Response to Attacks on the Consumer Financial Protection Bureau

The big Wall Street banks and their allies in Congress and in the media have launched an all out attack on the fledgling Consumer Financial Protection Bureau (CFPB). This new Consumer Bureau will be the first banking regulator with the sole job of standing up for consumers in the financial market place, starting on July 21, 2011.

For too long, enforcement of consumer protection laws in the financial market was left to regulators whose main mission was ensuring the financial stability of banks. Not surprisingly, these regulators made consumer protection their lowest priority, if they paid attention to it at all. But now we will have a “cop on the beat” solely dedicated to policing fair rules of the road for mortgages, credit cards, bank accounts, debt collection, student loans and other financial products.

The success of the Consumer Bureau is critical for American households and for the economy as a whole. Rip-off financial products with tricks, traps, and hidden fees suck tens of billions of dollars a year out of our pockets, and go to feed the inflated bonuses of a handful of Wall Street CEOs. Even more, as this devastating financial and economic crisis has made clear, the accumulation of shady business practices on consumer products like mortgages can destabilize our whole economy, at the cost of many trillions. Now, those same special interests are trying to kill the CFPB, which is easily the biggest consumer protection reform since deposit insurance, which passed after the bank-caused Great Crash of 1929.

It’s no surprise that those who oppose holding Wall Street and other lenders accountable are attacking this agency as an “unprecedented” new big government initiative. They’re also attacking Professor Elizabeth Warren, who has been tasked with setting it up, for overstepping her authority. But these arguments don’t stand up to scrutiny. They are just smoke screens for the real goal — attacking the very idea of an effective consumer protection regulator. Randy Neugebauer (R- Texas) Chair of the Subcommittee on Investigations and Oversight admitted as much, acknowledging that his goal was to defund the Consumer Bureau to the point where it could not function.

Opponents are hyperventilating that the CFPB is – as the Wall Street Journal’s editorial page put it – a ‘bureaucratic rogue’. This is just plain false. Its power and authority are similar to that of other bank regulators, except that in two respects it is more, rather than less, limited. Like them, it is subject to Congressional oversight. In addition, unlike any other bank regulator it can have its decisions overruled by a committee of the other regulators under some limited circumstances, and its budget is capped, while other bank regulators’ are not.

What’s different about the CFPB has nothing to do with accountability or being a “rogue” agency. What’s different is that this new Consumer Bureau will be the first banking regulator with the sole job of standing up for consumers in the financial market place. For too long, enforcement of consumer protection laws in the financial market was left to regulators whose main mission was ensuring the financial stability of banks. It didn’t work. The real outrage is the fact that existing regulators, like the Federal Reserve (by the way, a much less accountable agency) had the responsibility to protect the market from products like abusive subprime mortgages, but financial industry special interests objected, and they failed to do so, with disastrous consequences.

The personal attacks on Elizabeth Warren, a distinguished professor at Harvard Law School who has been appointed by the Administration to set up the CFPB, are part of the same pattern. The Wall Street Journal’s editorial page fulminated about Professor Warren supposedly ‘dictating’ extreme measures. But at the same time, its own news pages reported a story that made clear that Professor Warren is engaging in extensive consultation with industry as well as the public, and that her vision of a level playing field and fair competition in financial services is finding shared ground even with many bankers. The PR campaign is just a naked effort to prevent the appointment of someone who will be accountable to the American people and do a good job.

With an effective Director at the helm, this agency will stand up for the public interest, and make the financial system fairer. That’s what opponents are trying to prevent; we do not think the American people will let them get away with it.