Emboldened by House Financial Services Chairman Barney Franks move to limit the breadth of President Barack Obamas proposed regulatory reforms for the financial industry, financial services lobbyists are turning up the pressure on moderate Democrats on the panel to push for more concessions. Their goal is to include a federal pre-emption provision in the legislation that would exempt banks from having to comply with state consumer protection laws.
But consumer groups continue to resist efforts to alter Obamas reform proposal.
Frank sent a memo to House Democrats on the panel Tuesday laying out a series of changes that hell seek to the Obama administrations plan to address many concerns raised by industry groups and Republicans.
The Massachusetts Democrats plan would exempt many nonfinancial institutions like merchants, retailers, doctors and lawyers from oversight by the proposed
Consumer Financial Protection Agency. It also would remove a requirement for financial institutions to provide plain vanilla loans like 30-year fixed-rate mortgages as well as the requirement of a reasonableness standard that would have forced financial institutions to discern whether consumers understand the products that they are offered.
Treasury Secretary Timothy Geithner, who testified before the House Financial Services panel Wednesday, said he supported Franks modifications.
Limiting the industries affected by the agency quelled potential opposition from several powerful interest groups like trial lawyers and retailers that could have spelled disaster for moving the bill forward.
Its very clear the chairman is doing everything he can to narrow any potential collateral effects that would be either unintended or politically harmful to getting this scheduled for the floor, said Paul Equale of Equale & Associates, a Washington, D.C., public affairs firm.
Despite the changes, financial services lobbyists are continuing to oppose the CFPA, arguing that adding another regulatory agency for banking entities would be too cumbersome.
The idea that a new agency is going to create a new examination system for banks and a new examination system for nonbanks is just daunting, said Steve Verdier of the Independent Community Bankers Association.
Scott Talbott of the Financial Services Roundtable agrees.
Were for the C-F-P, just not the A, he said. We believe the better answer, the more effective answer is to strengthen the existing regulatory structure.
Still, Talbott acknowledged that thwarting the entire CFPA is an uphill battle given the political environment.
The FSR is part of a larger coalition of trade groups headed by the U.S. Chamber of Commerce lobbying against the CFPA. The chamber signaled Wednesday that it will not change its position despite Franks proposed modifications to the reform plan.
While we appreciate Chairman Franks recent changes to the CFPA, we continue to believe that the CFPA is the wrong way to enhance consumer protections and will have significant unintended consequences for consumers, for the business community and the overall economy, David Hirschmann, president and CEO of the chambers Center for Capital Markets Competitiveness, said in a statement.
Industry lobbyists are pushing moderate Democrats to take up the torch on pre-
emption in order for the provision to ultimately become part of the reform package in the Senate.
Pre-emption is a major sticking point in the whole piece of legislation, said Richard Hunt, head of the Consumer Bankers Association. The last thing we need are different sets of rules in the national banking system.
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