The Zombie Proposal

Ronald Reagan famously quipped that the “closest thing to immortality” was a federal government program, and now old friend (and Time cover girl)  Elizabeth Warren is upping the ante with an op-ed in Politico warning of the zombie-like proposal that she originated, the “Consumer Agency That Won’t Die.” Of course, in this instance the warning seems leveled squarely at the big banks, the non-traditional financial sector, and their lobbyists.

But the consumer agency made it through the House and the Senate. A conference committee will soon convene to reconcile the two chambers’ versions. Insiders say the lobbyists are taken aback that they could not kill the agency outright but are promising to weaken it enough to permit business as usual for their high-paying clients.

 

 The agency made it this far because the lobbyists were never able to undercut the basic sense behind consolidating seven different consumer protection bureaucracies into one streamlined agency that would be accountable to American families.

Professor Warren is celebrating the surprising strength of her proposal to create a Consumer Financial Protection Agency, and rightfully so, as Reid Cramer wrote recently, “A strong consumer watchdog remains in the financial reform bill.”

In her piece, Professor Warren argues that though the House and Senate bills both contain good consumer protection provisions, the fight is not over:

The lobbyists haven’t quit, though. They clearly hope that the details will be too technical for the public to track, so they can be more successful in conference. Wall Street’s complexity machine is hard at work, throwing sand in the works wherever possible. But the basic ideas behind their attacks are not hard to understand:

 

 Destroy independence. Though the Obama administration originally designed the agency as a stand-alone entity, the Senate placed it under the Federal Reserve. Nonetheless, the Senate’s version would still have substantial autonomy and a funding stream that would be protected from Wall Street interference.

 

 This is important. The lobbyists want the chance to fight the agency’s budget every year, keeping it handcuffed. Similarly, they want to slow down the agency’s process for issuing rules so it won’t be able to keep up with changes in the credit market — and to subject the agency to a veto by the same bank regulators who have spectacularly failed to rein in recklessness and abuse.

 

 A weaker, slower, more submissive agency, lobbyists hope, won’t be able to rein in bad practices.

She is clearly right about that (and watch the video at right to see her describe “the complexity machine”), however, the odds of a strong, effective, independent watchdog coming onto the beat are better than many  would have given months ago. Sometimes, the slow, relentless march of a zombie-proposal turns out to be a very good thing.