Push for consumer protection agency faces obstacles in new bipartisan talks

The push for a new federal agency for consumer financial protection faces major obstacles, even as senators on Thursday resumed bipartisan negotiations.

Senate Banking Committee Chairman Chris Dodd (D-Conn.) announced new negotiations with freshman Republican Sen. Bob CorkerRobert (Bob) Phillips CorkerSenate chaplain offers prayer 'as children are being separated from their parents' Senate passes 6B defense bill This week: House GOP caught in immigration limbo MORE (R-Tenn.) after a previous round of bipartisan talks had collapsed. Dodd had reached an "impasse" with the top Republican on the panel, Sen. Richard Shelby (Ala.), particularly over a proposed Consumer Financial Protection Agency (CFPA) to regulate products such as home loans and credit cards.

Corker said in an interview that he opposes a fully standalone agency that is backed by President Barack ObamaBarack Hussein ObamaFeehery: Betting on Trump Pew study finds Americans can’t tell fact from opinion Should President Trump, like President Obama, forsake human rights in pursuit of the deal with a tyrant? MORE and supported by the House in a December vote.

"For Republicans, including me, a free-standing agency is a nonstarter," Corker said in the interview. "Obviously consumer protection needs to be addressed and addressed in a balanced way."

Dodd and Corker are starting negotiations on some of the less contentious aspects of the overhaul package. The administration proposed a wide-ranging package of changes to how the financial industry is structured, including new rules on the multi-trillion dollar derivatives market and a new system to dissolve failing financial firms.

The administration and lawmakers have been debating ways to avoid future taxpayer-funded bailouts and situations where companies become "too big to fail."

Corker and Sen. Mark WarnerMark Robert WarnerWray defends FBI after 'sobering' watchdog report Top Dems: IG report shows Comey's actions helped Trump win election Dem senator: Trump at G-7 made me ‘embarrassed for our country’ MORE (D-Va.) have discussed a stronger bankruptcy code as the default method for dealing with firms whose failure threatens the broader financial system. The House-passed bill includes a fund, paid for by the financial industry, that could be tapped in the event that a firm needs to be taken over and dissolved by the government.

Corker said that on several of the issues Democrats and Republicans are not that far apart.

But the consumer protection issue remains the thorniest aspect of the debate. Dodd and Shelby had discussed creating a consumer financial protection division rather than a fully independent agency, financial lobbyists said. The two senators disagreed on the extent of that division's power to write rules over the financial industry.

House Democrats and consumer advocacy groups are ramping up their calls on Dodd to support the new agency.

Republicans and major parts of the financial industry prefer leaving consumer protection responsibilities with the regulators that oversee the safety and soundness of banks. The CFPA proposal would pool those responsibilities into a new agency.

Dodd last week criticized the administration for introducing several new proposals aimed at big banks that he said threatened to stall negotiations. The administration came out in support of a new fee on the largest financial institutions to recoup roughly $90 billion in taxpayer money for the bailout. The administration, at the urging of Paul Volcker, the former Fed chairman and Obama adviser, also proposed new restrictions on the size and scope of big banks.

The "Volcker rule" would prohibit commercial banks from having proprietary trading businesses.

Corker said he did not believe the Volcker rule or the fee proposal would dominate the new negotiations.

"My guess is the Volcker rule as put forth probably will not be a major topic of discussion," Corker said. "To be candid, I dont think we've had a discussion in the committee, and I've never had a discussion personally with Chairman Dodd about the fee issue," he added.