This vote was on an amendment by Bob Corker, R-Tenn., that would have prevented state attorneys general from enforcing banking rules, including those created by a new consumer financial protection agency. The amendment was offered to a bill that aims to close gaps in financial regulations, strengthen oversight of consumer lending and more closely oversee complex financial instruments.
The underlying bill contains a provision that would allow state attorneys general to enforce banking laws in order to protect consumers, while also allowing federal law to overrule states when it’s necessary to preserve the integrity of the national banking system. It attempts to strike a balance between banks engaged in interstate commerce, who say they should not be subject to innumerable and sometimes inconsistent state enforcement of laws, and consumer advocates, who say states do the best job of protecting consumers from abusive practices in the financial sector.
Corker’s amendment would have prevented state attorneys general from enforcing federal consumer regulations against national banks and their financial products, except in cases where state law doesn’t conflict with federal law. Corker said allowing these provisions to go forward unchecked would subject financial institutions to “50 different standards and interpretations” that would “result in onerous and expensive compliance burdens” as well as increased costs for consumers.
Corker said his amendment would keep state attorneys general from suing credit unions and small banks “over rules this Federal agency is creating that has no check and balance against it.”
Dodd said Corker’s amendment would disallow state attorneys general from enforcing any aspects of the financial overhaul and would create mass confusion.
“This is a complicated question. It isn’t just about Main Street and Wall Street; it is about how we enforce laws, how to make sure we don’t overreach and create unnecessary duplication and raise costs. We are trying to balance what should not be necessarily competing goals. One is to have stronger consumer protections. I hope I don’t have to make that case again. What got us into this mess to begin with was the lack of consumer protection. It was bad mortgages, no documentation, luring people into deals they could never afford, people making decisions to jump into deals they couldn’t handle,” Dodd said.
By a vote of 43-55, the amendment was rejected. All but one Republican present voted for the amendment. All but three Democrats present voted against the amendment. The end result is that the measure went forward without language that would have prohibited state attorneys general from enforcing banking laws, particularly ones dealing with consumer protections.