BofA Won’t Oppose Obama’s Consumer Protection Agency (Update1)

Feb. 2 (Bloomberg) -- Bank of America Corp., the nation’s largest bank, vowed that it won’t oppose President Barack Obama’s plan to create the Consumer Financial Protection Agency.

Chief Executive Officer Brian Moynihan informed White House and U.S. Treasury Department officials of the company’s stance last month, bank spokesman James Mahoney said today in an interview. While not endorsing the agency, the Charlotte, North Carolina-based bank agrees with the “policy direction,” Mahoney said.

“We’ve made it clear to various organizations of which we are part that we aren’t lobbying against the agency,” Mahoney said. The bank also isn’t promoting the concept, leaving the decision to Congress and U.S. agencies, he said.

The stance may put Moynihan at odds with rival bankers, whose lobbyists have spent millions of dollars to head off the new agency. Moynihan, 50, has sought to improve relations with regulators since taking over on Jan. 1 from Kenneth D. Lewis as CEO. Lewis clashed with U.S. officials about the bank’s $45 billion bailout and its purchase of Merrill Lynch & Co.

Officials at the Treasury who met with Moynihan were pleasantly surprised by the bank’s position, according to a department spokesperson. The Treasury is watching to see if groups that represent the company in Washington also refrain from opposing the new agency, the spokesperson said.

Moynihan wants regulators focused on making products and activities transparent, simple and fair without singling out one type of financial institution, Mahoney said. The bank opposes proposals that would allow state regulators to overrule federal guidelines, a process that would be inefficient for national banks, he said.

Bank Legislation

A House of Representatives bill to overhaul bank regulations, approved in December without support from Republicans, would create an agency empowered to ban financial products deemed too risky or abusive. Senate passage isn’t assured and Banking Committee Chairman Christopher Dodd, a Connecticut Democrat, and Sen. Richard Shelby of Alabama, the committee’s ranking Republican, are discussing alternatives, the Washington Post reported Jan. 31, citing unnamed Senate sources.

President Obama on Jan. 19 called the agency a “non- negotiable” part of his regulatory reform effort. The Consumer Federation of America views it as “our top priority,” legislative director Travis Plunkett said. More than 200 consumer groups banded together to support the agency, he said.

Bank Lobbies

“It’s disconcerting that one of the largest institutions would not be coming out resoundingly opposed to the CFPA in light of how this new panel would wreak havoc for consumers,” said Scott Garrett, a New Jersey Republican on the House Financial Services Committee. “This is the dilemma that you find yourself in when institutions become effectively beholden to the government -- they’re not going to bite the hand that feeds them.”

The U.S. Chamber of Commerce and American Bankers Association have organized TV ad campaigns and encouraged members to write more than 140,000 letters to congressmen against the agency, contending it is too costly and unneeded.

“Our industry group is beyond adamantly opposed to the CFPA; we’d use whatever word is stronger than adamant,” said Thad Woodard, president of the North Carolina Bankers Association, whose members include Bank of America. “We fervently believe those powers are embodied in the agencies already.”

Perceptions

JPMorgan Chase & Co. CEO Jamie Dimon said “we are not in favor of a new agency” in a conference call with analysts in December. “The new agency is just a whole new bureaucracy,” he said. New York-based JPMorgan Chase is the second-biggest bank in the U.S. ranked by assets.

“The big banks don’t want to be perceived as anti- consumer,” said Ron Glancz, chair of the financial services group at Venable LLP, a Washington law firm. “A lot of this may be about playing defense, because Washington is controlling the destiny of our banking industry.”

To contact the reporter on this story: David Mildenberg in Charlotte at dmildenberg@bloomberg.net