The House Financial Services Committee approved a controversial amendment, opposed by Chairman Barney Frank, to exempt auto financing from independent dealers from the oversight of the Consumer Financial Protection Agency. The vote was 47-21, with a large number of Democrats joining with Republicans. I’ll have the full committee breakdowns for you when I get them. The panel did approve the creation of the CFPA by a 39-29 count, ignoring the massive lobbying campaign trying to kill it outright.
The auto dealer exemption is probably the worst amendment in the entire Financial Services Committee markup on regulatory reform. You can make a case for some of the other amendments, and Rep. Frank said on Rachel Maddow’s show last night that the committee will pass the reform bill today that gives Democrats and the Administration “90% of what we wanted.” But this is part of that other 10%. Auto financing is typically the second-largest purchase a family makes, behind housing, and the horror stories of auto loan customers being ripped off are voluminous. The amendment was authored by Rep. John Campbell (R-CA), a former auto dealer who has been ripped by consumer groups for having major conflicts of interests.
The consumer groups, which also include organizations that want election reform, say that Campbell should walk away from his amendment for two reasons. First, because six auto dealerships pay him rent and would benefit from his amendment and he would benefit. And second, that Campbell received $170,000 in campaign contributions from auto dealers since he’s run for Congress.
The groups say Campbell’s personal financial disclosure forms show he received between $600,000 and $6 million in rent last year.
Campbell’s “defense” is that four of the six properties are no longer car dealers, having gone out of business – so two still are, and the amendment will directly shield them from oversight. He also says that the House Ethics Committee approved him authoring the amendment, without giving details. It turns out that Campbell recused himself from a vote last year on bailing out the automakers, based on a conflict of interest, but in this case, writing the amendment exempting them from oversight is OK with him.
Mary Boyle from Common Cause expressed her disappointment with the passage of Campbell’s amendment. “This is the kind of case that illustrates clearly why we need public financing. There’s the conflict of interest issue, and also just the clear benefit Rep. Campbell is providing to contributors.” According to Boyle, Congress is shying away in general from strong consumer protections in the regulatory reform bill. “This shows the power of Wall Street,” she said.
The AP details some other exemptions:
Under pressure from industry, the Financial Services Committee has carved out numerous exemptions to agency oversight, including retailers, auto dealers, real estate brokers, lawyers, cable companies and accountants.
Banks that help those businesses complete financial transactions would still fall under the agency’s purview. For example, a bank that issues a store-brand credit card or provides auto financing would be subject to agency rules.
Rep. Gwen Moore, a Democrat from Wisconsin with a major private mortgage insurer in her district, on Wednesday pushed though another exemption for credit, mortgage and title insurers.
Rep. Barney Frank, who chairs the panel, said exceptions were being made to clarify that the agency will monitor financial products and not every financial transaction made by the American public. But he scoffed at several Republican proposals, including one by Rep. Tom Price, R-Ga. that would have exempted student loan providers. Frank charged that those provisions were aimed at gutting the bill.
Overall, a win to get the CFPA passed, but it has been gutted to a certain extent.
…Shahien Nasiripour has some more information about the derivatives markup in the House Agriculture Committee. The short version is that oversight will be increased, but some transactions by the big banks will be allowed to remain secret, sadly.
The Agriculture Committee’s bill, shepherded by Chairman Collin Peterson (D-Minn.), does increase oversight of these previously mysterious and exotic financial instruments, experts say. Many derivatives trades would now have to go through clearinghouses or an exchange. But there are exemptions. In an effort to protect companies like airlines and manufacturers that use derivatives to hedge against things like price fluctuations and currency exchange rates, these so-called end-users would not be required to make public the terms of their contracts. Rather, they would continue to operate in the dark.
But Peterson on Wednesday amended the bill to extend the exemption to big banks and financial institutions, as long as their contracts were with these end-users.
UPDATE: Change Congress has an act.ly petition on this, demanding that Congress cancel the exemption from oversight for car dealers. It’s at act.ly/ps.