Mar 06, 2010

"As Congress and the White House battle over the outlines of an agency to protect consumers from deceptive financial practices, their biggest hurdle is figuring out how independent it should be.

Republicans have floated proposals to create a consumer protection unit at the Federal Reserve or the Federal Deposit Insurance Corporation, which could weaken President Obama's goal of creating an agency free from the influence of banks and federal regulators whose priority is to shore up banks' profitability and soundness.

Asking bank regulators to house a consumer protection authority could leave the balance of power tilted toward the banks, critics fear. The Fed, for instance, ignored years of warnings about the dangers of subprime mortgages and overdraft fees before finally taking substantive action in recent years. An independent agency devoted to consumer protection would be more responsive to such problems, the critics say."

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