US: Industry Takes Aim at Plan to Create Financial Protection Agency
Business and trade-group lobbyists are beating a path to Capitol Hill
this week for the first major battle over the Obama administration's
efforts to overhaul the financial regulatory system.
A coalition of business representatives, who are skeptical about a
proposed Consumer Financial Protection Agency, has met repeatedly in
recent weeks to hone their argument that a new regulator could cause
more harm than good and to strategize about which members of Congress
might be sympathetic to their cause.
These opponents of a new agency have begun visiting members of the
House Financial Services Committee, which plans to take up the proposal
in the coming weeks, and are putting a top priority on centrist
Democrats, according to people familiar with the meetings.
"It's your basic shoe-leather lobbying," said Bill Himpler,
executive vice president for government affairs of the American
Financial Services Association, the trade group for the consumer credit
industry. "This has become front burner -- the number-one issue of our
association, at least for the foreseeable future."
In addition to AFSA, the recent discussions have involved the
American Bankers Association, National Auto Dealers Association, U.S.
Chamber of Commerce, Mortgage Bankers Association and other lobbyists.
They are also courting other organizations, such as those representing
home builders, lobbyists said.
Though the groups represent different industries with often
divergent interests, they share concerns that the new agency proposed
by the administration could intervene in business activities in
overbearing and unproductive ways.
This coalition has solicited pitches from several public relations
firms, including Powell Tate and Direct Impact, to help make their case
through advertising and grass-roots political outreach. There have been
discussions about launching a television campaign similar to the "Harry
and Louise" ads that helped torpedo President Clinton's health-care
plan in the early 1990s, said two people familiar with the meetings.
The Obama administration is seeking to give the proposed agency
broad powers to oversee a range of financial products, from mortgages
to credit cards and checking and savings accounts. Advocates of
creating such an agency, who have formed a large coalition of their
own, say that it would guard Americans from the abusive lending
practices that contributed to the financial crisis, such as
undocumented mortgage applications, the poor disclosure of loan terms,
predatory credit card interest rates and deceptive ads.
Rep. Barney Frank
(D-Mass.), chairman of the House Financial Services Committee, says he
plans to have the panel vote on a bill before Congress's summer recess,
scheduled to begin Aug. 3. He has called the creation of the new agency
"one of our highest priorities."
Steve Adamske, a spokesman for the House Financial Services
Committee, acknowledged that lobbyists and industry groups "are coming
in and making their pitch." But he said that Frank is determined to
create the new agency, and he dismissed criticism from opponents that
policymakers are moving too quickly in creating legislation.
"The need is there," Adamske said, adding that consumer protection
"is at the heart of this financial crisis. It's something we will be
working on judiciously."
Opponents of the agency have been repeating several arguments in
meetings with lawmakers and in media interviews. Business groups warn
that another layer of regulation could increase costs, stifle
innovation and curtail choices for consumers. They complain that an
agency responsible solely for examining consumer financial products
would not be concerned about the health of the firms providing them.
They say the proposal would exacerbate the patchwork nature of current
regulation by setting minimum federal standards that individual states
Few lobbyists predict they can actually prevent the creation of a
new agency given the severity of the financial crisis and the momentum
in Congress for overhauling regulation.
"Politically, it would be difficult to kill it outright," said Scott
E. Talbott, senior vice president of government affairs at the
Financial Services Roundtable, which represents the nation's largest
financial firms. "Our goal is to change the agency, change the
proposal, to where the benefits outweigh the costs. Right now, we
believe it's the other way around."
In addition, opponents, like many lawmakers, are wary of being perceived as anti-consumer.
"We're not for the status quo," Talbott said. "We're for protecting consumers. The question is, what's the best way to do it?"
Administration officials and others who support a new agency say they hold the upper hand in the current debate.
"I don't think it's a surprise that big banks and institutions that
benefited from the status quo want to keep it that way," Michael Barr,
the assistant Treasury secretary for financial institutions, said last
week. "I think it's a horrible position for them to be in. I don't envy
The wave of lobbying efforts this week is the opening round in what
promises to be a long fight. Even if a bill emerges from the House
committee in the coming weeks, the full House would only take up the
legislation after it reconvenes in September. Later in the year, the
debate is expected to move to the Senate, where financial lobbyists
predict that they have a better chance of finding allies and winning
But just because a bigger battle is yet to come, it doesn't mean business lobbyists are writing off this one.
"A lot of intellectual markers will be laid down in the next 30
days," said Steve O'Connor, senior vice president of government affairs
at the Mortgage Bankers Association. "Momentum will start to form
behind different ideas. You want to engage in the education process
early on. It's important to be part of the discussion."
- 104 Globalization
- 106 Money & Politics
- 188 Consumerism & Commercialism
- 208 Regulation