FDIC joins consumer protection agency push

Sheila Bair, the head of the Federal Deposit Insurance Corporation (FDIC), is urging lawmakers to set up an independent consumer financial protection agency.

Andrew Gray, spokesman at the FDIC, said in a statement to The Hill on Monday that an agency should be independent and have significant rule-writing power.

{mosads}”Consumer abuses were one of the root causes of the financial crisis and regulatory reform legislation should address this problem.  The FDIC has been on the record that the ideal way to do this is through an independent agency with the power to write rules for the banks and non banks alike,” Gray said.

President Barack Obama proposed a standalone Consumer Financial Protection Agency (CFPA) to regulate products like home loans and credit cards. While the House passed broad financial overhaul legislation in December that included the CFPA proposal, the Senate has been unable to strike a deal on the proposal.

The FDIC’s position appears to cast doubt on a proposal from Sen. Richard Shelby (R-Ala.), the top Republican on the banking panel, to create a division of the FDIC for consumer protection.

According to a summary of Shelby’s proposal, the FDIC chair and board would approve rules from the consumer division.

Senate Banking Committee Chairman Chris Dodd (D-Conn.) is trying to craft legislation to beef up consumer protections, but a recent proposal to create a consumer bureau at the Treasury Department met objections from both Senate Republicans and liberal consumer advocacy groups.