Houses Frank May Scrap Overhaul Bill With Feeble Consumer Powers
Senate Republicans should be forced to vote on the proposed compromise that would create a consumer-protection division at the Federal Reserve, which would be a mistake, Frank said yesterday in an interview on Bloomberg Televisions “Political Capital With Al Hunt” broadcast this weekend.
“Im not sure that every Republican today in the Senate wants to stand up and defend the banks against the consumers, which is the way this plays out,” said Frank, a Massachusetts Democrat. “Im not prepared to be complicit in a deal in the Senate that never has these issues debated.”
Senators are crafting a compromise on an idea offered by Senator Bob Corker, a Tennessee Republican, to create a consumer division at the Fed. Senate Banking Committee Chairman Christopher Dodd joined Corker, abandoning a stand-alone Consumer Financial Protection Agency proposed by President Barack Obama in June. Few lawmakers have embraced the compromise.
Frank said he may reconsider the legislation and start over if the consumer agency provision isnt to his liking. “I might,” he said. “It depends.”
After the interview, Frank spokesman Steve Adamske said the lawmaker will review “the totality of the Senate bill” before acting. “We will insist on having a conference where there could be an open and public debate on the provisions of each bill,” Adamske said.
Fed, FDIC Mistake
Any legislation the Senate passes would have to be reconciled with the House before becoming law.
Frank said it “would be a mistake” to give consumer- protection powers to bank regulators such as the Fed or Federal Deposit Insurance Corp. because their mission is to promote banks profitability. “If your primary goal is to ensure that banks are profitable, thats not the best place to put consumer protection,” he said.
Republicans have called the Fed “arrogant, elitist, undemocratic” and “therefore the place where you ought to put consumer protection,” Frank said. “It does not suggest they think highly of consumer protection.”
Frank said the Fed “did an abysmal job” on consumer protection until Chairman Ben S. Bernanke took over from Alan Greenspan in 2006. Bernanke “has done better,” Frank said. “The Fed has been better as a reactor than Alan Greenspan.” Still, Frank would oppose giving the Fed or FDIC such powers.
Sticking Point
Frank said he could support a consumer unit at the Treasury Department, the idea Dodd offered a week ago that was quickly rejected by Republicans. They said putting it at the Treasury would subject it to White House influence.
The agency should have the power to police banks and non- banks, including payday lenders, to write rules and to not be overruled by bank regulators, he said.
Frank said the House and Senate “are close” on the overall legislation that he said will help prevent financial institutions from getting too big and requiring a taxpayer bailout, and will establish a resolution authority to close financial firms that pose a threat to the economy.
“While we do not have a bipartisan agreement yet at all, were getting there, were trying,” Dodd said yesterday in a speech on the Senate floor. “Ive been around here long enough to know that these things can fall apart very easily. Its fragile.”
Continued Uncertainty
There will be “continued uncertainty regarding the future of the bill,” Brian Gardner, an analyst at Keefe, Bruyette & Woods, said yesterday in a research note. “We also expect the regulators to step in with tougher enforcement of consumer protection and revised capital standards.”
Frank predicted the House will approve Obamas proposal to recoup at least $90 billion in U.S. bailout money by imposing fees on large financial firms, and said it probably wouldnt hurt consumers.