Dodd's Feeble "Consumer Protection" Bill

by: Jon Kantrowitz

Fri Mar 12, 2010 at 12:46:15 PM EST

Senate banking committee Chairman Christopher J. Dodd (D-Conn.) said Thursday that he will move forward next week with sweeping legislation to revamp the nation's financial regulatory system, despite failing to resolve key differences with Republicans.

Although Dodd said he will continue bipartisan talks, by unveiling the measure Monday, he is placing pressure on GOP senators to reach a compromise by creating a sense of urgency and by forcing the closed-door debate into the open. Republicans opposed to key elements of the bill, such as new protections for consumers, would have to make their case publicly.

After months of talks, the two sides have been unable to reach agreement over the enforcement powers of a new consumer watchdog, the scope of the Federal Reserve's regulation over banks and the financing of a new authority that would allow the government to wind down large, troubled financial firms without cost to taxpayers. But with the process dragging, Dodd is introducing the bill so his committee could begin discussing the measure before the Easter recess in early April.

And yet, and yet, and yet - he's still putting consumer protection in the worst possible place, the Federal Reserve, instead of in the hands of an independent agency, which is where all consumer advocates want it:

One of the major sticking points between Dodd and Corker has been the enforcement powers of the consumer watchdog, which is likely to be housed at the Federal Reserve in the forthcoming bill. While Corker said he thought the two sides had reached a deal on the matter, other government sources disagreed. Republicans wanted an elaborate appeals process to resolve conflicts between the consumer agency and regulators charged with keeping banks in good health. Dodd expressed openness to the idea but never agreed to it.

So the Republicans, having succeeded in defanging consumer protection, now are fighting to make sure not only the teeth but the gums are removed as well. And Dodd is open to the idea!

The Merkley-Levin legislation also embraces President Barack Obama's call for curbing the size of the nation's financial behemoths, requiring large, interconnected nonbank financial firms to keep more capital on hand and place a firm ceiling on the amount of proprietary trading they can do...

Joining Merkley and Levin in supporting the Obama administration's push for these rules are Sens. Sherrod Brown (D-Ohio), another member of the banking committee; Ted Kaufman (D-Del.) and Jeanne Shaheen (D-N.H.).

The Obama administration proposal is widely expected to be left out of the bill Dodd hopes to unveil in the coming days.

Merkley and Brown were among those Democrats who expressed strong concerns about another concession Dodd is making to Republicans: housing a new consumer watchdog in the Federal Reserve, which has been widely criticized for failing to use its existing consumer protection powers to curb predatory lending practices - especially out-of-control subprime mortgage lending - in the lead up to the financial crisis.