The Consumer Financial Protection Bureau, the new kid on the block
Top economics and financial officials met with Timothy Geithner today to discuss the future Consumer Financial Protection Bureau. The new agency will have to overcome old loyalties and resentment from existing regulatory agencies forced to give up their staff and budget.
FDIC Chair Sheila Bair (L) and Federal Reserve Bank Chairman Ben Bernanke at the ceremony where President Barack Obama signed the financial reform bill into law. (Chip Somodevilla/Getty Images)
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- Bernanke, Geithner meet on consumer protection
Fed chair Ben Bernanke and Treasury Secretary Timothy Geithner are meeting to discuss the new Consumer Financial Protection Bureau.
TEXT OF STORY
Kai Ryssdal: It was a hot time at the Treasury Department this afternoon. Seven top banking regulators just sittin' around talking.
Tim Geithner hosted. Fed chairman Ben Bernanke and Sheila Bair, the head of the FDIC, were there as well.
They were kicking around new ideas about the new Consumer Financial Protection Bureau, the one that was created by the financial reform law. The bureau's going to have broad powers to write and enforce rules on everything from credit card fees to home loans. It'll have hundreds of employees and a budget somewhere new a half a billion dollars. And as a new bureaucracy is born a traditional Washington rite of passage is taking place: Turf battles.
Our Washington bureau chief John Dimsdale reports.
John Dimsdale: The existing regulatory agencies were told today they're gonna have to give up some of their staff and budgets. Bureaucracies hate to relinquish either jurisdiction or money. And NYU professor Paul Light says that resentment could easily be a problem for the new consumer protection bureau.
Paul Light: Because you've got old loyalties that you're trying to merge under a new mission. You've got to create a hierarchy; you've got to blend a work force. There are significant challenges to it.
The financial services industry lobbied hard against the bureau. The law does give a regulatory oversight council a veto over consumer bureau rulings, but that's not enough according to Tom Quaadman at the Chamber of Commerce.
Tom Quaadman: There has to be a two-thirds vote of the council if they find a rule of the agency will endanger the economy of the United States. That's an awfully high bar.
The restructuring has begun even before the president nominates a director who, George Mason University Professor Todd Zywicke says will have unprecedented clout.
Todd Zywicke: With virtually unlimited power that gives this person the power to regulate virtually every credit transaction in America.
With that kind of sniping, taking charge of the bureau will be a huge administrative challenge. The leading candidate for the job is the woman who proposed it -- Harvard Professor Elizabeth Warren. She's been criticized as having an academic focus, lacking administrative experience. But you won't hear that from NYU Professor Light.
Light: From my standpoint from within academe now, we're just as bureaucratic as any organization, so I'm not holding that against her.
The clock is ticking. Congress required that the new agency be up and running within a year.
In Washington, I'm John Dimsdale for Marketplace.
Comments
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From Houston, TX, 08/02/2010
I thought there were some significant exemptions from the CFPA's regulation, car loan transactions to name one. I think the "broad powers" of the CFPA are overstated. Additionally, while the oversight committee has veto, and an apparent "high" threshold (not too high considering the CFPA will be the ONLY entity that will have the interests of consumers in mind), the Fed can put a stop to the CFPA's actions well before it gets that far, if it deems that the CFPA's actions will "harm the banking system". Given the Fed's only job is to serve the best interests of banks, it seems this will be at great odds with the CFPA's mission.
I have to say this was quite a shoddy story, and not worth the airtime, Marketplace. For months now, we have all been wondering how EFFECTIVE the CFPA is going to be. Instead of doing a good story on the ins and outs of the new legislation, you've jumped the gun and presumed that the CFPA will be effective, despite the fact that it is theoretically in direct conflict with much of the Banking Regulatory culture and practice.
From Emeryville, CA, 07/29/2010
Sorry Marketplace, but your coverage of Elizabeth Warren gives cover to Wall St and Finance's straw (wo)man reason to oppose Elizabeth Warren's appointment. They don't oppose her because of her lack of executive experience. They oppose her for her intelligent, knowledgeable, tenacious exposure of and opposition to their predatory practices.
You dropped the ball on this one, guys and gals.
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