There’s good news and bad news for American consumers this week.
The good news is that on July 21 the landmark Consumer Financial Protection Bureau (CFPB) takes over as the nation’s chief consumer bank regulator – it will supervise mortgages, credit cards, other bank loans, and fees such as those charged for overdraft protection. The failure of other regulatory agencies to stop predatory Wall Street practices is widely recognized as a primary cause of the 2008 mortgage meltdown that triggered the current recession, and the CFBP has been widely recognized as an essential tool to prevent another economic catastrophe.
The bad news is that because no director has been confirmed, the Bureau will not be able to effectively protect consumers in the financial marketplace that includes payday lenders, mortgage companies, and credit bureaus. Without a director, America’s newest consumer cops won’t have the political presence and clout needed in regulatory battles with Congress, other bank regulators, and the banks themselves.
Last fall the President selected Professor Elizabeth Warren to build the new agency. Warren gets the credit for creating and pushing the idea of a consumer watchdog and is a highly-respected academic expert and popular author on consumer finance. She worked tirelessly to hire and manage a variety of staff – selected from business, other agencies, academia, and consumer groups (some hires listed here) – to set up the new bureau so it would be ready on July 21.
The President has announced his intention to nominate one of Warren’s first senior hires – former Ohio Attorney General Richard Cordray, the current enforcement chief at the CFPB – as its first director. Cordray has a well-balanced record as an AG who worked to protect the people of Ohio, recovering over $2 billion dollars from Wall Street in the past two years to repay Ohio’s wrongly-foreclosed homeowners, the state’s looted pension funds, and cities and counties that lost money once guaranteed by Wall Street.
Although Cordray is well qualified to protect American consumers as the first director of the CFPB, his confirmation by the Senate is not guaranteed. Republicans, who hold a minority in the Senate, have already written to the President indicating that they will filibuster any nominee – regardless of qualifications – unless the Bureau’s powers are first gutted.
It is hard to imagine that Senators who oppose even highly-qualified nominees are putting the interests of the American people ahead of special interests on Wall Street. Simply put, these Republican senators are attempting political extortion on behalf of the big banks that have invested millions to oppose any meaningful reform to financial oversight.
If the Senate finds the former Attorney General qualified, they should honor their responsibility and allow the confirmation process to proceed. If they shirk their responsibility by blocking a vote, the President should act in the interests of consumers and use his authority to appoint a director in August.
The battle over appointing someone to lead the CFPB is part of an ongoing war being waged by powerful special interests against ordinary Americans, and it’s a battle the President should fight on behalf of Americans struggling keep their financial heads above water in a recession caused largely by Wall Street greed.
Congress asked taxpayers to bail out the banks immediately after the economic collapse, but waited nearly two years before finally passing the historic Dodd-Frank Wall Street Reform and Consumer Protection Act to protect consumers from a repeat of the nightmare. To make that promise real, a strong consumer ‘cop on the beat’ is needed to protect average Americans.
It’s certainly good news that we now have a new financial police department focused solely on looking out for consumers. It will be better news when that police department has a sheriff to lead it.
Note: NPI contributor Steve Breaux is a public-interest advocate for the Washington Public Interest Research Group (WashPIRG), which works to protect consumers, encourage a fair and sustainable economy, and foster responsive and democratic government.