WASHINGTON — Rep. Mel Watt, a potentially key ally in bankers' efforts to minimize the scope of a proposed consumer protection agency, blew up at industry representatives during a House Financial Services Committee hearing Wednesday, arguing that they were standing in the way while he tries to improve the bill.
The North Carolina Democrat, chairman of the monetary policy subcommittee, is still clearly weighing whether to support significant changes in the legislation, including weakening a provision that would eliminate preemption powers and allowing existing regulators to retain some enforcement power for consumer protections.
But he was also clearly fed up with the banking industry, accusing it of trying to kill the bill instead of working to improve it.
"Let me express in a public way what I have expressed to a number of your representatives privately, which is just the utmost sense of exasperation for the positions you have all taken on this which have really been: We are going to oppose it and oppose it and oppose it, and we are going to make all kinds of excuses for not doing this, and we are going to lay down in the road, and we are really not going to come in and sit down and talk about how to resolve the issues," Watt told Ed Yingling, the president and chief executive officer of the American Bankers Association. "There are some issues that I think need to be resolved, and I am just absolutely exasperated at the approach the industry has taken on this."
During the hearing, Yingling repeated the industry's concerns that a new consumer protection agency would target banks instead of nonbank mortgage lenders that he said created the housing crisis.
But Watt rejected Yingling's comments. "Even today you all are telling me, Mr. Yingling, that there is no real case for change here," Watt said. "After all the experiences that we have been through that demonstrate the need for change, to hear testimony that says there is no case for change that has been made, it is exasperating."
Watt, whom the industry has frequently turned to in the past to help it work out issues, threw his arms up in the air in frustration.
Yingling tried to defend himself by saying he was misunderstood.
"First, Congressman Watt, there is nobody who has worked harder in this Congress to resolve these kind of issues than you have, so we don't want you exasperated," Yingling said.
The exchange was the most dramatic of a hearing that showed that committee members are still struggling over the consumer protection bill's details, even as they plan to vote on it this month. Several lawmakers, including Watt, Dennis Moore and Melissa Bean, showed a willingness to whittle down the proposed agency's powers. This included questioning whether federal preemption of state consumer protection laws should be eliminated and whether bank regulators should retain enforcement powers. Under the Obama administration's reform plan, federal preemption would cease to exist, and banking regulators would cede consumer enforcement powers to the new agency.
Bean said that two-thirds of subprime mortgages were originated by nonbank lenders and questioned whether the consumer protection agency should focus there. "Would it be more effective to put coverage where there hasn't been?" she asked.
Committee Chairman Barney Frank, who is still drafting the bill, declined to comment on what it would finally look like but said he expects it to pass. "We will have a good agency that will satisfy the essentials of what … the administration is talking about," he said.
