As always, I await Elizabeth Warren's critique. But it doesn't take an expert to see that forbidding states from writing their own, tougher regulations probably isn't good:

WASHINGTON — The chairman of the Senate Banking Committee will unveil on Monday a proposal to revamp the nation’s financial regulations that would empower shareholders to have advisory votes on executive pay and to nominate directors for the boards of public companies through company proxy ballots, several people briefed on the draft legislation said Saturday night.

The shareholder provisions, which have been vigorously opposed by many corporations and by Republicans, will be part of a bill that would amount to the most sweeping overhaul of financial regulations since the Depression. But with no Republican support yet for the proposal, Democratic lawmakers and the White House have been gearing up for a potentially bitter partisan fight.

The impending proposal by the chairman, Christopher J. Dodd of Connecticut, hews in many ways to a proposal advanced last summer by the White House, the people briefed on the legislation said.

[...] The bill would create a consumer financial protection agency under the umbrella of the Federal Reserve, but with a director appointed by the president and the ability to write rules governing mortgages, credit cards, payday loans and a wide range of other financial products.

It would have some ability, within certain parameters, to ensure that the rules are followed; how the rules would be enforced has been a major source of partisan division. As in a House version of regulatory overhaul adopted in December, the bill would, in some circumstances, restrict states from writing their own, stronger consumer protection rules.

The Federal Reserve would see its bank supervision powers significantly diminished. It would continue to oversee bank holding companies with $50 billion or more in assets, and would be entrusted to regulate systemically important nonbank financial institutions. Mr. Dodd had considered setting the threshold at $100 billion, which would have been even worse for the Fed.

Because I live in a city (the unhip part), I actually know people who occasionally use payday lenders. And while the industry is ripe for all kinds of abuse, the people who use these lenders conscientiously (the ones who don't roll over the loan, thus incurring obscene amounts of interest) insist they want that option -- because it's still cheaper than going to the loan sharks.

However, the number of people who do roll over those loans is great enough that the payday lending industry needs to be very tightly regulated. The industry knows that; that's why they pour so much money into campaign coffers. But there's simply no question that the interest rates are usurious and this is exactly the sort of thing Democrats have been fighting to change. Not a good place for "bipartisan" compromise! From the NY Times Dealbook:

Senator Bob Corker, the Tennessee Republican who is playing a crucial role in bipartisan negotiations over financial regulation, pressed to remove a provision from draft legislation that would have empowered federal authorities to crack down on payday lenders, people involved in the talks said. The industry is politically influential in his home state and a significant contributor to his campaigns, records show.

The Senate Banking Committee’s chairman, Christopher J. Dodd, Democrat of Connecticut, proposed legislation in November that would give a new consumer protection agency the power to write and enforce rules governing payday lenders, debt collectors and other financial companies that are not part of banks, Sewell Chan reports in The New York Times.

Late last month, Mr. Corker pressed Mr. Dodd to scale back substantially the power that the consumer protection agency would have over such companies, according to three people involved in the talks.

Mr. Dodd went along, these people said, in an effort to reach a bipartisan deal with Mr. Corker after talks had broken down between Democrats and the committee’s top Republican, Senator Richard C. Shelby of Alabama. The individuals, both Democrats and Republicans, spoke on condition of anonymity because they were not authorized to discuss the negotiations.

Under the proposal agreed to by Mr. Dodd and Mr. Corker, the new consumer agency could write rules for nonbank financial companies like payday lenders. It could enforce such rules against nonbank mortgage companies, mainly loan originators or servicers, but it would have to petition a body of regulators for authority over payday lenders and other nonbank financial companies.

Consumer advocates said that writing rules without the inherent power to enforce them would leave the agency toothless.

"What's the big deal? Can't people just vote themselves another raise?"

And really, I'm disgusted that any Democrat has anything to do with this. What, exactly, do Democrats stand for these days? From the Consumerist:

A House subcommittee wants to legalize payday loans with interest rates of up to 391%. Lobbyists from the payday industry bought Congress' support by showering influential members, including Chairman Luiz Gutierrez, with campaign cash. The Congressman is now playing good cop, bad cop with the payday industry, which is pretending to oppose his generous gift of a bill.

"While they may not be JP Morgan Chase or Bank of America, they're very powerful. Their influence should not be underestimated," Gutierrez, the top Democrat on the Financial Services subcommittee in charge of consumer credit issues, said in an interview this week.

Yes, it's their mind control! He's helpless against their power!

Indeed, the payday lending industry is strenuously resisting Gutierrez's measure, which it says would devastate its business. The measure would cap the annual interest rate for a payday loan at 391 percent, ban so-called "rollovers" - where a borrower who can't afford to pay off the loan essentially renews it and pays large fees - and prevent lenders from suing borrowers or docking their wages to collect the debt.

Now, understand their strategy. By pushing for this federal law (which they're pretending not to want), the payday lending lobby is actually sidestepping potential legislation in several states where they're presently unregulated. As Brer Rabbit would say, "Please don't throw me in that briar patch!"

But consumer groups say the legislation would do little to crack down on the most egregious payday lending practices. They argue it would for the first time lend federal legitimacy to usurious loans and undermine successful efforts under way in several states to slap tougher limits on it.

"We don't believe that this is going to protect consumers. It would in fact condone the payday lending that can be extremely harmful to the people who can least afford it," said Jean Ann Fox of the Consumer Federation of America.

She testified Thursday before Gutierrez's subcommittee on behalf of seven consumer groups that are outraged about the measure. They're pushing to cap all lending interest rates at 36 percent annually.