House Financial Services Committee Chairman Barney Frank said Tuesday that he will postpone next week's planned vote on legislation to create a consumer protection agency until after the August recess.
The delay was due in part to the panel's busy schedule, but committee officials also said they wanted to give consumer groups more time to respond to lobbying by the banking industry, which is opposed to the bill. Industry lobbyists said this week that their arguments to curb the powers of a new agency were gaining traction.
Steve Adamske, a spokesman for Frank, said consumer groups needed time to respond to industry arguments against the new agency and efforts to limit its authority.
"Consumer groups and advocates have planned a ground campaign in August and we want to give them time to preserve this agency," Adamske said. The goal is to allow lawmakers more time to "hear from their constituents," he said.
"The Wall Street lobbyists have been heavily lobbying against this, but that's only telling one side of the story," he said.
John Taylor, the president of the National Community Reinvestment Coalition, said it was clear the banking industry was going all out to stop the agency.
"Every time I go up there I'm tripping over blue-suited lobbyists representing the banks. All the banking lobbyists are up there all over the place," he said. "They still have pull. It's the best Congress that money can buy as it relates to the Financial Services Committee."
Consumer groups are already beginning to fight back. Americans for Financial Reform has scheduled a press conference for Wednesday on the need for a new consumer protection agency. Frank and other top committee Democrats are scheduled to attend.
Administration officials also said they remain confident that the bill will eventually pass.
"I think the prospects for our package of reforms, including the consumer protection agency, are strong," said Michael Barr, the Treasury Department's assistant secretary for financial institutions, during a conference call. "I think we have an enormous amount of support, but we are obviously mindful of the chairman's desire to run the process in the way he thinks is most effective and that's what he's doing. But we have 100% confidence in him and in the process."
Frank announced the delay as a hearing with Federal Reserve Board Chairman Ben Bernanke got under way.
The Massachusetts Democrat said he would delay a vote until next week on a bill to set limits on executive compensation. As a result, he said, the consumer protection bill would have to be put off until September.
"When I set the schedule, I was aware it was on the heavy side," Frank said.
The schedule has been altered several times this month and congressional staff and industry lobbyists speculated that the delay on the consumer protection agency was more than just a scheduling issue.
They attributed it to a series of unresolved issues and a push by some members, including many Republicans, to slow the pace.
"I believe that slowing down the process would be in the best interest" of the committee, said Rep. Spencer Bachus of Alabama, the panel's senior Republican.
The concept of breaking off consumer protection from prudential supervision and housing it in a separate agency has emerged as one of the most contentious parts of the administration's regulatory reform plan.
Under the bill, banking regulators would lose the power to write and enforce consumer protection rules, which would fall to the new agency. It would also gut federal preemption by allowing states to set higher standards and enforce federal and state laws against both national and state banks.
The legislation was introduced by Frank with a handful of Democratic co-sponsors July 8, but it instantly became clear that many issues about how the agency would function had been left largely unresolved.
Rep. Paul Kanjorski of Pennsylvania, the panel's No. 2 Democrat, has argued the committee should take more time to consider the legislation.
"It's hard to just stand still and say we've thought all these things out and we can see how they come together," Kanjorski said in an interview early this month. "I don't think anybody has totally and I think that's our job before we go ahead and act."
Several outstanding questions include the agency's cost, how it will be funded, what enforcement authority it will have over banks and nonbanks and how conflicts with the banking regulators would be resolved.
The Financial Services Committee has an aggressive agenda, scheduling at least one hearing nearly every day this month, and briefings on a range of regulatory reform and other issues. In addition to the hearing with Bernanke, the panel also held a hearing Tuesday on institutions deemed too big to fail. It is scheduled to hold a regulatory reform hearing on Friday with Treasury Secretary Tim Geithner and the heads of the banking agencies.
The consumer financial protection agency is the latest piece of regulatory modernization to be pushed on the fast track and then delayed.
On March 18, after outrage erupted over bonuses paid to employees of American International Group, President Obama announced that he was asking Congress to expedite legislation that would provide regulators with resolution authority to unwind systemically risky bank holding companies and nonbank financial players like investment banks.
For weeks, both Frank and Senate Banking Committee Chairman Chris Dodd discussed the idea of rushing though such legislation. But the legislation was complicated by cost, and the power to unwind a firm appeared too intertwined with how best to regulate these systemically risky companies, which is significantly more controversial.