BANKRUPTCY UPDATES

• Taking Your Credit Score from Bankrupt to Perfect 10 (May 21, 2012)
• Music Storage Website MP3Tunes.com Seeks Bankruptcy Protection (May 22, 2012)
• Book Publisher Houghton Mifflin Harcourt Files for Bankruptcy (May 17, 2012)
• Las Vegas Tycoon Lists $500 Million in Debts in Bankruptcy Filing (May 15, 2012)
• Nassau Broadcasting Sells its Assets in Bankruptcy Court (May 22, 2012)

Legislators Argue Over Direction of Consumer Protection Bureau

The selection of the leader of the new Consumer Protection Bureau is looking like it will be a heated fight. With the power to set policies that could have a big impact on consumers and business operators, there is no shortage of opinions on what type of leader is needed.

The fight over the leadership of the new agency has grown increasingly heated over the past few days. While President Obama can nominate whomever he wishes, Senate confirmation is required for the nomination to become official.

This intense debate comes as no surprise since the creation of the bureau itself was the most hotly contested addition to financial reform bill, according to a report in the Wall Street Journal.

High Stakes Lead to Heated Debate

The individual eventually tabbed to head the agency will have an enormous amount of discretion in deciding how best to protect consumer agencies. Some notable features of the Consumer Protection Bureau include:

• The agency will initially have a $500 million annual budget. This budget does not require approval from Congress, so the director will be free to allocate the money as he or she pleases without fear of Congressional reprisal.
• The bureau will have complete independence to make new legislation governing a wide range of American commerce, including the maximum amount of fees on credit cards and the type of mortgages people can purchase.
• The agency can enforce its rules against payday loan firms, student loan companies, large mortgage lenders, and most large banks.
• Its rules can only be overturned by legislators if they “would put the safety and soundness of the U.S. banking system or the stability of the U.S. financial system at risk.” The ambiguity of this clause will likely result in future legal battles.

The Leading Candidates

Sources indicate that leading liberals are pushing the White House to select Elizabeth Warren, a law professor at Harvard University who initially formulated the idea of creating an agency to protect consumer rights.

However, several banking groups strongly oppose Warren’s potential nomination, claiming that her favored policies would have the unintended consequence of harming poor Americans’ access to credit.

Other candidates include an assistant Treasury secretary, Michael Barr, and a key member of the Justice Department, Gene Kimmelman.

Barr is viewed by banking groups as more friendly to their cause, especially compared with Warren. On the other hand, Kimmelman has a long history of pushing for tougher reforms on banks.

If the Senate confirms Elizabeth Warren, it will be a victory for those who push for more aggressive reforms of the current banking system. But if an individual like Michael Barr secures the nomination, the agency will likely focus on preserving the ability of banks to chart their own courses.

More information on bankruptcy.