White House stepping up defense of consumer agency

Looking to regain the offensive in the overhaul of the nation's financial regulatory structure, the Obama administration has come out swinging on its effort to push for a proposed Consumer Financial Protection Agency, which has been stalled among qualms from moderate Democrats and strong industry opposition.

White House National Economic Council Director Lawrence Summers threw down the gauntlet on Friday when he said that opponents of the agency were running "death panel" ads trying to scuttle it by claiming that the CFPA would be so burdensome that a small business such as a florist would not be able to extend credit to customers.

"Advertisements are being run on behalf of florists and other Main Street merchants suggesting that somehow we envision a regulator that would make it impossible for a florist to extend credit to one of their customers. I doubt very much that any florists are paying for those ads. And I would suggest those ads are the financial regulatory equivalent of the 'death panel' ads that are being run with respect to health care," Summers said during a conference at Georgetown University.

President Obama on Saturday used his weekly address to also weigh in on the debate, specifically taking on big banks. "Not surprisingly, lobbyists for big Wall Street banks are hard at work trying to stop reforms that would hold them accountable, and they want to keep things just the way they are. But we cannot let politics as usual triumph so business as usual can reign," Obama said.

The strategy is a reverse of the path the White House has taken on the healthcare debate, where it allowed Congress to dictate the details and stayed out of the fight until late in the process, when opponents started gaining the upper hand over charges that it would benefit illegal aliens, create death panels and pay for abortions. The Obama administration intends to get ahead of the curve as both House and Senate negotiators are crafting the measure.

"We need to push back, and when you got messengers such as the president and the head of the NEC ... obviously that helps us a great deal," said Ed Mierzwinski, program director for the U.S. Public Interest Research Group.

Though not mentioned by name, Summers was clearly referring to the U.S. Chamber of Commerce's campaign against the CFPA, where it has used an advertisement featuring a butcher who offers credit to his customers. The Chamber claims the proposed agency would collect information about his customers' financial accounts and strip them of their credit choices.

"We think the things that Summers is pushing are consistent with what we support, which is making sure we are going after predatory products, that people aren't exposed to fraudulent products, making sure that disclosures are clear," said Ryan McKee, the Chamber's director for the Center for Capital Markets Competitiveness. "We're just concerned because we don't think this new federal agency necessarily addresses some of the key problems."

The Chamber has focused on what it contends is the broad scope of the proposed agency, particularly on the definition of who is covered in the draft bill proposed by Treasury, arguing it would ensnare businesses that had nothing to do with the financial crisis.

"If they don't intend for them to be covered, then rewrite the legislation so they are not covered," McKee said. "Whether or not they can reassure us that it is not their intent to cover the small businesses, a plain interpretation of this legislation would be they would be covered."

Treasury's draft legislation would give it the power to oversee consumer bank and credit products, taking away such power from various banking regulators who have been criticized for failing to prevent abuses in the mortgage and credit card markets.

It would have the authority to impose fines and refer for criminal prosecution those who engage in unfair, deceptive or abusive acts. It would be able to act when it reasonably concludes the product in question would likely cause "substantial injury" to consumers.

Mierzwinski called the Chamber's campaign misleading, saying the FTC has the power to go after businesses that engage in unfair and deceptive practices, and that it is an effort to shift away the focus on the banks who were responsible for contributing to the financial crisis.

"Anybody who sells products in the financial marketplace should be in the scope. The question is, should the agency be going after little butchers or is it going after big bad banks who are cheating their customers with overdraft fees?" Mierzwinski said.

House Financial Services Committee Chairman Barney Frank, D-Mass., is revising the Treasury draft in an attempt to ameliorate concerns that Blue Dog Coalition and New Democrat panel members have about the measure. For example, Rep. Melissa Bean, D-Ill., is pushing for greater federal pre-emption and Rep. Ed Perlmutter, D-Colo., is concerned about the agency's enforcement powers.

A Financial Services Committee markup on the bill was slated before the August recess but has been delayed until mid-October as Frank worked on concerns that were brought to him. "Some of the moderates don't seem to be looking beyond the talking points," said Travis Plunkett, legislative director of the Consumer Federation of America.

Frank is expected to clarify in his revised draft, which could be released this week, on who will be included under the scope of the bill. He has already said a Treasury provision to require firms to offer "plain vanilla" products will not be included, but, rather, he would push for greater disclosure on the variety of products that are offered in the marketplace.

"They will pass CFPA," said one business lobbyist of the House Financial Services Committee. "I know we can make it much better, but there's no way to kill it." Frank's goal is to get as much of a pro-consumer vehicle out of the House to provide room in negotiations with Senate Banking Committee Chairman Christopher Dodd, D-Conn., who must get Banking ranking member Richard Shelby, R-Ala., on board to pass a bill out of the Senate.

Dodd insists that any beefed-up consumer protection must be done through an independent agency and not carried out among various regulators. "For him, the line in the sand is making it an independent agency," a Dodd aide said. "If everybody is responsible for consumer protection, everybody makes it their last priority."