U.S. Representative Barney Frank, the lead negotiator on the financial-overhaul legislation, has accepted the Senate’s proposal to house a new consumer protection bureau at the Federal Reserve.
Frank, chairman of the House Financial Services Committee, will make the concession as part of a package of changes to be debated tomorrow, Steve Adamske, spokesman for the Massachusetts Democrat, said today. Frank had supported creating a standalone agency, an idea included in the financial bill passed by the House in December.
President Barack Obama originally made a standalone agency a centerpiece of his proposal for revising the government’s oversight of Wall Street. Under the Senate plan, the bureau would have independent authority to write and enforce rules about consumer lending in mortgages, credit cards and other financial products while being housed at the Fed.
“The way the Senate provision is drafted, it does give the bureau a significant degree of independence,” said Gilbert Schwartz, a former Fed attorney and a partner at the law firm Schwartz & Ballen LLP in Washington.
The consumer agency was a main sticking point between Republicans and Democrats crafting the Senate version of the bill. Republicans wanted existing regulators to continue policing banks for compliance with consumer-protection rules. They also resisted a standalone agency, proposing instead that it be contained at the Federal Deposit Insurance Corp. or the Fed.
Frank’s package of proposed changes to the Senate bill included restoring a measure that would exclude automobile dealers from oversight by the bureau. The exemption was included in the House version of the bill but was stricken by the Senate. The White House wants auto dealers to fall under the bureau’s jurisdiction. The measure is likely to be a subject of debate when negotiators meet tomorrow.
In addition, Frank proposed putting payday lenders, check cashers, money remitters and private student-loan providers under the supervision of the consumer bureau.
The Obama administration in February backed away from a standalone agency after the issue derailed negotiations between Senate Banking Committee Chairman Christopher Dodd, a Connecticut Democrat, and Alabama Senator Richard Shelby, the banking committee’s top Republican.
“The President has been clear that a consumer protection agency must be structured so that it can operate independently on behalf of the consumers,” White House spokeswoman Amy Brundage said today in an e-mailed statement.
Obama’s priorities include ensuring the agency has independent funding and authority to write and enforce its own rules, Brundage said.
“We believe that the proposal in the Senate bill meets that standard,” Brundage said.
House and Senate negotiators are entering a third week of talks to reconcile the differences between their two bills. They have said they expect to send completed legislation to Obama by July 4.