Consumer Financial Protection Agency Faces Crucial Vote

Lawmakers in the U.S. are scheduled to vote today on a landmark financial reform bill, including whether to create a Consumer Financial Protection Agency

In a twist, Rep. Walt Minnick, D.-Idaho, yesterday proposed scrapping the CFPA and instead relying on a council of existing regulatory agencies. Unsurprisingly, consumer rights activists aren't pleased. Ed Mierzwinski, consumer program director for the U.S. Public Interest Research Group, says the plan would hand responsibility for protecting people from abusive financial products and services to a "coalition of the unwilling."

The CFPA is likely to pass. But other leaks are opening in the Wall Street Reform and Consumer Protection Act. In a victory for financial services firms, House Democrats added language to the bill that bars U.S. states from imposing tougher consumer protections than those mandated by the federal government.

The amendment, sponsored by Rep. Melissa Bean, D.-Ill., gives the Office of Thrift Supervision and the Office of the Comptroller of the Currency (which under the bill would be absorbed into OTS) greater authority to preempt state consumer protection laws.

That's a problem. These regulatory agencies don't have the vaguest idea of how to protect consumers (Their record of policing banks is hardly any better.) And over the years, many states have proved much far more aggressive than the feds in policing the financial industry.

Why would Bean do something that exposes consumers, some of whom may even be her constituents, to harm? Here's one theory:

It's because the three-term Illinois congresswoman and leader in the New Democrat Coalition has pocketed almost $2.2 million since she's been in Congress from the banking and financial services interests she oversees as a member of the House Financial Services Committee, according to the Center for Responsive Politics, including $338,125 so far this year.

Not that the fight ends here. With the Senate gearing up to debate its own financial reform bill, an official with the U.S. Chamber of Commerce, which opposes the proposed agency, told Congressional Quarterly that the close vote "demonstrates that there is support for an alternative to new government bureaucracy, and gives us fresh momentum for an open and deliberative debate. . . ."