SEC chief stakes claim on consumer protection

ByABC News
May 21, 2009, 1:36 PM

— -- The chief of the Securities and Exchange Commission is opposing a proposal to move some of the SEC's oversight tasks into a new financial watchdog agency aimed at protecting consumers. The opposition sets up a possible turf battle within the Obama administration.

The administration is considering the agency as a way to safeguard consumers who use or buy a broad range of financial products, including mortgages, credit cards and mutual funds. Such oversight is handled by a variety of agencies, including the SEC, the Federal Trade Commission and the Office of the Comptroller of the Currency.

SEC Chairman Mary Schapiro said consumer protection can't be separated from her agency's broader regulation of stocks and mutual funds.

"I question profoundly any model that would try to move investor-protection functions out of the Securities and Exchange Commission," Schapiro said Wednesday. "It's not a discrete thing that gets moved away without really damaging the fabric of the entire investor-protection regime."

She said some type of agency might be viable, but added, "I certainly hope they'll be refining it."

The watchdog agency idea was discussed at a dinner Tuesday night at the Treasury Department. Attending were Treasury SecretaryTimothy Geithner, National Economic Council Director Lawrence Summers and former Federal Reserve chairman Paul Volcker, among others.

"No decisions have been made, but the administration is actively considering various viewpoints as it puts together its regulatory reform framework," Treasury said in a statement.

The idea grew out of legislation introduced in March by Sen. Dick Durbin, D-Ill. The bill would create a "financial product safety commission" intended to protect consumers from "dangerous and deceptive" financial products, according to a letter sent to Geithner last month by the bill's sponsors.

Supporters say regulation of financial products is spread across 10 federal regulators, and none are primarily focused on consumer protection. The subprime mortgage crisis and recent unfair increases in credit card rates underscore the hazards of lax regulation, bill backers say.