Financial Reform: Process and Priorities

The Conference Committee that will mark up the final version of the financial regulatory reform bill has been formed and will begin it’s work shortly. The calendar for the committee is becoming clear and Tim Fernholz has a good post at Tapped laying out how the process will work.

“Conference works like this: Going title by title through the bill, House members will submit an offer to the Senate contingent. If any House member wants to change that offer, they can propose an amendment and it will be voted on — but only by the House members. When the offer is finalized, it goes across the table to the Senate’s conferees, who can elect to accept the offer, or amend it to make a counter-offer — again, voting just among Senate conferees. Conferees may leave the room to negotiate with their respective caucuses, and the offers go back and forth until there is consensus. At no time does the entire conference committee vote on one title or the whole bill; the final version — the conference report — is authorized with the signatures of a majority of conferees.”

Having been through one of these myself (as a Senate staffer) I can tell you that he’s got it right, and that it can be a really frustrating process. This is not necessarily a “majority rules” situation. The rivalries between the House and Senate can be significant and can really impact the legislative process even when the House and Senate are controlled by members of the same party. As Tim points out, the default document for the Conference is the Senate bill, so the onus is on the House and opponents of the content of the Senate bill to make changes to that underlying document. This may prove to be advantageous to fans of consumer protection, as the Senate bill is thought to be stronger than the House version.

There are a gajillion lobbyists scrambling to impact this process and have their voices be heard on this question because the ticking of the clock is deafening at this point. We’ve been rooting all along for a strong set of consumer protections in this bill, and the Consumer Federation of America sent a letter to the conferees recommending the best way to see that goal is achieved. Here are some of the highlights from their letter:

• CFPA Structure and Funding–CFA supports an independent Consumer Financial Protection regulator with independent funding and a Presidentially-appointed, Senate-approved director, as proposed in the Senate bill. If the conferees agree on independent funding and a director for the agency, then CFA strongly supports the creation of an independent agency (as passed by the House) over the Senate provision for a bureau within the Federal Reserve.
• CFPA Enforcement Authority–CFA supports the provision in the House bill giving the agency authority over small nonbanks, including payday lenders. The agency also should have back-up enforcement authority over small banks, as in the House bill. Both the Senate and House bills include provisions on the critical issues of federal preemption and state enforcement of CFPA rules. CFA urges conferees to adopt the House provision, which ensures that the federal bank regulators cannot preempt a state law as it applies to national banks on consumer financial issues unless federal law has standards in place.
• Mortgage and Foreclosure Protections–Both bills offer significant improvements over the current situation, which enabled the mortgage crisis and subsequent financial meltdown. The Senate anti-steering provision is stronger in curtailing lender payments to “steer” borrowers into higher cost and riskier loans than they qualify for, while the House bill contains additional anti-steering regulatory authority. The House bill would also improve protections for very high-cost (HOEPA) loans; authorize needed changes to the Administration’s mortgage modification program; create a new HUD Office of Housing Counseling; provide funding for attorneys helping homeowners facing foreclosure; and create a new fund using TARP dollars to assist homeowners facing foreclosure due to unemployment or medical debt. We recommend the Senate remedies for non-compliance with the bill’s requirements.

We’ll be keeping a close eye on the progress of the Conference Committee, and as the CFA letter shows, there are still significant issues to be addressed in the process, but the vision of a major reform of financial regulations with strong consumer protections is closer than ever to becoming a reality.