Consumer Agency: A Political Lightning Rod

May 27, 2011

The Consumer Financial Protection Bureau will on July 21 officially become the nation's newest government agency — and the only one with the singular aim of looking out for the best interests of consumers. The agency is controversial, and at the center of it all is the woman whom President Obama asked to set it up: Elizabeth Warren.

Warren, a Harvard professor, is a longtime crusader against unfair lending practices. She's widely credited with coming up with the idea of a government agency designed to protect consumers. Even her many detractors acknowledge she is an articulate advocate.

"This most recent crisis started one lousy mortgage at a time," she said at a House Oversight Committee hearing earlier this week. "If we had had a Consumer Financial Protection Bureau in place, we could have avoided a lot of the pain that we've gone through in the last 2 1/2 years."

At this point, no one is really questioning the need for a consumer watchdog, but many people, mostly Republicans in Congress and those in the financial industry, are questioning the way this new agency was designed.

'A Horrible Agency'

Sen. Richard Shelby (R-AL), ranking member on the Senate Banking Committee, laid out his concerns on the Fox Business Channel earlier this month.

"It's a horrible agency," he said. "No accountability, vests a lot of power in one person. No accountability as far as money to the Congress, self-funding so to speak. And something's got to give."

On the House side, at the oversight committee hearing, Rep. Patrick McHenry (R-NC) greeted Warren with suspicion.

"What controls are being created to protect the American people from abusive government power?" he asked. "We demand internal controls of companies. What internal controls govern the bureau?"

The reality is that most of the Republicans in Congress and many in the financial industry never supported the bureau's creation. Now that it's the law, they're working to change it.

David Hirschmann, president of the U.S. Chamber of Commerce Center for Capital Markets Competitiveness, says those who would be regulated have many questions.

"How is this regulator going to work?" Hirschman asked. "How is it going to use its broad new powers?"

There are a number of Republican bills in Congress that would reshape the agency. Among the changes proposed: The agency would be run by a board of directors rather than a single person; Congress would control its purse strings, stripping away financial independence; and it would be easier for other banking regulators to overrule regulations the agency writes.

'The Fight Isn't Over'

Supporters describe these changes as reasonable adjustments. But Warren isn't a big fan.

In an appearance on the Daily Show in April, she described the Republican legislation as an effort to delay, defund and defang the agency.

"The fight isn't over," she said. "The fight moved from Main Street to the dark alleys. And so now the game is, let's just see if we can stick a knife in the ribs of this consumer agency."

At the moment, Warren is a special adviser to the president working to set up the agency. The Obama administration did this as a workaround to avoid what most likely would have been a bloody confirmation battle. The bureau is set to open its doors in July and it still needs a director. Warren is seen as the leading candidate. But 44 Senate Republicans recently sent a letter to the president saying if their concerns with the agency's design aren't addressed, they'll block confirmation of anyone he appoints to head the new agency.

"They want to weaken the agency if possible," said David Arkush, the director of Public Citizen's Congress Watch Division who is a Warren booster. "They want to oppose Elizabeth Warren but they don't want to say that they're opposing Elizabeth Warren."

He says this letter is basically forcing the president to make a recess appointment. Arkush doesn't like it.

"They actually, I think in some way, prefer if the president makes a recess appointment because it fits in with this narrative that they are pushing about how there's a lack of accountability and transparency and ordinary process," he said. "So they get to cry foul over the president doing a recess appointment even though they've forced him to do so."

No word from the White House on whether a recess appointment might come this holiday weekend — or ever. But a spokesman for Shelby insists the president does have a choice here: He could agree to some limits on the bureau's powers — something nearly everyone agrees the president has no interest in doing.

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