When Sen. Christopher Dodd (D-Conn.) last week announced that he would move forward with a consumer protection bill without seeking Republican support on the Senate Banking Committee, there was a tentative sense of progress in the room of housing advocates and practitioners attending the annual National Community Reinvestment Coalition conference in Washington, DC. People were hopeful that a new bill with “teeth” would trump the existing political compromise of a Consumer Financial Protection Agency (CFPA) housed at the Fed or Treasury, and replace that with an agency that had independent regulatory oversight – preferably one with enforcement power.
But that independent agency is not part of the version of the Dodd bill that was handed down today, where a new CFPA — a consumer financial products regulator — would be housed at the Federal Reserve, amid the protests of many Democrats who have argued for a free-standing agency saying the Fed had the power to regulate financial products for years, but failed to do so. Housing the agency at the Fed appears to be an effort to get Republicans on board who have opposed an independent CFPA. Nonetheless, The Washington Post reports that the Dodd bill represents “the biggest overhaul of regulations since the New Deal.”
But for supporters of an ambitious overhaul once proposed by President Obama, including the Fed’s own consumer advisory council, the Dodd bill is something of an anticlimactic letdown. Yes, any Consumer Protection Financial Agency is good on paper, but will housing it within the Fed render it toothless? NCRC’s John Taylor, who made use of a conference luncheon to conduct an impromptu phone bank last week at NCRC’s convention, flooding the Congressional switchboard with calls in support of an independent CFPA, is not pleased:
“Putting the CFPA at the Federal Reserve, as has been proposed, will be more of a waste of taxpayers’ money because we’ll have to pay for the appearance of protection without getting any. Had the Fed exercised their authority and enforced consumer protections, they could have nipped the foreclosure crisis in the bud. Now to turn over consumer protections to the very people who allowed the abuses to happen is simply beyond belief.”
Taylor wrote on CFPA and Community Reinvestment Act modernization in the most recent issue of Shelterforce. We’ll have more response and analysis on the Dodd bill over the next several days.