In contrast to her fellow federal bank regulators, Federal Deposit Insurance Corp. Chairman Sheila Bair continues to back an independent consumer-focused agency to protect borrowers from predatory lenders.
At a gathering of bankers held by the American Bankers Association, Bair reiterated her support for the consumer agency, though she acknowledged that the chances of it being a stand-alone agency -- free from interference by other regulators -- are waning.
"It's better to have a stand-alone agency, she said in response to questions from reporters. But, "it doesn't look like that's going to happen."
The agency, vigorously opposed by bankers and lenders, has emerged as a hotly-contested issue between Democrats and Republicans. The argument for the agency has been reduced to "Banks versus Families," as articulated by bailout watchdog and Harvard Professor Elizabeth Warren.
But 18 months after the financial crisis nearly brought down the world's economy, Washington has yet to enact a law addressing the crisis or to prevent new ones.
Some experts pushing for financial reformer privately concede that the holdup over the agency is delaying much more important -- and necessary -- market reforms, like regulating derivatives and ending Too Big To Fail.
Bair's insistence on an independent agency, though, stands out among the nation's federal bank regulators. Federal Reserve Chairman Ben Bernanke has said he does not want to lose the Fed's authority over consumer protection; John Bowman, head of the Office of Thrift Supervision, does not support the proposed agency; and John Dugan, who leads the Office of the Comptroller of the Currency, has long resisited the idea of divorcing bank regulation from consumer protection.
Yesterday, Dugan told a gathering of bankers at the ABA conference that if the two are separate, consumer protection would trump bank profitability, which he said is "backwards."