CFPB should not be undermined

Republican lawmakers should stand down in their efforts to delay and obstruct the shaping of the Consumer Financial Protection Bureau, which if properly implemented will go down in history as the most significant and innovative change to come out of the Dodd-Frank financial reform law. In the name of consumer protection, conservatives, liberals and everyone on the Hill who is in between also should recognize that the agency will need a strong and sagacious leader, and that Elizabeth Warren, who is in charge of setting up the bureau, is the best person for that job. Ideologically, we generally favor less regulation over more. But if the financial meltdown proved nothing else, it is that American consumers need and deserve an independent watchdog and a tireless advocate in their dealings with banks. That is exactly what the bureau could be, provided that legislators don't muck it up before it goes live July 21. If actualized according to the standards established by Dodd-Frank, the bureau will protect American consumers from predatory lending, excessive fees, unscrupulous credit card practices and other acts of financial malfeasance. It will also assure that fewer Americans are blindsided by hidden surcharges, interest rate changes or other “surprises” often concealed in fine print and legalese. Consequently, the bureau will strengthen — not weaken — the free-market system. By assuring that American consumers are armed with the information that they need to make solid financial decisions, the board will empower consumers to embrace products and practices that they like and to reject those that they don't. That is, of course, if House Republicans are unsuccessful in their efforts to reshape the bureau's leadership structure and water down its powers. House Financial Services Committee Chairman Spencer Bachus, R-Ala., recently introduced a bill that, if enacted, would replace the bureau's director with a five-member bipartisan panel. Although the proposal undoubtedly would quell Republican fears about having one person at the helm of the bureau, it also would be a recipe for partisan infighting and would result in delay and procrastination. House Republicans' concerns about the bureau's having too much control over financial markets are overblown to the point of becoming theatrical. For starters, like any other government agency, the bureau will be subject to the Administrative Procedures Act. That means that it will be required to post notice and gather comments on any proposed rule changes. More importantly, any and all rule changes will have to demonstrate a rational basis. For the bureau, meeting that requirement will involve considering the potential costs and benefits to both consumers and to providers of consumer financial products and services. Second, unlike with any other government agency, rules created by the bureau may be vetoed by another governmental agency. Indeed, the 10-member Financial Stability Oversight Council, which is made up primarily of the heads of the major governmental agencies, including the consumer bureau, will be empowered to overrule the bureau's rules if two-thirds of its members vote to do so. Admittedly, the likelihood that the council will exercise that power is slight. But the possibility that a veto could occur likely will go a long way toward keeping the bureau's rulemaking agenda in check.

POWER OF CONGRESS

And let's not forget one other stopgap against overzealous rulemaking: Congress. As is true with all other federal agencies, Congress has the power to overturn any rule that it dislikes. Even more troubling than resorting to histrionics to mask their antipathy for any kind of government oversight are efforts by House Republicans to cast Ms. Warren as a power-hungry despot more interested in making bankers squirm than in looking out for the interests of American consumers. Without a doubt, she is the best-qualified person to run the bureau. The 61-year-old attorney and professor at Harvard Law School served as chairman of the five-member Congressional Oversight Panel, which was created to oversee the implementation of the Emergency Economic Stabilization Act. Long before the financial meltdown, Ms. Warren was warning anyone who would listen about the dangers of escalating consumer debt. Moreover, she was an advocate of the formation of a consumer financial watchdog long before the bureau was proposed. It is clear that the only reason President Barack Obama hasn't appointed Ms. Warren director of the bureau is because he knows that she likely will not be confirmed by the Senate. Nevertheless, it is time for him to step up to the plate and nominate her to become the bureau's permanent director. And then he should roll up his sleeves and fight.