Republicans in rear guard action against new financial industry legislation
This kind of thing is driving the Democrats and Obama crazy. Republicans on the senate Banking Committee have dug in their heels on the creation of a "consumer protection agency" that many feel would make credit harder to get and place unreasonable burdens on financial services companies.
Sewell Chain writing in the New York Times:
"I fully support enhancing both consumer protection and safety and soundness regulation," Mr. Shelby said. "I will not support a bill that enhances one at the expense of the other, however. In order to strike the appropriate balance they must be integrated with each other, not separated from each other."President Obama put forward a package of regulatory changes last June, and the House passed a sweeping overhaul in December, largely along partisan lines.
The House bill would, among other things, create a council of regulators to oversee systemic risk, establish a process for dissolving large institutions without requiring government bailouts, give shareholders an advisory vote on executive pay, strengthen the Securities and Exchange Commission's power to protect investors, regulate over-the-counter derivatives and tighten rules for mortgage lenders and credit rating agencies.
Many, if not most, of those provisions have attracted bipartisan support.
But a proposal for a separate agency with power to issue regulations governing consumer financial products has emerged as the main sticking point. President Obama has expressed support for the notion, which is contained within the House bill.
Several people involved in the Dodd-Shelby negotiations, who spoke on the condition of anonymity out of deference to Mr. Dodd, said the chairman had agreed in principle to concede a new agency in favor of a new consumer protection unit within an existing regulatory body. But these people said Mr. Dodd and Mr. Shelby could not agree on the degree of independence of that unit.
As Ed Lasky notes in his piece on this new consumer protection racket, the agency would have extremely broad powers to penalize businesses who didn't thoroughly explain a mortgage or an investment opportunity to a customer. In fact, even offering the product to a consumer who was not sophisticated enough - in the opinion of the new agency - would be grounds for sanction.
This kind of draconian, "Sword of Damocles" hanging over the head of financial service employees is worth blowing up negotiations for. Let's hope Republicans stick to their guns and prevent another government growing agency from being born.
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