A Storm Brewing, and Progress in Consumer Protection

With all the other happenings in Washington this week (Congress coming back to town) and around the country (birds continually dropping from the sky and whatnot), you’d be forgiven if you missed a storm brewing around consumer protection. Specifically, the on-going work of Elizabeth Warren and the people working to stand up the new Consumer Financial Protection Bureau versus the incoming Republican House of Representatives.

In what should come as little surprise, a number of House Republicans who opposed the passage of the Dodd-Frank Financial Reform Act and the creation of the CFPB from the beginning are making noise about repealing the law. Michele Bachmann (R-MN) said:

“I’m pleased to offer a full repeal of the job-killing Dodd-Frank financial regulatory bill. Dodd-Frank grossly expanded the federal government beyond its jurisdictional boundaries. It gave Washington bureaucrats the power to interpret and enforce the legislation with little oversight.”

Steven Pearlstein says that this should tip us off that Rep. Bachmann “isn’t to be taken seriously.” However, I’ll take her at her word that she is serious about trying to move her repeal legislation through the House, never mind it’s chances beyond that. There are plenty of roadblocks that can be erected, starting on the funding side and noting that one of Rep. Bachmann’s co-sponsors is the Chair of the House Oversight Committee, Rep. Darrell Issa, “the man with the subpoena.” What is important here is something that we’ve emphasized from the early days of the bill, that passing the legislation was just the beginning of what would need to be an extensive and difficult effort to put real consumer protections into place.

So, some important Republican members of the House have signaled their intent, but what about Professor Warren? Well she wasn’t exactly silent this week. First, she held a press conference announcing a new partnership between the CFPB and the state bank regulators aimed at non-depository institutions. This is good news, and a smart step for Warren. The CFPB is going to have it’s hands full and partnering with the state entities to ensure as efficient and seamless a system as possible is good policy, good politics, and less burdensome for the businesses who will be under the jurisdiction of the CFPB.

Second, it’s been announced that Holly Petraeus, the wife of the widely venerated General David Petraeus is taking a role with the CFPB, heading up the Office of Service Member Affairs. One of the arguments that advocates of Professor Warren made for her to take the helm of the CFPB was that she would attract talented people to the new agency. In Mrs. Petraeus she has done that, finding a talented and experienced person for the role. What may be surprising is the political skill this shows. Congress has traditionally shown more willlingness to provide consumer financial protections to service members than the general public, and having a strong advocate in place for the Office of Service Member Affairs helps lend credibility to the whole enterprise, especially if the CFPB is going to be regularly sending staff up to testify before Congress.