House poised to vote on overhaul of financial regulation

The bill gives government new powers to rein in 'too big to fail' companies and to protect consumers. The House is set to vote on the financial-regulation measures Friday.

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Negotiations over this provision delayed floor debate on the bill, and they entailed the Treasury Department and speaker’s office working out a compromise. It was backed by the Financial Services Roundtable, a leading industry group. But critics, including consumer groups, cautioned that the provision sets a ceiling on state consumer protections.

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“We found out in the 1990s that often the federal regulators won’t move when they plainly should. Blocking the states from moving means you will repeat the experience,” says Thomas Ferguson, a political scientist at the University of Massachusetts in Boston.

But the top issue for business groups – as well as the consumer interests opposing them – is the fate of the proposed Consumer Financial Protection Agency. According to critics, a new federal agency, especially in the current political climate, could exert too strong a hand and suppress financial innovation and jobs.

Freshman Rep. Walt Minnick (D) of Idaho, a member of the fiscally conservative Blue Dog Coalition, is proposing an amendment to ax the proposed CFPA. Instead, he proposes a 12-member Consumer Financial Protection Council made up of existing offices, including the secretary of Treasury, secretary of Housing and Urban Development, the chairman of the Federal Reserve, and other federal and state regulators.

Business groups, including the US Chamber of Commerce and the Financial Services Roundtable, strongly oppose the CFPA and endorse this amendment. “While we support consumer protections, we think there’s a more effective way: to use existing regulators and elevate consumer protection as a core mission,” says Scott Talbott, chief lobbyist for the Financial Services Roundtable.

Republicans are expected to support the Minnick amendment but oppose the overall bill.

“What we’ve seen from the Democrats is an attempt to spend our way into jobs, to borrow our way into jobs, and now an attempt to bailout our way into jobs,” said Rep. Jeb Hensarling (R) of Texas during Thursday night’s floor debate. “The result is the first trillion-dollar deficit in our nation’s history and a tripling of our national debt.”

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