WASHINGTON — Senate Democrats on Thursday defeated a GOP amendment to shrink the reach and power of a proposed consumer watchdog, scoring a victory on a central plank of the Obama administration's plan to revamp financial regulation.
Lawmakers voted, 61-38, to reject the GOP alternative to the consumer protection section of the bill.
But the fight over the new consumer bureau didn't die with the GOP alternative. Republicans vowed to follow up with a series of narrower amendments, seeking to change specific provisions in the consumer section rather than replace it entirely.
There are six or seven "things that we can do surgically to fix this," said Sen. Bob Corker, R-Tenn., Top Republican goals include stripping out a measure to allow state attorneys general to sue national banks for violating federal consumer laws and beefing up the power of current banking regulators to veto rules written by the new consumer entity.
Republicans could find allies for these more targeted strikes among moderate Democrats who remain uncomfortable with the scope of the agency's power but were unwilling to scale it back as far as the GOP alternative proposal would have.
For instance, Sen. Tom Carper, D-Del., is already working on an amendment to remove the new enforcement powers state attorneys general would gain under the current language.
The bill under debate would create a largely autonomous consumer financial protection bureau within the Federal Reserve. The bureau would be empowered to write rules that would apply to almost all institutions offering consumer financial services or products. Current bank regulators would lose most of their consumer protection authority to the new entity.
The defeated GOP measure, in contrast, called for a more limited overhaul of consumer protection regulations, establishing a new division within the Federal Deposit Insurance Corp. to supervise and enforce consumer laws over only a portion of the financial services industry.
Current bank regulators would retain their consumer protection authority over banks and thrifts.
