Consumer Law

Some Bad News Buried in the Dodd Financial Reform Bill?

By Brian Wolfman

The financial reform bill introduced by Sen. Chris Dodd on Monday would not create an independent Consumer Financial Protection Agency as does the financial reform bill passed earlier by the House of Representatives. Rather, Sen. Dodd's bill would create a new bureau within the Federal Reserve. Not to worry. We were told that this didn't matter much because the bureau would be truly independent of the Fed, with separate funding and its own rulemaking and enforcement authority.

Maybe not. Credit Slips has posted a short piece by University of Connecticut law professor Pat McCoy that explains that the Dodd bill includes an "obscure measure that would fatally hamstring the [Fed's] new 'Bureau of Consumer Financial Protection.'" What is it you ask? I'll let McCoy tell you:

Today?s bill, however, would gut both objectives [that is, consumer protection and the safety and soundness of the banking industry] by giving any federal banking regulator the unprecedented right to appeal consumer protection rules issued by the BCFP to a new Financial Stability Oversight Council, made up in part of ? guess who? -- federal banking regulators. The Council could overturn any BCFP rule by a 2/3 vote[.] ... In effect, the bill hands a nuclear option to the same federal banking regulators who failed to protect consumers and the financial system during the housing bubble.

Yikes!

Full post as published by CL&P Blog on March 17, 2010 (boomark / email).