Reg Reform Debate Pulls Fed into Unfamiliar Fight
By Steven Sloan
Congress has opened a new front in the battle over federal preemption — just as lawmakers reached a compromise on the original question. A little-noticed provision offered by House Financial Services Committee Chairman Barney Frank would prevent the Federal Reserve Board or a systemic-risk council from overriding state or federal consumer protection standards — a move some said could have punishing consequences in the future. The proposal is buried in a nearly 250-page manager’s amendment the Massachusetts Democrat attached to the regulatory reform legislation being considered by the House this week. “This is very much entwined with the larger debate” over preemption, said Karen Shaw Petrou, the managing director of Federal Financial Analytics Inc. “It seems to be an effort to close a potential back door for federal preemption.” Because of procedural rules, it is often difficult to fight individual provisions in a manager’s amendment, but industry representatives said they will oppose the measure.