Federal Consumer Protection Laws Could Preempt State Laws
A standoff this week that threatened to stall House debate over sweeping financial regulatory reform ended with a deal seen as a victory for the nation’s big banks.
Rep. Melissa Bean (D-Ill.) and other moderate Democrats briefly held the so-called Wall Street Reform and Consumer Protection Act hostage on Wednesday, demanding consideration of a proposal that would allow federal laws governing consumer protection to preempt those set by individual states.
The current draft of the legislation would allow states in most cases to impose tougher restrictions, using federal standards as a floor rather than a ceiling. The financial industry has lobbied relentlessly against that structure, saying it would add layers of burdensome bureaucracy and confuse consumers.
After meetings Wednesday involving top House Democrats and Treasury Department officials, the groups reached a compromise: A modified form of Bean’s amendment, allowing banks to ask a judge or the Office of the Comptroller of the Currency to set aside state laws that exceed existing federal laws, would go forward on the House floor. In addition, it would be folded into a broader amendment put forward by Rep. Barney Frank (D-Mass.), which all but ensures its passage.
"It’s clearly a victory for the banks," said Ed Mierzwinski, consumer program director for the U.S. Public Interest Research Group.
"Overall, it’s a significant step in the right direction," said Scott Talbott of the Financial Services Roundtable, a group that represents the largest financial firms.
Banking and financial services lobbyists have intensified their efforts to derail key portions of the legislation in recent days, taking particular aim at the proposed Consumer Financial Protection Agency. Earlier this week, House Republican leaders huddled with more than 100 financial lobbyists to plot strategy for defeating the legislation. The meeting included discussion of letter-writing campaigns by major trade groups and calls to identify and target conservative Democrats who might oppose the bill, participants said.
Bean and other members of the New Democrats coalition have received $6.5 million in campaign contributions this year from banking and financial interests, according to a study released Thursday by Consumer Watchdog, a liberal advocacy group. Bean, the coalition’s vice chairwoman, has received nearly $400,000 from the financial sector this year, or about half of her total contributions, the study showed.
Bean’s measure is one of 36 amendments that the House began to debate Thursday evening. Early in the debate, Bean rose to express her "strong support" for the bill.
Staff writer Dan Eggen contributed to this report.