States push for more power to protect consumers
Tuesday, March 16, 2010
With Washington digesting Sen. Christopher Dodd‘s bill to overhaul financial regulations, the Washington Post did a nice job Monday parsing a movement by state attorneys general to try to carve out their own turf. In effect, they want states to be able to enact consumer protection laws affecting national banks that are stiffer than those established by the federal government.
The issue is referred to as “federal preemption,” which means the feds supersede all other regulators. But critics argue that the nation’s financial meltdown was due in part to weak federal oversight, and that states have a similar responsibility to protect their citizens from predatory bank policies.
The Obama Administration has said yes, that states should be able to enact their own tougher rules. Not surprisingly, banks and their political supporters say no. From the story, by Brady Dennis:
The attorneys general have logged thousands of miles over the past year to lobby lawmakers on the issue, testify before both houses of Congress and appear as “special guests” of President Obama at a White House speech aimed at bolstering consumer protections. They have made their case in letters, speeches and national conference calls, and they have become reliable allies of the administration’s controversial proposal to create a powerful, independent Consumer Financial Protection Agency.
Their argument is simple: Freeing states to enact tougher laws would yield better protections against many of the predatory practices that contributed to the crisis, such as payday lending and subprime mortgages.
As the Dodd bill makes it way through the legislative blender, it’s uncertain how much of what he proposed will survive, and what other elements will get added. At the moment, it looks like Dodd has agreed to leave things the way they are — with the federal regulations holding the trump card.
But U.S. Rep. Barney Frank, D-Mass., has been pushing in the House for more power for the states, which could help propel the attorney generals’ cause.