Obama's CFPA: A Bad Divorce in the Making? "Consumer Financial Protection Agency" Would Consolidate Federal Consumer Protection Functions, but Split Them from Bank Safety and Soundness Issues

Cocheo, Steve, ABA Banking Journal

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"The great temptation in Washington with every financial panic is to play around with the regulatory boxes, said Wayne Abernathy, ABA executive vice-president for financial institutions policy and regulatory affairs at a recent association event. "Government officials want to do something, they feel that's what they were sent here to do, and since they are not in the financial business themselves, they work with what they have, the government agencies."

It's the rare financial debacle that hasn't resulted in a revision to the regulatory scheme. Abernathy reeled off a series of such shifts. Among examples he cited: The Panic of 1907 which led to creation of the Federal Reserve Board, the Great Depression, which spawned the FDIC, and the 1980s S&L crisis that created the Office of Thrift Supervision.

Will the crisis of 2008 lead to a Consumer Financial Protection Agency?

The Administration's far-reaching regulatory reform blueprint was introduced in late June. Of its many parts and pieces, ABA supports some in whole, some in part. But one of several elements that ABA does not support is the creation of a new regulatory body, the proposed CFPA. While the Administration's plan covers many areas, Abernathy said that the CFPA proposal "is the one that will most likely affect the on-the-ground business of banking more than any of the other proposals currently being offered." He added that CFPA "is the worst, most intrusive legislative proposal that I have ever seen, and I've been here working on these issues since 1978."

Two very different views

In the words of Treasury Secretary Timothy Geithner, the Administration supports the CFPA because:

"There is broad agreement that consumer …

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Publication information: Article title: Obama's CFPA: A Bad Divorce in the Making? "Consumer Financial Protection Agency" Would Consolidate Federal Consumer Protection Functions, but Split Them from Bank Safety and Soundness Issues. Contributors: Cocheo, Steve - Author. Journal title: ABA Banking Journal. Volume: 101. Issue: 8 Publication date: August 2009. Page number: 5+. © 2009 Simmons-Boardman Publishing Corporation. COPYRIGHT 2009 Gale Group.

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