House Panel Approves Consumer Bureau Changes

May 13, 2011, 4:32 PM EDT By Phil Mattingly

May 13 (Bloomberg) -- Republicans on the House Financial Services Committee advanced three bills today to reshape the Consumer Financial Protection Bureau, turning the tables on Democrats who approved the agency in party-line votes last year.

Lawmakers led by Representative Spencer Bachus, the Alabama Republican who leads the panel, are pushing changes to the Dodd- Frank Act, the regulatory overhaul they’ve targeted since taking control of the House in January. The Republicans have proposed about a dozen bills to revise the new rules, which they were nearly unanimous in opposing when Dodd-Frank was passed in July.

The three bills approved today are “important pieces of legislation, all of which will promote greater certainty for our economy and job creators,” Bachus said yesterday.

After more than 10 hours of debate yesterday over the CFPB measures and a bill to re-authorize the National Flood Insurance Program, Bachus put off until May 24 consideration of an 18- month delay of derivatives rules mandated by Dodd-Frank. The bill would push implementation of rules for the $583 trillion over-the-counter swaps market -- many of them due by July -- to December 2012.

The Republican measures, even if they are approved by the full House, are likely to face opposition from the Senate, which remains in Democratic hands, and from President Barack Obama, who initiated the regulatory overhaul in response to the worst financial crisis since the Great Depression.

Republican Questions

The CFPB, which Obama proposed after financial firms were accused of predatory practices in mortgage and credit-card lending, has faced questions from Bachus and his colleagues over its funding and potential reach. The Republican bills would clamp down on the bureau by replacing its as-yet-unnamed director with a bipartisan, five-member board, delaying its scheduled July 21 start date and making it easier for bank regulators to veto bureau rulemakings.

The proposals have been criticized by consumer groups as a way for Republicans to gut the bureau and undermine Elizabeth Warren, the Harvard University law professor serving as an Obama adviser to shape the agency she’s credited with conceiving.

“This legislation completely disregards and denies the causes of the regulatory failures that led to the current financial crisis,” a group of consumer groups and labor unions, including the AFL-CIO and the National Community Reinvestment Coalition, said in a May 3 letter to committee members.

Necessary Checks

Representative Shelley Moore Capito, a West Virginia Republican, said the bills are necessary checks on the power of bureau that will play a large role in financial markets.

“Whether we like it or not, the bureau will likely be the financial product regulator for the foreseeable future,” said Capito, who leads the financial institutions subcommittee.

Representative Barney Frank of Massachusetts and the committee’s Democrats have attacked the bills as delay tactics aimed at weakening consumer protection. The Democrats offered several amendments to change the measures, including one that would require that the president appoint Warren as the chairman should a commission be installed.

“Make no mistake, by expanding the ability for banking regulators to veto the CFPB, I believe that my Republican colleagues are far less concerned about the stability of the banking system, and far more concerned about hurting bank profitability,” Representative Maxine Waters, a California Democrat, said.

--Editors: Gregory Mott, Lawrence Roberts

To contact the reporter on this story: Phil Mattingly in Washington at pmattingly@bloomberg.net.

To contact the editor responsible for this story: Lawrence Roberts at lroberts13@bloomberg.net

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