Thursday a U.S. congressional committee supported creating a federal financial consumer watchdog. The commettee's decision gives the Obama administration a win, but only after one of its key financial reforms was pared back.
The House of Representatives Financial Services Committee, in a 39-29 vote after four days of debate, backed legislation to set up the U.S. Consumer Financial Protection Agency, which would regulate mortgages, credit cards and other products.
The agency is a central part of President Barack Obama's sweeping plan to tighten bank and market regulation to try to prevent a repeat of last year's severe financial crisis.
The CFPA bill was expected to come before the full House for a vote next month. Its outlook was unclear in the Senate, which is moving slowly on financial regulation reform, Reuters reports.
In the meantime, the legislation has strong support from Democrats and consumer and public interest groups, which blame banking regulators for failing to adequately protect consumers as the financial crisis approached.
But the new agency is adamantly opposed by Republicans and banking and business groups, which say that it would actually hurt consumers by imposing so many new rules that companies would be forced to charge more for loans and credit -- or possibly not offer them at all. There is also a sharp philosophical divide, with Republicans charging that the agency would take choice away from consumers and place it in the hands of unelected officials.
The committee approved several amendments clarifying that certain financial activities would not be swept in by the new agency. Stores that sell gift cards, for example, would not be subject to agency oversight unless they control the terms of the cards. But Democrats beat back numerous attempts by Republicans to water down the agency's authority, The Los Angeles Times reports.
It was also reported, panel Republicans, speaking at a news conference before the vote, blasted the agency, saying it would prolong the downturn and hurt the choices available to consumers.
Rep. Spencer Bachus of Alabama, the panel's top Republican, contended the agency's director would have "total discretion" to issue regulations and set fees -- setting him or her apart from all other federal agency heads.
"That [is something] we have never had in the history of our country," he told reporters.
Rep. Jeb Hensarling (R., Texas) argued the legislation sent a message to consumers that they were "either too ignorant or too stupid" to choose their own financial products, The Wall Street Journal reports.