The following editorial appeared in The Miami Herald:
More than three years after the collapse of the housing market and the onset of the Great Recession, a government agency designed to protect consumers from fraud, abusive practices and deception in the financial arena has finally come into being.
That’s the good news. The bad news is that Wall Street and its allies in Congress are waging a determined rearguard action to keep the agency from functioning effectively, to the detriment of every American who needs a mortgage, wants to secure a loan or carries out any other kind of financial transaction. Wall Street may have lost round one, but the fight isn’t over yet and consumers could still wind up losing big.
The new agency was the main feature of the Dodd-Frank bill approved by Congress last year with strong backing from the Obama administration. The law overhauled the nation’s financial regulatory system by placing authority for enforcing nearly 20 consumer financial laws under one regulatory roof. Previously, these were handled by seven separate agencies — some of which were practically captives of the financial industry. It is the most beneficial and most tangible reform to grow out of the Great Recession and should lead to more effective regulation.
For that reason, creation of the Consumer Financial Protection Bureau has been strongly opposed by those who made out like bandits before the collapse.
They’re adamantly opposed to changes that would empower regulators to make consumer-friendly rule changes, and they appear to be winning the battle. The main issue is whether the agency will have one director — as foreseen in the law — or a panel of commissioners, as opponents like Sen. Richard Shelby, R-Ala., an unabashed ally of Wall Street, would prefer. Critics fear this will undermine the agency’s leadership, make it more susceptible to lobbying by financial interests, and tie it up in political infighting.
A few days ago, President Barack Obama bypassed Elizabeth Warren, the driving force behind the new agency, and nominated former Ohio Attorney General Richard Cordray to head the bureau, reckoning it might be easier to get approval in the Senate for someone who was deemed less of a lightning rod. Fat chance.
Cordray had a reputation in Ohio as the Midwestern sheriff of Wall Street. He sued the likes of Merrill Lynch, the insurance behemoth A.I.G. and credit rating agencies, among others, for actions that he said contributed to the collapse of the economy. Clearly, Cordray takes the role of watchdog seriously, and that’s what worries Wall Street.
In May, 44 Senate Republicans vowed to block any nominee unless Obama agreed to major structural changes, including replacing the single director with a five-member panel.
This will stymie the agency’s operations, which suits Wall Street just fine. Without a confirmed director in place, it can enforce consumer financial protection laws already on the books, but it cannot implement new rules to ban products or practices deemed “unfair, abusive or deceptive.”
Republicans have enough votes to block Cordray. But Obama should stick to his guns. His effort to conciliate opponents by overlooking Warren got him nowhere, and Cordray is the right kind of leader to head the nation’s first consumer protection agency in the realm of finance.
With the consequences of the Great Recession still evident all around us, it should be painfully clear that Wall Street needs a strong sheriff now more than ever.