Creation of New Federal Consumer Protection Agency Faces Opposition
A regulatory overhaul proposed by President Barack Obama will likely include the creation of the Consumer Protection Agency. However, the plan will have to survive political opposition to go into effect. The House of Representatives passed the bill, but whether it will survive Congressional negotiations remains to be seen. Republicans and major financial institutions, such as JP Morgan Chase & Co., oppose the new regulatory organization. However, House Financial Services Committee Chairman Barney Frank said the agency is an important part of the President’s proposal, according to a report in Business Week.
Republicans oppose the new agency, saying it is an example of big government run amok, whereas Democrats claim the agency is essential for protection against the kind of business practices that led to the current financial downturn. Alabama Sen. Richard Shelby is working on a competing version of the bill that replaces the Consumer Protection Agency with a new bank regulator, a move intended to help save taxpayer dollars.
According to the Northpoint Mortgage Lenders, oversight of financial firms has become a chief concern of Congress since the collapse of the subprime mortgage market contributed to the failure of major investment groups, which the government bailed out to the tune of $182.3 billion. Frank, who proposed the consumer agency legislation in December, stated that as of now, the government institution assigned to protect consumers is the Federal Reserve, a job they are not performing adequately.
The Obama administration’s proposed watchdog to protect against abuses in lending is at the center of Senate negotiations on the bill, which would create new regulations for financial institutions. Senate Banking Committee Chairman Christopher Dodd, a Connecticut Democrat, expects an unveiling of a new version of the bill with amendments being discussed in early March. Dodd is reportedly seeking a bipartisan compromise on the bill.