In Senate, a Renewed Effort to Reach a Consensus on Financial Regulation

By SEWELL CHAN

Published: February 28, 2010

WASHINGTON — When Christopher J. Dodd announced in January that he would not seek a sixth term in the Senate, he called reform of financial regulation, along with health care, “the two most important issues of our time,” and pledged to spend his last year in Congress “fully focused” on his legislative duties.

But as Mr. Dodd, chairman of the Senate Banking Committee, prepares a proposal to overhaul financial regulation, to be released possibly as early as this week, he is finding that complete focus may not be enough.

Details of part of his plan became public in news reports on Friday. The most hotly disputed elements — the creation of a consumer protection agency to watch for deceptive and abusive terms on mortgages, credit cards, payday loans and other financial products — are a reminder of how intense lobbying and partisan gridlock threaten to significantly weaken what the Obama administration has called a top priority.

“The financial services lobby and particularly the big banks are driving the agenda right now,” Travis B. Plunkett, legislative director of the Consumer Federation of America, said. “They are the ones gaining ground. Their strategy is clear: death by a thousand cuts.”

As part of a regulatory overhaul adopted in December, the House voted to create a freestanding Consumer Financial Protection Agency. Since then, the financial services industry has been largely unified in trying to reduce the proposed agency’s independence, as well as the scope of its powers.

The lobbying effort has been so fierce that the Treasury secretary, Timothy F. Geithner, called a meeting on Thursday with representatives of the United States Chamber of Commerce, the American Bankers Association and six other groups, at which he warned that failure to pass a regulatory overhaul could destabilize the markets.

Mr. Dodd, a Connecticut Democrat, met on Saturday and Sunday with a banking committee member, Bob Corker, Republican of Tennessee, in hopes of coming up with a “consensus package” that would have at least some Republican support, Kirstin Brost, a spokeswoman for Mr. Dodd, said. He was not available to comment on his plan, she said.

While Mr. Dodd has indicated a willingness to give
ground on several aspects of the consumer proposal, those concessions have not been enough to gain the backing of Richard C. Shelby of Alabama, the senior Republican on the committee.

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Dodd Scraps Obama’s Consumer Agency, Proposes Treasury Bureau

February 28, 2010, 12:02 AM EST
By Alison Vekshin and Robert Schmidt

Feb. 28 (Bloomberg) -- Senate Banking Committee Chairman Christopher Dodd abandoned the Obama administration’s stand- alone consumer financial agency and is proposing a bureau in the Treasury Department, seeking to overcome Republican opposition to legislation overhauling Wall Street regulations.

The Bureau of Financial Protection would be run by a director appointed by the president, have power to write rules for companies offering financial services and be funded mainly through industry fees, according to a two-page summary the Connecticut Democrat circulated this weekend.

“It is one of several proposals he has advanced to seek a bipartisan consensus and enhance consumer protection,” Dodd spokeswoman Kirstin Brost said yesterday in an e-mail. “We do not have an agreement.”

Dodd’s plan is aimed at breaking a deadlock with committee Republicans, who oppose the independent Consumer Financial Protection Agency sought by President Barack Obama in his June financial regulations proposal. The disagreement has stalled Senate negotiations on the overall financial regulatory bill.

Dodd, in a Feb. 26 Bloomberg Television interview, said negotiators were “close” to a deal on the legislation and declined to set a date for releasing the measure. Senator Bob Corker, a Tennessee Republican, had been negotiating with Dodd on the legislation.

The Treasury bureau would have examination and enforcement authority over large banks and bureau would be funded by fees paid by large banks and non-banks, with the Federal Reserve making up any shortfall.credit unions, and non-bank mortgage companies. Banking regulators would retain such power for banks and credit unions with less than $10 billion in assets, according to the proposal.

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Biden unveils new rules on U.S. retirement savings

* Rules aim to guard against conflicts of interest

* Tens of millions of workers to be affected

* Seen as targeting disaffected middle class voters

By Matt Spetalnick and Caren Bohan

WASHINGTON, Feb 26 (Reuters) - Vice President Joe Biden on Friday proposed new rules to help protect U.S. workers' retirement savings as part of a broader government effort to bolster the finances of middle class voters.

With President Barack Obama's popularity ratings down in a congressional election year, his administration has sought to focus more on middle-class voters' concerns about high unemployment, the ailing economy and their troubled finances.

Biden, who heads a year-old panel assigned to improve middle-class living standards, announced new Labor Department regulations on workers' retirement savings at an event to release the annual report of his middle-class task force.

The new safeguards, which the White House says will affect tens of millions of workers, are aimed at protecting employees and their 401(k) and IRA retirement savings plans from financial advisers' potential conflicts of interest.

Retirement investment advisers and money managers would only be allowed to give advice if they did not get any commission for steering workers into funds with which they are affiliated, or if their advice was based on a computer model certified to be unbiased by independent experts.

"Some kinds of investments are more profitable for financial institutions than others, but those investments may not be the best ones for workers," the White House said in a briefing document on the proposed rule changes.

"As a result, if investment advisers get a commission or other compensation for steering workers into investment options with high fees and expenses, they face conflicts of interest that can undermine the reliability of their advice.

COLLECTIVE BARGAINING AGREEMENTS

"Expert advice can be helpful, but that advice must be unbiased and there must be no risk that the adviser will benefit from steering workers to particular investments," Deputy Labor Secretary Seth Harris said at the event.

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