The White House on Tuesday suggested that President Obama would consider vetoing regulatory reform legislation if it did not include strong enough protections for consumers of credit cards, mortgages and other financial instruments.
Press Secretary Robert Gibbs told reporters that there were "big" concerns inside the administration over reports that Congress was scaling back a key pillar of the president's approach to reform: the creation of a Consumer Financial Protection Agency (CFPA). And, in a warning shot to the legislative branch, he suggested that proposed legislation to create the CFPA might not pass the president's desk if it becomes too watered down in the process.
"The president would not sign any bill that he thought was too weak," said Gibbs. "I think we have seen what happens whether it is credit card companies, mortgage companies, we now see it more in stories covering the charges for bank overdrafts and the amount of money that costs the American people each year. The American people deserve an advocate on their behalf dealing with these entities. The president believes that strongly and believes that at the end of the day we will have a strong Consumer Finance Protection Agency working on behalf of the American people."
Gibbs would not definitely say whether the administration was issuing an actual veto threat (he just hinted at the possibility). "We are confident that it will be in the final bill that he'll be able to sign," he said. Nevertheless, the press secretary's rhetoric was the clearest signal to date that the White House is not pleased with how Congress has handled the regulatory reform process.
The brainchild of TARP Oversight Chair Elizabeth Warren, the CFPA was adopted by the White House as a tool to curb the abuses of many financial industry and even non-financial industry institutions. The agency would effectively serve as a cop on the consumer product beat, regulating home loans and credit card fees, and ensuring that terms used in advertising to promote such products were straightforward and understandable.
In recent days, however, the concept has been narrowed down by House Financial Services Committee chairman Barney Frank, in an effort that seems designed to ensure that it passes through Congress. The new version of the CFPA, for instance, would not cover telecommunications companies or real estate brokerages. Nor would it have the power to require financial institutions to offer "plain vanilla" products and services -- a move that critics say would leave consumers largely exposed to predatory practices in both these industries.
Tapping into a bit of populist rhetoric, Gibbs stressed the White House's concern over these legislative changes and threatened, broadly, to push back against them.
"The president will fight for and fight against anybody with special interests who don't see it as an important part of financial regulatory reform," he said.
UPDATE 9/30/09: On Wednesday the White House insisted that it is so far satisfied with congressional action on regulatory reform.