Wall Street Reform Turns to Main Street, Maybe

(March 2) -- Who's looking out for the little guy?

During all the debate over government cures for the financial crisis, billions of dollars in bank bailouts and fiery finger-pointing at greedy executives and heedless regulators, questions about the plight of American consumers have largely gone unanswered.

Repair to Wall Street periodically emerged as a headline issue in Washington, but it always overshadowed accompanying provisions aimed at helping Main Street.

Now those consumer-protection rules are back in play, as a spark of potentially bipartisan financial legislation is kindled in the Senate with support from the White House.

In its push for an overhaul of how the government makes sure banks and financial markets are operating fairly and openly, the Obama administration since last year has argued for the creation of a Consumer Financial Protection Agency. The idea is to set up an independent agency whose sole mission would be to shield Americans from the likes of predatory credit card issuers, subprime loan providers who push prospective homeowners to borrow beyond their means, banks that slap depositors with hidden fees and other companies that sell fraudulent or deceptively risky financial products.

Proponents want the CFPA to:

• Make consumer protection equal to oversight of banking and stock markets after years of playing second fiddle in financial regulation
• Close gaps in rules governing mortgages, credit cards, overdraft fees and other problem areas exposed by the financial crisis
• Write rules for fair and transparent lending under existing laws and have authority to stop the sale of deceptive and abusive consumer financial products and services
• Cover the consumer operations of banks, thrifts, credit unions and nonbank institutions that include payday lenders and money transmitters

Republicans in Congress, and some Democrats, have largely opposed formation of an independent agency, saying it would add to an already complicated bureaucracy of financial regulators and hinder Americans' access to credit.

Still, the House included creation of a CFPA late last year when it passed a bill that would give the government broad powers aimed at preventing the kind meltdown in financial markets that paralyzed lending and damaged the U.S. and global economies in 2008 and 2009. The bill passed the House in December with no Republican support.

Yet work to tighten financial regulations in the Senate never got beyond the banking committee, where Chairman Christopher Dodd tried and failed for months to get Republicans on board. And for a while, the prospects for a consumer-protection agency seemed dead, amid doubts that even more limited changes to financial regulations wouldn't make it through a divided Congress.

This week talks between Dodd, D-Conn., and Sen. Bob Corker, R-Tenn., seemed to be heading toward a bipartisan bill that would include a CFPA -- only it would be housed in the Federal Reserve, raising questions about how much autonomy the agency would have.

The White House may be ready to take whatever it can get. Press Secretary Robert Gibbs said Tuesday that even if a CFPA emerges from the committee weaker than President Obama would want it, "we will work to strengthen that on the floor" of the Senate.

But that might be a dealbreaker for Democrats in the House.

"I do not support housing the Consumer Financial Protection Agency in the Federal Reserve," Rep. Barney Frank, champion of the House bill, said Wednesday morning. "I continue to vigorously support the House-passed bill that establishes an independent agency with strong rule-writing authority and enforcement powers to implement consumer protections."

But Frank left open the possibility of horse trading on the issue, saying he would consider allowing a CFPA under the Treasury Department's auspices if it had enough independence.

Obama planned to address the issue later Wednesday.