I just listened to a conference call conducted by the U.S. Chamber of Commerce regarding Senator Dodd's new financial reform proposal (.pdf). While the group addressed the bill at large, the vast majority of its discussion focused on objections to the proposed Bureau of Consumer Financial Protection. Several of these criticisms stood out as quite compelling.
The two parties doing most of the speaking were David Hirschmann, the President and CEO of the Chamber's Center for Capital Markets, and Andrew J. Pincus, a Partner at Mayer Brown LLP who works as the Chamber's counsel. Since it's difficult on these calls to hear who it is talking, I'll just refer to the Chamber broadly when characterizing their comments.
The Director's Power
One difference I noted between the House's version and Dodd's Bureau was how the power was focused. The House would establish a commission of five individuals within the new Agency, in addition to its director. Individuals on that commission would have staggered Presidential appointments. Dodd's version would just have a director, who has pretty much complete autonomy to hire whoever he or she chooses.
The Chamber complains that Dodd's Bureau provides an awful lot of power to that one director. I think this is a valid concern. The House version is much more careful to create a robust, more diverse commission within its Agency to regulate. Dodd's director would also have sole discretion to spend the Bureau's lofty budget, which the Chamber estimated to start at around $430 million -- more than twice the Federal Trade Commission's budget for consumer protection. Dodd's director could also only be fired for cause.
It's unclear to me why Dodd would want to assign so much power to the director. The Bureau would be a powerful regulator, and he would put all of its power in the hands of one individual.
Vague Standard of Abusive Practices
The Chamber also doesn't like the vagueness that Dodd's proposal uses in saying that the Bureau could enforce actions against firms who engage in "abusive" practices. The group wonders what "abusive" means. Vague laws are a bad practice, because without clear rules to follow firms can't function effectively.
The following example was offered on the call to explain why vagueness is a problem here: Imagine if we had a law that it was illegal to speed when you're driving, but we didn't define exactly what speeding meant. Yet, the law also empowers federal and state speeding enforcers to make sure people don't speed. All sorts of different standards of speeding could be established.
I think some expanded detail of what is meant by "abusive" is a reasonable request. At the same time, however, the Bureau could eventually determine that detail once it sets up shop. As long as that determination is made clear at that time -- and state regulators hold the same standard -- then I think this criticism would be answered. But Dodd's current proposal doesn't make clear that defining abusive practices will necessary take this path.
The Chamber also complains that there remain too many groups with consumer protection enforcement power. In addition to the Bureau, the Federal Trade Commission and State Attorney Generals would still be empowered to bring action against firms that engage in abusive practices. I think this is also a pretty legitimate complaint. If you're going to bother creating an agency that hopes to streamline consumer protection, shouldn't you also consolidate enforcement authority and eliminate overlap? This, again, boils down to firms potentially having to worry about different sets of rules that different agents of enforcement might care about.
One last note of interest. The Chamber didn't seem at all impressed that Dodd's Bureau would be contained in the Fed, rather than a stand-alone agency. As I mentioned in my earlier post, the independence of the Bureau intended by Dodd would result in it not really mattering where the Bureau is located. I, too, am a little unclear why Republicans fought for having the Bureau located in the Fed. I don't see that as any kind of game-changing characteristic in the eyes of pro-business critics of a new consumer financial protection watchdog, so long as its independence is provided for.
On Dodd's new bill, also see:
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