Elizabeth Warren Tips Her Hand

Elizabeth Warren made a big address to a gathering of some 400 bankers gathered by the Financial Services Roundtable. How did she get out of there alive?

While there’s a lot of media interest in the “Elizabeth Warren: Pro-Consumer or Anti-Business” frame, we now have a little bit of evidence as to what she’s thinking and what direction she wants to take the new CFPB. Here’s the good professor:

With only ten days on the job, it’s too soon to make many promises. But, if only to set Steve’s mind at ease, I’m going to start with two. When you hear them, I hope you’ll understand why I didn’t hesitate to be here tonight.

First, in the weeks and months ahead, I’m going to listen more than I’m going to talk, and I’m going to keep my door open.
And, second, I am committed to helping build a consumer credit structure that works—works for families, works for the financial services industry, and works for the American economy.

Sounds pretty good right? The Washington Post called her speech an “olive branch.” However, while it’s generally a good thing that decent relationships can exist in this frame, the meat of her speech is really what’s more important, and the upshot is that the CFPB is going to pursue reform by way of principles-based regulation. Here’s the Professor herself:

Instead of creating a regulatory thicket of “thou shalt nots,” and instead of using ever more complex disclosures that drive up costs for lenders and provide little help for consumers, let’s measure our success with simple questions. Your first principle is “Fair treatment for consumers.” I’ll paraphrase your explanation of how to tell if that principle has been met: Can customers understand the product, figure out the costs and risks, and compare products in the marketplace? Regulators should be aiming
toward the goals you laid out.

Instead of layering on regulations that don’t fully protect consumers, a better approach would focus on how to give consumers the power to make the right choices for their families—and, at the same time, to ease the regulatory burden for the lenders.

We’ve argued for this type of approach for some time, as we believe that this approach can best lead to a level-playing field and a win-win situation for customers and businesses. Here’s Felix Salmon with another opinion on what this all means, but the signal here is that a new way of doing business is on its way to town.