Panel ensures state oversight of big banks
WASHINGTON - The House Financial Services Committee agreed yesterday to ensure states can impose their own tough consumer protection laws against big banks, dealing a blow to a financial industry blamed for bringing down the US economy and lobbying furiously against more government oversight.
The measure, approved by voice vote, would allow federal regulators to exempt national banks from state laws if those laws would “significantly interfere’’ with a bank’s ability to do business. Otherwise, banks would be forced to comply with a myriad of state laws that are often tougher than federal laws, under the House plan.
The House panel was on track to approve by today broader legislation that would create a Consumer Financial Protection Agency dedicated to monitoring such common financial products as credit cards and mortgages.
Yesterday’s debate on the agency’s scope was the latest tussle between lawmakers, who say they are working to protect the average American from abusive rate hikes and predatory lending, and a powerful financial lobby.
The financial industry has contributed more than $53 million this year to members of Congress and the political parties, with $6 million of that going to members of the House Financial Services Committee as of the end of July, according to the Center for Responsive Politics.
The Chamber of Commerce has led the attack on the consumer protection agency. This summer it conducted a $2 million campaign against the proposal, provoking President Obama to criticize its tactics in a speech.
The industry was able to gain significant traction by arguing that the legislation - a centerpiece of Obama’s plan to reform financial regulations - would hurt small neighborhood banks and local retailers.
The House committee, chaired by Representative Barney Frank, Democrat of Newton, responded by exempting retailers from agency oversight and voting to spare most banks from having to undergo additional agency examinations. Frank also dropped a requirement that financial institutions offer customers standardized, “plain vanilla’’ products because he said it would be too tough to enforce.
Banks also pushed hard to get lawmakers to drop Obama’s plan to subject federally chartered banks to potentially tougher state consumer laws. They thought they had found a sympathetic ear with moderate Democrats, including Representatives Melissa Bean of Illinois and Ed Perlmutter of Colorado, who said unleashing 50 different sets of regulations on banks was impractical.
Democratic Representatives Melvin Watt of North Carolina and Dennis Moore of Kansas introduced yesterday’s amendment as a compromise because it would allow federal regulators to exempt banks from state laws on a case-by-case basis.
In coming weeks, Democrats are expected to roll together the various regulatory reform proposals into a single bill to be voted on by the full House.