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Change of Heart?

April 7, 2010 - by Donny Shaw

Sen. Richard Shelby [R, AL], who just two weeks ago said that “safety and soundness [of banks] trumps…the consumer finance whatever,” is all of a sudden championing a stand-alone Consumer Financial Protection Agency (CFPA), the Washington Post reports:

Staff members for Sen. Richard C. Shelby (Ala.), the ranking Republican on the Senate banking committee, sent a proposal to their Democratic counterparts last week that would create an independent consumer financial protection agency, according to sources familiar with the negotiations.

The offer marks a significant reversal from the position that Shelby and other Republicans have long held: that such an agency would clash with a separate set of regulators charged with overseeing the health of financial firms.

What’s going on here? Banking Committee Chairman Chris Dodd [D, CT] shunned consumer protection advocates and put the CFPA in the Federal Reserve in his financial reform bill as a concession to Republicans. Now Republicans are the ones pushing for an independent agency? Maybe not…

The proposal includes limits on the consumer agency’s authority, including a commission of regulators that could serve as a check on rules put forth by the agency, according to one source.

Is it really independent if there is a council of regulators with to authority over its actions? That seems to cause the same problem as housing it within another regulator — namely that consumer financial protections would once again take a back seat to protecting the safety and soundness of the financial markets.

Obviously, details make all the difference here, and the Washington Post piece is very spare on that front.

From what’s in the article, the strategy I blogged about yesterday to be relatively tough on banks in areas where the public is (supposedly) paying attention, while giving the banks huge wins in areas of the financial reform legislation that people aren’t necessarily privy to, like derivatives.

Pic of Shelby at ribbon cutting for the Shelby Center for Science and Technology at UAH used under a CC license from Shelby Center for Science and Technology at UAH.

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