WASHINGTON (Reuters) - Senator Christopher Dodd, chief negotiator for the Democrats in talks on a bipartisan financial reform bill in the Senate, on Thursday called for creating a new government "office" with the power to craft and enforce rules to protect consumers.
In a statement conspicuously omitting any call for an independent agency on consumer protection, Dodd said:
"A lot of attention is being paid to what address the new consumer watchdog will have, but the critical question is 'Will this office have the authority and independence it needs?'"
President Barack Obama's proposal last year to create an independent Consumer Financial Protection Agency (CFPA) has been the main impediment for weeks to a Senate compromise on financial regulation reform legislation.
No compromise bill will be unveiled this week, a committee aide told Reuters late on Thursday.
"There is no agreement" on the watchdog issue or on an overall bill, Dodd told reporters late on Thursday outside his office on Capitol Hill after he had briefed fellow Democrats on negotiations toward a bipartisan compromise with Republicans.
It was unclear when a deal might come and whether a summary of it would be released before a formal bill. Staff from both sides were expected to work through the weekend.
Banks, credit card firms and mortgage lenders would be subject to regulation by the CFPA, which could directly threaten their profits if it mandated sharp reductions in fees and interest rates charged to financial consumers.
Republicans oppose making the watchdog an independent agency, but have said they could live with it as a unit of a banking regulator. Dodd has been discussing putting it in the Federal Reserve as a possible compromise.
But some Republicans also want the agency in which the watchdog is housed to have veto power over any rules it writes -- a position that Democrats have been unwilling to accept.
"That will not be part of this," Dodd said.
DODD HAS 'FOUR PRINCIPLES'
"I am pushing for an office with an independent head, appointed by the president and confirmed by the Senate; that has an independent budget to do its work; autonomy to craft rules, and an ability to enforce those rules," Dodd said.
Sources told Reuters on Wednesday that Senator Richard Shelby, the banking committee's top Republican, was open to possibly putting the CFPA inside the Fed.
Shelby told reporters on Tuesday that whichever agency is the CFPA's parent must "absolutely" have veto power over rules the consumer watchdog might write. "Otherwise you are just creating something that's going to run amok," he said.
Wherever the watchdog ends up, it would consolidate consumer protection duties now scattered across several agencies, including the Fed.
Some Democrats who attended the briefing with Dodd held out afterward for an independent agency, as Obama proposed.
"There should be an independent consumer financial protection agency and if that's not the final agreement, then we'll try to make an amendment," said Senator Jack Reed.
On prospects for building Democratic consensus around a plan, Dodd said: "Do I get everybody to agree? I don't know."
On another aspect of the legislation, Dodd said it must include a provision regulating the over-the-counter derivatives market. "That's got to be" in the bill, he said.
He added, only half-jokingly, that eternal damnation might be preferable to enduring the new government "resolution" process lawmakers want to include in the bill for dismantling large financial firms that get into trouble.
Dodd said if the bill does nothing else, it will ensure that resolution is hard-hitting and there will be no more bailouts of the sort taxpayers funded for giants such as AIG, Citigroup and Bank of America.
"The resolution vehicle -- it's bankruptcy, it's receivership and it's painful," Dodd said. "You'd rather go to hell and live there for a lifetime than live through resolution."
(Reporting by Kevin Drawbaugh; editing by Carol Bishopric)
