Senate Republicans vow they will block any attempt to name a director for the government’s newest consumer watchdog agency, escalating a political battle over the policing of the financial services industry.
In a recent letter to President Obama, 44 Republican senators warned that they would filibuster the administration’s nominee to lead the new Consumer Financial Protection Bureau. Instead, they want the bureau’s director to be replaced by a board of directors. They also want the bureau’s budget to be controlled by Congress, instead of the Treasury Department. And they want to add a further layer of oversight to the board’s decisions.
“This [is] about accountability,” Senator Richard Shelby (R-Ala.), Ranking Republican on the Committee on Banking, Housing and Urban Affairs, said in a press release. “Everyone supports consumer protection, but we should never entrust a single person with this much power and public money.”
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Democrats counter that the Consumer Financial Protection Board already has plenty of oversight. The Dodd-Frank financial reform act, signed into law last year, created the board. It also created the Financial Stability Oversight Council, composed of the leaders of nine financial regulatory agencies. The council has the power to overrule decisions by the board’s director.
“The truth is this bureau is already subject to greater checks and balances than any other financial regulator and this is just another attempt by Republicans to delay and derail these critical new protections,” Tim Johnson (D-S.D.), chair of the Senate Banking Committee, told reporters.
This is just the latest battle in a long war over the bureau, which was created in the aftermath of the economic meltdown to protect consumers from harmful financial products such as predatory mortgage loans. Elizabeth Warren, a Harvard law professor who served as the overseer of the TARP federal bailout program, lobbied for the bureau’s creation and is widely viewed as President Obama’s likely choice to become its first director.
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Warren is also an outspoken critic of what she sees as Wall Street banks’ deceptive practices, which she says hurt consumers and caused the economic meltdown. The current financial market “is not a free-market system. It’s a rigged game,” Warren told Jon Stewart recently on The Daily Show. “So a few million lose their jobs from time to time. A few million people lose their jobs. People get their retirements wiped out, their savings gone. But a few people did really well.”
Her criticism makes her a lightning rod for Republicans and banking interests, who fear she would hurt the financial industry if named director of the new agency.
“Allowing a single unelected bureaucrat to define their own jurisdiction and regulate vast segments of our economy without accountability or restraint is a ‘reform’ that should be rejected,” Sen. Jerry Moran (R-Kan) said in a press release.
Some consumer finance experts criticized the Republicans’ move to block Warren’s appointment.
“Why would anyone expect anything different from the people whose deregulatory philosophy contributed mightily to the utter economic devastation we barely survived,” says Adam K. Levin, founder and chairman of Credit.com. “Hopefully, in the 2012 elections, the American consumer will remember the guys who really stood up for them.”
“I would say this is a regrettable development,” says Jean Noonan, a Credit.com blogger and attorney who focuses on consumer financial issues, and former Associate Director of the FTC. “I think it’s not good for either consumers or bankers.”
The Republicans’ move may force President Obama to appoint the bureau’s director after Congress leaves on recess. Such recess appointments have been criticized recently by both parties as end-runs around the Congressional nominations process. Given the Republicans’ promise to filibuster, “It’s hard to see how we could have anything other than a recess appointment,” Noonan says.
Image: Sabrina K, via Flickr