House panel backs weakening new consumer bureau

WASHINGTON Wed May 4, 2011 2:02pm EDT

WASHINGTON (Reuters) - A U.S. House of Representatives panel backed legislation on Wednesday aimed at weakening the powers of the new Consumer Financial Protection Bureau.

The bureau is a key part of the Dodd-Frank financial oversight law and one of its most hotly debated provisions. When it opens its doors on July 21, the agency will have the authority to write rules governing financial products such as credit cards and home loans.

Republicans and the banking industry argue the bureau has too much power to write and enforce rules that they contend could restrict credit and cripple lenders.

The initiatives have little chance of becoming law since they would have to be approved by the Democrat-run Senate and signed by President Barack Obama.

They show, however, that political tensions over the bureau are still running hot.

The legislation approved on Wednesday by a House Financial Services subcommittee would have the bureau run by a five-member board rather than a single director and make it easier for the new Financial Stability Oversight Council to overturn bureau regulations.

"A commission is not an unprecedented leadership structure for a regulatory agency," said Republican Representative Shelley Moore Capito, chairman of the subcommittee.

She argued that other regulatory agencies are run this way and it will help prevent the bureau from being a partisan tool of any administration because no more than three board members could be from the same party.

The subcommittee also approved a proposal to prevent the bureau from exercising some authorities until a director is in place.

Democrats sought to make Elizabeth Warren, the Harvard law professor preparing the agency for its July 21 launch, an issue during Wednesday's debate.

Warren is beloved by consumer advocates and liberals but has received a cool and at times hostile reception from Republicans and bankers.

The Obama administration is considering whether to nominate Warren as bureau director and then fight to have her confirmed by the Senate.

Republicans denied their legislation had anything to do with Warren, saying that even if she was confirmed she could only lead the agency for a few years.

"This is no more about Elizabeth Warren than George Washington," said Spencer Bachus, chairman of the Financial Services Committee.

Democrats charged the legislation was at least partially motivated by opposition to Warren's nomination.

To make that point Carolyn Maloney, the leading Democrat on the subcommittee, offered a proposal listing criteria that should be used in nominating a director that mirrored parts of Warren's resume and her public stances on consumer issues.

"This whole debate is clearly about Elizabeth Warren so let's make it about her," she said before her proposal was voted down.

(Reporting by Dave Clarke, Editing by Phil Berlowitz and Tim Dobbyn)

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