Finance

Chris Dodd Tries To Make Everybody A Little Unhappy

Nobody's happy with the finance-reform bill Chris Dodd just is releasing today. Maybe that's the point.

The Democrats need at least one Republican vote to pass a finance bill in the Senate; any bill that wins over all the Dems but none of the Republicans won't make it.

So Dodd's trying to take ideas the Dems like and jimmy them a little bit to win over a few Republicans, without losing too many Democrats.

Take, for example, what the bill does about consumer protection — one of the most contentious parts of the debate. A press release Dodd just put out says the bill:

Creates a new independent watchdog, housed at the Federal Reserve, with the authority to ensure American consumers get the clear, accurate information they need to shop for mortgages, credit cards, and other financial products, and protect them from hidden fees, abusive terms, and deceptive practices.

The key word here is "housed." It's a weird word in this context, a little bit opaque. That's because a key point of debate has been whether the consumer-protection agency would be independent (as Democrats want), or part of an existing regulator. Republicans have argued that banks already have plenty of regulators, and that creating a new agency could cause more problems than it solves.

With the "housed" thing, Dodd is going for a compromise that pleases almost no one. The consumer-protection agency will be part of the Fed, but with a director appointed by the president and with independent funding. So the Dems don't get their standalone agency, and the Republicans are still looking at more regulation.

Many arguers on the left have been arguing that the Dems shouldn't compromise on this one — that they should keep pushing for a standalone consumer-protection agency, and force Republicans to cast politically unpopular votes against it.

But this post over at Economics of Contempt takes an interesting middle-ground position:

(1) even a non-independent CFPA will provide some protection to consumers (whereas no CFPA will help consumers not a whit); and (2) it's much easier to strengthen an already-existing agency than it is to create a whole new agency. Measures to strengthen a CFPA can be inserted into larger legislative packages in a way that measures to create a whole new independent CFPA can't.

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