Nancy Pelosi (D-Calif.)
WASHINGTON (Legal Newsline)-State attorneys general powers are limited in a bill that narrowly passed the U.S. House of Representatives on Friday.
The legislation, approved on party lines in a 223-202 vote, would create the U.S. Consumer Financial Protection Agency. No Republicans supported the bill, and 27 Democrats crossed party lines to vote against one of the top domestic priorities of President Barack Obama.
"We are sending a clear message to Wall Street: The party is over," House Speaker Nancy Pelosi, D-Calif., said after the vote.
An amendment in the bill offered by U.S. Rep. Melissa Bean, D-Ill., limits the ability of state attorneys general from pursuing tougher consumer financial protection regulations than the federal government has on its books.
Bean's effort was opposed by Illinois Attorney General Lisa Madigan, a Democrat.
The Bean amendment would give the Office of the Comptroller of the Currency and the Office of Thrift Supervision powers to preempt state consumer protection laws. The amendment also would make federal consumer protection statutes the ceiling for states.
Bean is the vice chair of the 68-member New Democrat Coalition of pro-business lawmakers.
House Financial Services Committee Chairman Barney Frank, D-Mass., introduced the legislation to create the U.S. Consumer Financial Protection Agency, following the near-collapse of the financial system last year. The proposal is outlined in H.R. 3126.
In addition to setting up the new agency, the 1,279-page Wall Street Reform and Consumer Protection Act also imposes restrictions on the over-the-counter derivatives market and establishes a system for dissolving foundering financial firms.
Rep. Walt Minnick, D-Idaho, sponsored an amendment that would have created a 12-member Consumer Financial Protection Council of existing regulators instead of a new agency. His amendment failed on a 208-223 vote.
The Congressional Budget Office has estimated the House bill would increase federal budget deficits by $4.5 billion over 2010 to 2019 period.
In a letter to congressional leaders this fall, 40 state attorneys general said the federal government should not preempt state laws aimed at protecting consumers from frauds and abuses, particularly in the enforcement of state banking and mortgage foreclosure laws, if lawmakers create the new agency.
"Rather than limiting the states' role in consumer financial protection, as some have advocated," the letter said, "we believe Congress should encourage an active and effective partnership between the states and federal financial regulatory agencies to the ultimate benefit of all consumers."
From Legal Newsline: Reach staff reporter Chris Rizo at chrisrizo@legalnewsline.com.