WASHINGTON - Rep. Melissa Bean's amendment to federal legislation creating a Consumer Financial Protection Agency was withdrawn at the House Financial Services Committee Tuesday.
The amendment would have made it impossible for states to impose on banks overseen by federal regulators tougher rules than the ones defined at the federal level.
With the Barrington Democrat staying in Illinois because of swine flu affecting members of her family, Rep. Ed Perlmutter, a Colorado Democrat, made the withdrawal.
Bean said in a prepared statement that it had been her intention to introduce and then withdraw her amendment Tuesday to call attention to concerns about the legislation "while committing to continue to work with the Chairman on this issue as the bill moves toward the floor."
With other members of a centrist New Democrat coalition, Bean has been pushing for weeks to include the amendment, which would have made the bill more favorable to the financial industry. She believes that subjecting national banks to a myriad of state laws is impractical.
Bean's amendment had the votes to pass Frank's committee, since Republicans on the committee had publicly announced their plans to support it. But they would not have voted for the underlying bill creating the CFPA, and several liberal members of the panel threatened to oppose the final bill if Bean's amendment were included.
Worried that Bean's amendment could make the bill fail, Rep. Barney Frank, a Massachusetts Democrat and chairman of the committee, convinced her to withdraw it.
With Bean stepping back, the bill that emerges from the committee will provide states with more power to scrutinize banks.
Under a proposal by Democratic Reps. Melvin Watt of North Carolina and Dennis Moore of Kansas, banks could ask federal regulators for exemptions from specific state laws. But they would otherwise have to answer to both state and federal laws.
The measure was billed as a compromise between liberal Democrats like Watt who want to empower states to impose tough consumer protections, and conservative Democrats like Bean and Perlmutter.
Bean vowed to fight to limit state oversight. She said she plans to reintroduce her amendment when the legislation reaches the House floor in coming weeks.
"Rolling back this 140-year-old precedent of federal rules to a system of 50 different state regimes increases costs for training and compliance, which gets passed to consumers," Bean said in her statement.
The panel plans to vote Wednesday on whether to establish the proposed Consumer Financial Protection Agency and whether it should share with states the power to regulate such products as credit cards and mortgages.