House votes to check new consumer agency

AP News
Posted: Jul 21, 2011 8:08 PM
House votes to check new consumer agency

The House greeted the official opening Thursday of the new agency to protect consumers from financial abuse by voting to change its structure and reach.

Republican sponsors said they were trying to make the Consumer Financial Protection Bureau more transparent and accountable. Democrats said Republicans wanted to cripple the agency before it gets on its feet.

The 241-173 vote, mainly along party lines, sends the legislation to the Democratic-led Senate, which is not expected to support it. The White House has issued a veto threat, saying the bill would "expose American consumers and the nation's economy to the same risks that led to the 2008 financial crisis."

Despite the poor prospects of the legislation, the debate gave the two parties a chance to air their differences on a central part of the financial system overhaul act that President Barack Obama signed into law exactly a year ago. The consumer protection office officially opened Thursday without a director to lead it as lawmakers continued to argue over its structure and purpose.

The legislation would replace the director of the new agency with a five-person commission and make it easier for federal regulators to override regulations created by the agency.

It states that the Financial Stability Oversight Council, made up of 10 senior financial officials including the head of the Federal Reserve and the Treasury secretary, must revoke any regulation put forth by the consumer protection bureau that is inconsistent with the safe and sound operations of U.S. financial institutions. The bill reduces from two-thirds to a simple majority the vote of the oversight council needed to overturn a bureau ruling.

The measure would also postpone the transfer of regulatory powers to the agency until the Senate has confirmed the chair of the five-person commission.

Earlier this week Obama nominated Richard Cordray, the former Ohio attorney general who is the bureau's enforcement chief, to become director. But all 47 Senate Republicans have said they will block confirmation of any nominee unless Obama agrees to change the bureau's structure.

Consumer advocates and many Democrats had pushed for Obama to nominate Elizabeth Warren, the Harvard law professor who came up with the idea of the consumer protection office and has led the efforts to get the agency running over the past year. But Warren has met opposition among Republicans and financial industry groups who have resisted creation of the watchdog agency.

House Banking Committee Chairman Spencer Bachus, R-Ala., said the commission was preferable to a single director whom he referred to as "an unaccountable czar" given "unmitigated discretion to issue rules to ban financial products." His office said the director would have authority over more than 1,000 government employees and the power to decide which financial products and services will be available to consumers.

Bachus insisted that the legislation "does not gut the Consumer Financial Protection Bureau. It is not anti-consumer."

Democrats said the leadership change would make the agency more bureaucratic and less responsive to consumer issues, and that giving regulators greater power to stop agency rules would undermine its purpose.

"This legislation is part of Republicans' stated goal to dismantle Wall Street reform _ protecting special interests but leaving Americans unprotected from another crisis," the House's second-ranked Democrat, Steny Hoyer of Maryland, said.

"This is as close as they dare come now, because of public opinion, to abolishing the whole agency," said Barney Frank of Massachusetts, top Democrat on the banking panel.

The agency was created to shield consumers from abuses involving mortgages, credit cards, lending and other financial services.

The Treasury Department said Thursday that on its opening day the agency's Consumer Response Center began accepting credit card complaints on its new website, It said the agency would also refer distressed homeowners to housing counselors and, over the coming months, expand its operations to handle complaints about other consumer financial products.