Republicans want to strangle the Consumer Financial Protection Bureau before it even gets off the ground. On Thursday, 44 out of the 47 Republicans in the Senate sent a letter to President Obama saying that they would block the nomination of any candidate to lead the Consumer Financial Protection Bureau unless major reforms to the agency's structure are made.
But this may just be an attempt to take attention off the popular and charismatic Elizabeth Warren, architect of the CFPB and a consumer advocate and Harvard law professor who is the White House’s first choice for director of the agency. Contentious confirmation hearings over her nomination could play to the Democrats’ hand, making Republicans look like they aren't willing to be tough on Wall Street. Undoubtedly, someone would bring up the little fact that so many Republicans have received big money from financial services firms of late. In fact, some banks are now saying that they love Warren, writes the left-leaning Mother Jones magazine. Even ABA President Frank Keating said he’ll back Warren if she’s nominated, though he later dialed back his endorsement. Doesn’t all this sudden Warren-loving seem a little bit off?
Warren has been playing pretty aggressive defense for the CFPB. Late last month, she made one of many recent appearances on the Daily Show to defend the work that the agency would do for middle class families. "Now the game is, let's just see if we can stick a knife in the ribs of this consumer agency," she told Daily Show host Jon Stewart. Warren, who has written best-selling books about the financial distress facing today's middle class families with her daughter, is hard to paint into a corner. She's a no-nonsense, tough-talking educator who grew up in Oklahoma and has been named to numerous most-influential people lists. She's likeable even if she has a slight air of the schoolmarm.
Some say Republican demands for a restructuring of the CFPB could even backfire. They are unlikely to pass a Democrat-controlled Senate and the result could be a recess appointment of Warren instead.
In their letter, the Republican Senators demand the agency be led by a board of directors instead of a single director, that its budget be subject to the Congressional appropriations process and that it come under the oversight of the Financial Stability Oversight Council. Over in the House of Representatives, the Financial Services Committee voted Wednesday in favor of three proposals to limit the agency’s new powers.
The Consumer Federation of America (CFA) and Americans for Financial Reform fired back on Thursday and Friday, condemning the senators for trying to defang the consumer agency and prevent it from doing its job.
“The measures that these Senators are demanding were all considered and rejected by Congress last year because they would give big banks extraordinary power over the Bureau’s operations and handcuff the only consumer financial cop on the beat that Americans have ever had,” wrote the CFA in its letter. “Enactment of these measures would virtually guarantee that the CFPB would be a weak and timid agency without the will or ability to curb the kind of financial abuses that caused the nation’s worst financial crisis since the Great Depression. They will also muddle decision-making at the CFPB, while expanding the power of disgraced banking regulators to stop strong consumer protections.”
Created by Dodd-Frank and scheduled to open its doors for business July 21, the CFPB is the only regulatory agency in the United States whose sole function would be to protect consumers. Many other financial services industry regulators are also tasked with protecting the solvency of the financial system, and therefore, the banks and brokerages that sell products to consumers. The problem with having regulators who do both is that it results in conflicts of interest. The agency would be in charge of regulating mortgages and credit cards, writing new consumer protection rules and enforcing them at the largest banks.
Elizabeth Warren is currently a White House adviser and has been working with the Treasury Department to get the CFPB up and running. She has clearly stated her support for strong regulation and has aggressively condemned the “tricks and traps” some banks use to collect fees from consumers.