President Barack Obama’s plan to create a new government agency to protect consumers from risky mortgages and credit cards ran into resistance from several House Democrats on Wednesday.
House lawmakers who oversee the Federal Trade Commission said they were concerned the proposal would weaken the FTC and suggested that the commission be given more resources instead.
Their remarks, while in contrast to more powerful members of Congress who support the plan, suggest that Obama’s goal of clamping down on the financial industry is easier said than done. Government turf battles, along with industry opposition, could threaten to slow the plan’s enactment.
“I have more than a modest degree of skepticism regarding the administration’s proposal,” said Rep. John Dingell, D-Mich., at a hearing by the House Energy and Commerce subcommittee on trade and consumer protections.
Last month, Obama delivered to Congress legislation that would establish a new Consumer Financial Protection Agency. The “CFPA” would be in charge of regulating financial products for consumers in the same way other government agencies regulate the safety of drugs, food and toys.
The FTC already enforces consumer protection laws that apply to institutions other than banks, covering issues such as telemarketing fraud, Internet privacy and identity theft. The FTC also has a hand overseeing some financial providers, such as mortgage brokers, and has worked to shut down scams related to loan modifications and foreclosures.
Under the new plan, the FTC is expected to retain oversight of non-financial markets such telemarketing fraud but lose much of its oversight related to mortgage laws.
Rep. Bobby Rush, chairman of the subcommittee, said he disagrees with stripping the FTC of any of its current powers.
“Looking at all reliable indicators, the commission has performed commendably with a small and scrappy staff and abridged powers,” said Rush, D-Ill.
Michael Barr, assistant secretary for financial institutions at the Treasury Department, said the shift in power is necessary to provide consistent oversight to mortgages throughout the life of the loan, from sale to payoff or foreclosure.
“We need one agency for one marketplace with one mission ? to protect consumers of financial products and services ? and the authority to achieve that mission,” Barr said.
Nearly every member of the House panel told Barr that they had doubts. Republicans were the most blunt.
“They don’t know how much they are going to spend. They don’t know what resources they’re going to need. And also they are going to be taking on expertise on areas they know nothing about that the Federal Trade Commission has years on,” said Rep. Cliff Stearns, R-Fla.
Copyright 2009 The Associated Press.