A group of Democratic state attorneys general waded into the debate today over a proposed Consumer Financial Protection Agency, arguing that a new regulator would supplement their own efforts to protect consumers.
Speaking at the spring meeting of the National Association of Attorneys General, the group highlighted the failure of some of their federal counterparts to police mortgage lenders and other financial institutions. A new agency, they said, should be independent of existing regulators such as the Federal Reserve and the Office of the Comptroller of the Currency.
“Federal banking regulators have a track record that is nothing short of dismal,” said Illinois Attorney General Lisa Madigan. “None of them,” she added, “should now be charged with this crucial commission.”
Ohio Attorney General Richard Cordray compared the proposed agency to the Consumer Product Safety Commission, which Congress created in 1972. “What we have now seen, in this generation, is that financial products can be just as hazardous to the health and safety and well-being of households as other products, and we need protection at the federal level,” Cordray said.
Their support for the proposal came a few days after a key congressional negotiator, Sen. Chris Dodd (D-Conn.), floated the idea of creating a consumer protection agency that would be housed in the U.S. Treasury Department, rather than exist independently. The Obama administration has supported a stand-alone agency, and the U.S. House backed that idea in December. Senate Republicans argue that an independent agency would be in conflict with regulators whose goal is to keep the banking industry stable.
Also left to be decided is the extent to which any new federal legislation would preempt regulation on the state level. The state attorneys general pressed for states to retain at least some leeway because, they said, state governments are closer to consumers and are able to respond more nimbly.
“It’s dumb to take 50 cops off the beat, particularly when you’re dealing with complicated financial transactions,” said North Carolina Attorney General Roy Cooper.
Photo by Diego M. Radzinschi