make up the difference elsewhere. This, The New York Times reported yesterday, is what’s happening in Australia, where card issuers have responded to new regulations by attaching new fees to airline tickets, among other purchases.

“[I]f regulators limit one fee or rate, banks are likely to find another way to keep revenue flowing,” The Times wrote.