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Senate to Move on CFPA, Regulation Reform

With financial services reform put on a fast track out of the House Financial Services Committee, the Senate is preparing to move as well. From Bloomberg:

Senate Banking Committee Chairman Christopher Dodd said he will unveil legislation next week to overhaul regulation of U.S. financial markets without Republican support after failing to reach a compromise.

The more cloistered Senate bill is likely to differ in significant ways from the House bills that have already reach the house floor. Nevertheless, reform could pick up in speed over the next few weeks, as word has come down from the White House that something needs to be passed. Anything really. Just something to get the president a policy win that he can tout before the year is up.

Dodd has complained that GOP members haven't been willing to deal. But it doesn't appear that he has been willing to budge much either. On the issue of consumer protection, left-wing democrats in the House and Senate seem dead set on a stand alone agency. Blue Dogs are getting strong armed into it. But there isn't any reason for one other than the political gain. From Bloomberg again:

Senator Richard Shelby, the committee’s top Republican, opposes a standalone consumer agency, which is a priority for Dodd and the administration. The agency would police banks for lending abuses in mortgage and credit-card lending. [...]

Shelby, of Alabama, today said he could support a consumer agency if it is part of a bank regulatory agency, rather than a separate entity proposed by Obama and backed by House Democrats. “That would be something we could discuss very positively,” Shelby told reporters in Washington. A separate agency is “a dangerous thing for safety and soundness.”

A stand alone consumer financial protection agency of any kind could be extremely damaging to the country, especially small businesses. (See here for my host of reporting on CFPA.) Banking and consumer issues are very complimentary, and should be kept together. Taking them away from the Fed and put into a stand alone agency isn't a bad idea in principle, though it could turn south quickly if handled improperly.

Dodd says he wants to have the bill out of committee by December. If that happens, financial services reform may be complete by year's end. It has seemed unlikely until the past few weeks with the White House now breathing heavily down Dodd and Frank's necks.

Anthony Randazzo is Director of Economic Research

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