In the wake of what many believe is the worst U.S. financial crisis since the Great Depression, the
Obama Administration has proposed sweeping reforms of the financial services regulatory
system, the broad outline of which has been encompassed in a nearly 90-page document called
the President’s White Paper (the White Paper or the Proposal). The Proposal seeks to meet five
objectives:
(1) “Promote robust supervision and regulation of financial firms”;
(2) “Establish comprehensive supervision and regulation of financial markets”;
(3) “Protect consumers and investors from financial abuse”;
(4) “Improve tools for managing financial crises”; and
(5) “Raise international regulatory standards and improve international cooperation.”
The Administration likely will offer specific legislative proposals that would implement each of
the five objectives of the White Paper. On June 30, 2009, the Obama Administration made
available the first such legislative proposal, called the Consumer Financial Protection Agency Act
of 2009 (the CFPA Act or the Act). The Act would establish a new executive agency, the
Consumer Financial Protection Agency (the CFPA or the Agency), to protect consumers of
financial products and services. On July 8, 2009, Representative Barney Frank, Chairman of the
House Financial Services Committee, introduced very similar legislation, H.R. 3126, which also
is entitled the CFPA Act of 2009.
This report provides a brief summary of the President’s CFPA Act and delineates some of the
substantive differences between it and H.R. 3126, as introduced. It then analyzes some of the
policy implications of the proposal, focusing on the separation of safety and soundness regulation
from consumer protection, financial innovation, and the scope of regulation. The report then
raises some questions regarding state law preemption, sources of funding, and rulemaking
procedures that the Act does not fully answer.