WASHINGTON, May 6 (UPI) -- A schism is forming among U.S. Senate Democrats about how much power the federal government should have to pre-empt state consumer regulations, insiders say.
Congressional and industry sources said centrist Democrats argue the Wall Street reform bill under consideration in the Senate should do more to reach a middle ground between state and federal powers, The Hill reported Wednesday. Meanwhile, some liberal Democrats and consumer advocates are looking for ways to give stronger powers to states.
Striking a federal-state balance concerning consumer protection is at the center of debate over creation of a new federal agency that would oversee consumer financial products. As part of its argument for financial reform, the White House has advocated giving state attorneys general and other state officials the power to seek stronger regulations than imposed by the federal government.
The financial industry argues that the federal government should be able to pre-empt the state because otherwise financial institutions would face overlapping and conflicting regulation, The Hill reported.
"We cannot have a patchwork set of rules for federally chartered banks," Richard Hunt, Consumer Bankers Association president, told the Washington publication. "Why would you add an additional layer of confusion?"
Senate Republicans circulated language that would establish a new division for consumer financial protection but retain the current law on pre-emption giving the federal government strong power to set standards. Several state attorneys general joined consumer advocates to oppose the industry and Republicans, The Hill reported.
"I hope that bipartisan language on investor protection can be retained, that we can find common ground on national pre-emption and state AG enforcement," Tim Johnson, D-S.D., said.