Liberals wary of Federal Reserve role in consumer protection office

A compromise plan to create a consumer financial protection office at the Federal Reserve suffered a tough liberal backlash Tuesday.

Senate Banking Committee Chairman Chris Dodd (D-Conn.) and Sen. Bob CorkerBob CorkerThe Trail 2016: The establishment comes around GOP warms to Trump Trump vows to expand map for GOP, win Michigan MORE (R-Tenn.) are trying to strike a bipartisan deal on financial overhaul legislation that has been held up primarily over disagreements on how to boost consumer financial protections.

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As a compromise, they have discussed creating a consumer protection office at the central bank instead of a standalone regulatory agency, as originally proposed by President Barack ObamaBarack ObamaArmstrong Williams: Obama 'should get on his knees and pray' Obama makes move on 'smart guns' Movie trailer gives peek at Obamas' first date MORE.

The administration has not ruled out this option, but the compromise is proving to be a tough sell to the Democratic base.

“It’s a horrible idea. It’s a terrible idea,” Sen. Byron Dorgan (D-N.D.) told The Hill. “I don’t support it and I’ll try to change it.”

Sen. Bernie SandersBernie SandersSanders drops lawsuit against DNC Sanders-Warren ticket would sweep the nation Pelosi defends Clinton from Trump MORE (I-Vt.), a vocal critic of the Fed, said the central bank has a poor track record of protecting consumers, particularly in the run-up to the financial crisis.

“Consumers need real, real, real protection,” Sanders said. 

Senate Majority Whip Dick DurbinDick DurbinElizabeth Warren stumps, raises funds for Duckworth Senators roll out changes to criminal justice bill Let the Democratic veepstakes begin MORE (D-Ill.) did not rule out the idea, but said it is a “very good question” why lawmakers should give the Fed more power over consumer protections.

Outside consumer advocacy groups that have been pushing for the administration’s proposal for a Consumer Financial Protection Agency (CFPA) said the Fed is a poor choice at which to locate a consumer protection regulator.

“Granting the Fed consumer protection authority would create a lapdog for Wall Street, not the watchdog consumers need,” said Carmen Balber of Consumer Watchdog.

Other Democrats, including Sens. Charles SchumerCharles SchumerCruz's dad: Trump 'would be worse than Hillary Clinton' With Ryan’s blessing, lawmakers press ahead with tax reform talks Big business will never appease the Left MORE (N.Y.), Sherrod BrownSherrod BrownLawmaker offers bill to impose 'exit tax' on expatriating companies For Clinton, there's really only one choice for veep Let the Democratic veepstakes begin MORE (Ohio) and Jeff MerkleyJeff MerkleyOvernight Finance: Fed steady on rates; Dems rally behind retirement rule Overnight Finance: Puerto Rico pressure builds; Big tariff vote Wednesday Senate votes to increase wind energy funding MORE (Ore.), said they had concerns about the proposal, but they did not oppose it outright.

“I have significant reservations if it does not have independence, and I prefer it to be standalone,” Brown said.

Republican senators on Tuesday appeared cautiously open to the possibility, and said they were concerned less about where the office would be located than with limiting its power and scope to write and enforce rules over the industry.