Tuesday, July 27, 2010

Warren The Trenches

Felix Salmon called it back on Friday that Elizabeth Warren would be named as the head of the new Consumer Financial Protection Bureau and indeed, she appears to be a growing consensus choice for the position.  The problem is as David Dayen argues is that the CFPB could get cut to ribbons before Warren even gets a bureau to be in charge of.  The agency will start out as part of Treasury where a transitional group to get the ball rolling will be started, and the person Timmy is putting in charge of that process basically opposed the entire CFPB concept from the beginning.
However, a source tells FDL News that Geithner is working on this process with Elizabeth Duke, a member of the Federal Reserve Board of Governors. Duke is a former community banker and the past head of the American Bankers Association, a trade lobby group. She served on the ABA’s board of directors from 1999 to 2006. The ABA opposed the Dodd-Frank bill almost entirely because of the Consumer Financial Protection Bureau.

What’s more, Duke herself specifically opposed an independent agency in July 2009 testimony, and endorsed keeping the responsibility for consumer protection in the Federal Reserve. In fact, she went further, promoting the Fed’s consumer protection prowess despite the agency having missed the housing bubble and the predatory lending that enabled it.
In other words the person creating the agency's rank and file could very well be someone who sees no reason for it to even exist.   "Conflict of interest" doesn't begin to describe it.
This is crucially important. There’s a lot someone in power can do to mess with a federal agency at the outset. You can hire some staffers not committed to the agency’s goals, or give them poor working conditions, or any number of things. Then the new director comes in and is immediately faced with a turf war. If a community banker dismissive of consumer protections ends up setting the vision for the consumer protection bureau, it could slow its progress out of the gate. If the Department where the agency originates is more concerned with “extend and pretend” – letting the banks get out of trouble by earning their way past the bad loans on their books, in part through inundating consumers with higher fees on their products – then that worldview of the banks being more important than the people can get embedded into the agency.
I’ve heard conflicting reports on this – including that the lead staffer setting up CFPB worked previously at the Center for Responsible Lending. And given how the President and the Treasury saved the CFPB from peril over and over again during the FinReg debate, they may be plenty committed to its successful operation. So this could be nothing. But if the mission of the CFPB conflicts with the goals of letting the banks earn their way out of insolvency, that could present problems. Especially if those involved are more concerned with saving the banks.
The easy way out of this is to not only nominate Elizabeth Warren, but to without delay name her to the position of interim director by hiring her at Treasury. This requires no Senate confirmation for an indefinite period.
Seems like a winning plan to me.  Not much the Republicans can do on Presidential interim appointment.  But Obama's going to need to move fast before the Republicans regain their footing on this.  Just because the bill got passed doesn't mean it's all smooth sailing from here.

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