Frank to unveil U.S. consumer agency bill Wednesday

By Karey Wutkowski

WASHINGTON (Reuters) - The powerful chairman of the House Financial Services Committee plans to introduce legislation on Wednesday that would create a new consumer financial protection agency that would strip powers away from current regulators, a spokesman said.

Representative Barney Frank's legislation will be largely similar to the Obama administration's proposal, with only a few technical changes, the spokesman said.

The administration has proposed an independent agency that would have broad power to write and enforce rules on financial products such as credit cards and mortgages.

The new consumer agency has drawn sharp criticism from the financial services industry and concern from current bank regulators, but is a top priority for Democratic lawmakers and the Obama administration.

It will likely be among the first pieces of the administration's financial regulatory reform overhaul to move through the U.S. House of Representatives.

President Barack Obama last month unveiled a sweeping package of reforms to rewrite the rules for banks and capital markets in response to a severe financial crisis that has dragged down economies worldwide for more than a year.

Frank has said the House Financial Services Committee will meet in July to polish legislative language for the consumer protection agency.

The creation of a new agency to protect consumers from risky financial products has populist appeal, while other technical reforms such as increased regulation for over-the-counter derivatives are harder for lawmakers to explain to their constituents.

Many Democratic lawmakers strongly support the idea, while some Republicans have lined up with the banking industry on attacking the new agency, saying it would be an unnecessary layer of regulation that could drive up costs for consumers.

Current regulators are also voicing their concerns behind closed doors. They believe it makes little sense to split consumer protection from government oversight of the banking business' health.

Obama wants to enact new laws on regulation reform by the end of the year. Democrats have consistently said that could be done, although some analysts foresee debate on the matter running into 2010.

(Reporting by Karey Wutkowski, editing by Matt Daily)