I noted earlier in the week that the Chamber of Commerce was ginning up opposition to the creation of an independent Consumer Financial Protection Agency (CFPA) by conducting a “fly-in” of small business owners, who were then led to pre-arranged anti-CFPA meetings. The false premise of the Chamber’s theatrics was that the CFPA would be harmful to small businesses.
One of the events that the Chamber organized was a discussion with Sen. Mike Johanns (R-NE), who made it clear that he doesn’t think much of the CFPA:
Johanns outlined his opposition to the CFPA proposal, arguing it would drive up costs on consumers and create an agency with a “potential power grab over the nation’s economy.”
Johanns is vastly overstating what the CFPA will be able to do, but he is right in the sense that the CFPA is meant to grab a bit of power for consumers away from the financial services industry and the regulators which it dominates. Right now, all the power in the regulatory structure lies with the banks, whose fees the regulators count on in order to survive. Giving some power back to consumers and protecting them from predatory practices is an okay shift in my book.
That’s why it’s encouraging to see President Obama throwing his weight behind the CFPA. After reports surfaced last week that Senate Banking Committee Chairman Chris Dodd (D-CT) was considering dropping the CFPA from his regulatory reform proposal, in favor of a trumped up consumer protection division within an existing bank regulator, Obama met one-on-one with Dodd to personally advocate for the agency. One administration official said the CFPA proposal is “nonnegotiable.”
But what can’t happen here is to let the CFPA become the public option of regulatory reform, in that Obama personally backs it and it becomes the crux of the reform effort, only to be dropped in the end. While the bailout tax and today’s proposal to limit bank size and risk-taking are both good steps aimed at reining in Wall Street, the CFPA is the only part of the regulatory reform effort that is directly for consumers and will produce tangible results on their behalf. As Ezra Klein put it, the CFPA is “the only part of [regulatory reform] that voters can easily understand. It’s the only policy that’s popular on its own. It’s the only piece of it that you can actually use to message.” Without it, the direct effect of regulatory reform becomes much less apparent.
And if Republicans like Johanns want to oppose the CFPA for reasons that don’t make any sense, that’s fine, as long as they are forced to actually cast that “no” vote. “It’s the banks versus the people, and it’s time to choose. For me, that’s the frame, and that’s what the conversation is about,” said Harvard Law Professor Elizabeth Warren. “If the White House forces that choice on the Congress, then we’re getting the leadership we need.” Weak regulatory reform is just about as bad as no regulatory reform, so let the right vote with the banks, and then make sure every voter knows where the right’s priorities lie.