After almost a week of legislative wrangling and maneuvering, at press time the Senate was beginning what many expect to be several weeks of debate on a measure to overhaul the system for regulating financial services.
The major source of dispute has been the proposal for dealing with financial institutions that are deemed too big to fail. Some Republicans contend that the proposed bill would set up a system of additional taxpayer bailouts.
But the structure of the new entity to regulate consumer financial products is also causing some concern. The Senate bill creates an agency housed in the Federal Reserve, but it would be headed by a presidential appointee. Under the version passed by the House last year, the regulator would be an independent agency. Under both versions, the new regulatory entity would only have direct examination authority of financial institutions with assets of more than $10 billion. All other institutions would have to comply with the regulations issued by the regulator, but the enforcement would be done by their safety and soundness regulators, such as the NCUA.
Republicans, and some Democrats, expressed concern that the new regulator could have too much power and approve regulations that would have the effect of limiting the flow of capital or restrict consumer choice. But some liberals don't think the agency has enough power.
Under the alternative measure unveiled by Senate Republicans, the regulation of consumer financial products would be carried out by a consumer protection council, which wouldn't be empowered to be the main examiner of credit unions on consumer issues.
The Council for Consumer Financial Protection, an independent agency that would be made up of the Federal Reserve Board chairman, the FDIC chairman and the Comptroller of the Currency, would write the consumer laws. While the council would have supervision and enforcement authority over large banks, nonbank mortgage originators and other financial service providers, credit unions and regional banks would be supervised by their safety and soundness regulators. The council would have "back up enforcement authority" over those institutions.
But in a chamber with a partisan breakdown of 59 Democrats and 41 Republicans, any success that the GOP is likely to achieve is to have its ideas incorporated into the legislation, which the Senate Banking Committee approved along party lines.
CUNA and NAFCU joined with the two largest banking trade associations in urging lawmakers to narrow the definition of remittance transfers so that those financial institutions won't be forced out of the international electronic fund transfer business.
The groups wrote lawmakers that the regulatory overhaul would classify certain transfer services as remittance services and make institutions that provide them liable for disclosing all costs up front.
Lobbyists for CUNA and NAFCU also said they were watching out for amendments that would place additional regulations on interchange fees.
The debate followed three procedural votes in which all Republicans and one Democrat (Sen. Ben Nelson of Nebraska) held together to deny the Democrats the 60 votes needed to begin debate.
The Republicans withdrew their objections when the Democrats agreed to allow Republicans to offer a large number of amendments to the bill. The Democrats also threatened to hold an all-night session (and had begun to set up cots) if the GOP had continued to block a vote on the bill.
If the Senate passes a bill, it must be reconciled with the version of the bill the House passed last December.