President Obama is facing rising discontent from Democrats over how he plans to implement regulations designed to protect consumers from greedy financial advisers out to pocket commissions from Wall Street.
A growing number of Democrats — including more than a third in the House — say his current proposal would end up raising consumer costs and even limit low-income Americans’ access to financial advice.
“Impractical,” was how one senior aide to a House Democrat with concerns about the proposal said.
{mosads}At a meeting last week, Democrats who want significant changes to the rule made their case to Labor Secretary Thomas Perez, the official charged with implementing the rule. The aide was optimistic that Perez understood Democrats’ concerns and said that Perez was “convincing and sincere in saying the rule is not final.”
Democrats are now demanding significant alterations to the plan, which the business community and Republicans already oppose. The opposition is a real problem for the White House. Opponents of the rule believe that if enough Democrats object, it would be far more difficult for White House to make it final.
A Labor spokesman said the department will “examine the public feedback that we have received over the course of the past five months” once the comment period closes on Thursday.
“At this point, I do not have an estimate on when a final rule could be published,” according to the DOL spokesman. “Secretary Perez and staff continue to talk with Members of Congress and their staff, and by and large, those discussions have been forthright, honest exchanges, that have left all involved in a better place in regards to where this rule is heading. This includes last week’s very productive meeting.”
Obama’s plan would increase disclosure requirements for financial advisers in an effort to better help consumers understand how they’re financial advisers receive payments off selling certain packages of financial advice. But critics of the plan say that the regulations are unneeded given the current rules that exists and would create expensive compliance costs that’d hurt consumers.
Specifically, many Democrats are concerned that financial advisers who serve low-income Americans would face regulatory burdens that would take away economic incentive to continue marketing their services to small accounts.
“The meeting with Secretary Perez got heated at times,” said Rep. Gwen Moore (D-Wis.), who attended the meeting. “Members have substantive questions about the rule. These are the frank conversations that need to happen. It is healthy and speaks to the yeoman’s work the Secretary has put into getting the rule right.”
Reps. Ed Perlmutter (D-Colo.) and Jared Polis (D-Colo.) were some of the other lawmakers who attended the meeting. Moore praised Perez for demonstrating that “the Department is moving to address concerns.”
“Despite the fiery exchange, I took comfort in seeing Secretary Perez’s willingness to address our collective concerns and find common ground with my Democratic colleagues,” she said.
Moore has already convinced more than 70 House Democrats to sign on to a letter calling for changes to the administration’s proposal. It’s the strongest showing of Democratic discontent with the regulatory proposal, and it comes following Sens. Claire McCaskill (Mo.), Heidi Heitkamp (N.D.), Joe Donnelly (Ind.) and Jon Tester (D-Mont.) sending letters last month to Perez voicing similar concerns.
“The White House and DOL should be very concerned that this many Democrats are expressing very legitimate concerns over this proposal,” said one industry lobbyist close to the discussions.
Obama unveiled the regulatory proposal earlier this year with much fanfare and the backing of Sen. Elizabeth Warren (D-Mass.), after a similar proposal fell short in 2010.
Together, they attempted to frame the issue as a way to fight back against Wall Street as the business community — including the U.S. Chamber of Commerce — lobbied furiously against the proposal.
– Updated at 7:48 p.m.