Overhaul opponents highlight turf battles

As the battle over the proposed Consumer Financial Protection Agency heats up, opponents are focusing on regulators' qualms to make their point instead of emphasizing complaints of the industry that stands to come under tighter scrutiny.

The outline can be seen in recent letters to House Financial Services Committee ranking member Spencer Bachus, R-Ala., on the Obama administration proposal, which would create an agency modeled on the Consumer Product Safety Commission for rule-writing, examination and enforcement for financial products such as credit cards, mortgages, payday loans and credit insurance products. Bachus is leading the charge against legislation to create the agency, which is part of the administration's plan to revamp the nation's financial regulatory structure. It is slated to be marked up next month in his committee.

FTC Commissioner Thomas Rosch, a Republican, has told Bachus the Obama administration is asking the public to buy a "pig in a poke." In a July 16 letter, he wrote that the only certainty "is that the creation of this new agency would result in considerable delay in protecting consumers, wasteful and inefficient consumer protection law enforcement, and very substantial if still indeterminate cost."

Another FTC Commissioner, William Kovacic, wrote that the proposal to give the FTC backstop authority to bring enforcement actions against financial firms would be "anything more than a mirage."

FTC Chairman Jon Leibowitz, appointed by President Obama, does not see the proposal as a threat and is working with the Treasury Department to ensure the bill would ensure his agency would even gain some new authority, such as streamlined rulemaking and the ability to impose civil penalties for unfair and deceptive practices.

The regulators' opposition to the CFPA has also been voiced by the Federal Reserve and Comptroller of the Currency John Dugan, who said in an Aug. 4 letter that the proposed agency's rulemaking authority would be undercut by allowing states to enact even tougher laws. Furthermore, he wrote, it would not address safety and soundness concerns raised by bank regulators.

The pushback from regulators has been so severe that Treasury Secretary Timothy Geithner reportedly pushed them in a contentious July 24 meeting to get on board the administration's plan. The regulators' concerns have given a boost to a coalition of financial groups opposing the proposal, taking the focus off the industry's actions on some abusive credit card practices and predatory mortgages that played a role in the banking crisis and turning it toward interagency turf battles and power plays.

House Financial Services Committee Chairman Barney Frank, D-Mass., has said it is not surprising that regulators are pushing back against a plan that would take away some powers from their respective agencies. But he believes the bill should pass because the existing system has too many lapses.

Lawmakers might be forced to make further concessions to regulators as the bill moves forward. For example, FDIC Chairwoman Sheila Bair, who has a good relationship with Frank and Senate Banking Committee Chairman Christopher Dodd, D-Conn., has spoken out in favor of such an agency. She added examination and enforcement in consumer protection should be retained by banking regulators and not given to the proposed agency.