The House Financial Services Committee on Wednesday will begin marking up legislation on derivatives regulation and the new Consumer Financial Protection Agency (CFPA). Both are central elements of the Obama administration's plan to overhaul the financial system following the worst crisis in decades.
The battle is most public over the CFPA, which would have regulatory power over industries, including credit cards, home loans and payday lenders.
A group of 17 trade associations, including the U.S. Chamber of Commerce, Financial Services Roundtable and Business Roundtable, sent a letter on Tuesday to House members in opposition. “We remain concerned that this legislation will have significant and harmful unintended consequences for consumers, businesses, and the overall economy,” the groups wrote.
Committee Chairman Rep. Barney Frank (D-Mass.) had scaled back the legislation to win over wary centrist Democrats and assuage concerns among non-financial businesses that they would not fall under the new agency's power. But some of those industries that Frank intended to exempt, such as car dealerships, remain concerned. The National Automobile Dealers Association signed the letter in opposition.
The most contentious issue in the CFPA debate is likely to be whether the new agency's authority allows state officials to pursue stricter or stronger regulations than the federal standards. The business and financial industry is overwhelmingly opposed to the possibility of additional rules and regulations at the state level and has lobbied heavily in favor of the agency having preemption powers.
Meanwhile, advocates in favor of the CFPA released a poll on Tuesday of likely voters in districts held by conservative Blue Dog Democrats or by Democrats in tough reelection races.
More than two-thirds of those voters in each type of district supported the creation of the new agency, according to the poll conducted by Lake Research Partners. Those polled also favored new regulations for the derivatives market by a margin of more than 40 percentage points in each type of districts.
Forty-one percent of those polled said a vote against the CFPA would lead them to be less likely to re-elect their congressman.
“These results show that the American people understand both who is to blame for the financial collapse and what needs to be done to ensure nothing like this can ever happen again,” said Heather Booth, campaign director of Americans for Financial Reform, which sponsored the poll.