UPDATE 1-White House touts states’ role in bank overhaul

(Adds comments from Carper and Dodd.)

* State officials join White House on preemption issue

* Issue pitched as battle for public over big banks

* W.House, some states disagree with moderate Democrats

By Patricia Zengerle

WASHINGTON, May 13 (BestGrowthStock) – An amendment to the Wall
Street reform bill in the Senate to give the federal government
more power than states to regulate banks would seriously harm
efforts to protect consumers, the White House and two state
attorneys general said on Thursday.

Several Democratic senators are supporting the amendment —
also co-sponsored by 10 Republicans — to give federal
regulators more power to preempt state regulations, saying
there should be one strong central regulator.

The White House said states had to help regulate the
115,000 financial service providers across the United States.

“It’s not reasonable to expect that the federal agencies
can do this alone,” Diana Farrell, deputy director of the White
House’s National Economic Council, told reporters on a
conference call.

The sprawling Wall Street reform bill working its way
through Congress would be the biggest overhaul of the U.S.
financial rulebook since the 1930s.

Final approval is expected as soon as next week but major
disputes over amendments remain.

Most congressional Democrats, many state attorneys general
and the Obama administration are pushing for the Senate bill,
one of President Barack Obama’s top policy priorities. It would
have federal regulators set a minimum standard, and allow
states to push for tougher rules as they feel appropriate.

“We feel strongly that the states should have the right to
protect their citizens as they see fit and that national banks
should have to follow the same rules that their state bank
competitors do,” Farrell said.


Tom Carper, one of the Democratic senators pushing for the
amendment, said his bill would protect consumers.

Other Senate Democrats backing the amendment are Mark
Warner, Tim Johnson and Evan Bayh.

“I support creating a new Consumer Protection Bureau to
guard against unfair and deceptive lending practices,” said
Carper. “All my amendment says is that we should make that
bureau do its job. This is the cop on the beat that we need.”

“As a former governor, I believe strongly in state rights.
However, there are times when it’s not always wise to have 50
different states weighing in on what’s best,” he said.

Iowa Attorney General Tom Miller and Connecticut Attorney
General Richard Blumenthal, who joined the call, depicted the
issue as a choice between supporting big Wall Street banks and
promoting the public interest.

“The big banks drove the economy off the cliff, and we had
to bail them out because they are special. But if there’s one
thing we should agree on, it’s that they are not so special
that they should get exempted from the state laws that all the
small banks have to follow,” said Elizabeth Warren, chairwoman
of a congressional committee evaluating the bank bailouts.

“Study after study has shown that the mortgage crisis would
have been less severe if we had let states take a more active
role in consumer protection. It’s no coincidence that the same
financial services industry that has been exempt from state
regulation was also the industry that brought down the economy
with its recklessness,” Warren told Reuters.

Senator Christopher Dodd, who is overseeing the
financial-reform effort in the Senate, said Democrats might
reach consensus on the issue. He said he did not know whether
Carper’s proposal would come up for a vote.

“I feel pretty strongly that you can’t have a sweeping
preemption but there’s room I think for some discussion,” he
told reporters.

(Additional reporting by Kevin Drawbaugh, Karey Wutkowski and
Andrew Sullivan; Editing by Kevin Drawbaugh and Andrew Hay)

UPDATE 1-White House touts states’ role in bank overhaul