As I begin to trudge through Senate Banking Committee Chairman Christopher Dodd's (D-CT) new financial reform proposal, I thought a good first stop for additional detail might be the much-debated consumer financial protection function. I mentioned earlier that they're actually pretty similar, despite the fact that Dodd's version is housed in the Federal Reserve. I still think that's true, but there are a few differences worth noting.
One easy way to differentiate the House version from what Dodd proposes is to just use the terminology provided. The House wants a stand-alone "Consumer Financial Protection Agency" (the "Agency"), while Dodd wants a "Bureau of Consumer Financial Protection" (the "Bureau").
I don't intend to address all the differences and similarities between these two proposals, because they're pretty complex and, well, long. My general sense is that the House version is a bit more robust than Dodd's version. One aspect of the two plans that make this kind of obvious is the fact that the House's proposal is 404 pages long, while the Senate's is just 306 pages. Of course, this is also stressed by the fact that the Agency would be truly independent while the Bureau would be basically independent, but housed in the Fed.
Yet it looks like Dodd really wants his Bureau to be the final word when it comes to consumer protection. In many instances, he specifically says that the Bureau will have the "exclusive" authority for this and that, while on the same points, the Agency would just have "primary" authority. That could just be semantics, but there's a sense that Dodd's Bureau would have a touch more power than the House's Agency.
The Agency would also create a Consumer Financial Protection Oversight Board made up by a council of important regulators (think Fed chair, FDIC chair, etc.) who would advise the director of the agency on what the market does or does not need in terms of consumer financial protection. The Bureau has no such provision, though the proposal does say that it would work broadly with regulators to ensure that its rules are sensible.
The House's bill is also a little more specific about the most important employees of the Agency. It would have a commission of five individuals (all appointed by the President and confirmed by the Senate) in addition to the director who would prescribe the regulations. No such commission is laid out for the Bureau, and its employees would all be hired by its head (who is appointed by the President, like the Bureau's director).
As far as how the two bodies would examine and enforce, they differ mostly in the details. For example, the House version would exempt auto dealers; Dodd's proposal would not.
Also interesting is that Dodd's version would create an "Office of Financial Literacy." While the House version speaks to the importance of financial literacy, it doesn't go as far as to actually create a new body to specialize in it.
As I mentioned in my earlier post, the broad strokes of these two proposed consumer financial watchdogs are essentially the same. Of course, the details matter with these things, so I'll be curious to see how policy wonks pull the Senate's version apart in the days to come. But at this point, it doesn't look like the House or the Obama administration would have any major objections to what Dodd has proposed. Though a distinctive flavor, it still creates a new regulator dedicated to consumer financial protection with sufficient independence and autonomy, and that's the goal.
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