26 July 2010

Is the Obama Administration Sabotaging the CFPB Already?

There are increasing reports that Elizabeth Warren, largely as a result of a growing chorus among liberals to appoint her as head of the Consumer Financial Protection Bureau, will be the nominee as the first chair.

Well, I figured that if they were forced, as it appears that they are, then they would play to lose the nomination: After all, how tough is it to get Republicans to filibuster someone who wants to work for the average American?

Well, if the following report is true, then they are also sabotaging the CFPB as an organization as we speak, having tasked a Federal Reserve Governor and former banking industry lobbyist to start staffing the organization:
However, a source tells FDL News that Geithner is working on this process with Elizabeth Duke, a member of the Federal Reserve Board of Governors. Duke is a former community banker and the past head of the American Bankers Association, a trade lobby group. She served on the ABA’s board of directors from 1999 to 2006. The ABA opposed the Dodd-Frank bill almost entirely because of the Consumer Financial Protection Bureau.

What’s more, Duke herself specifically opposed an independent agency in July 2009 testimony, and endorsed keeping the responsibility for consumer protection in the Federal Reserve. In fact, she went further, promoting the Fed’s consumer protection prowess despite the agency having missed the housing bubble and the predatory lending that enabled it.


If the reports I’m getting are true, this is the woman dealing with staffing up and organizing the Consumer Financial Protection Agency, before the director gets a chance.

The Federal Reserve has not yet returned comment regarding Elizabeth Duke’s role.

This is crucially important. There’s a lot someone in power can do to mess with a federal agency at the outset. You can hire some staffers not committed to the agency’s goals, or give them poor working conditions, or any number of things. Then the new director comes in and is immediately faced with a turf war. If a community banker dismissive of consumer protections ends up setting the vision for the consumer protection bureau, it could slow its progress out of the gate. If the Department where the agency originates is more concerned with “extend and pretend” – letting the banks get out of trouble by earning their way past the bad loans on their books, in part through inundating consumers with higher fees on their products – then that worldview of the banks being more important than the people can get embedded into the agency.
Obviously, there are conflicting reports here, but I'm inclined to believe these reports.

Obviously, David Dayen's suggestion that Obama do the right thing and, "without delay name her to the position of interim director by hiring her at Treasury," is a good suggestion, but this assumes a level of support of the CFPB and its core mission, and I do not believe that.

First, I believe that Obama and his economic team really do buy into neoliberal idea that markets are always smarter and better than regulators, and second, I think that they honestly believe that the banking system will collapse if they generate profits by cheating ordinary Americans.

Of course I've been pessimistic about Obama for about three years, so feel free to argue that I'm not hopey changey enough.


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