Pro-Consumer or Anti-Business?

David Mark, who runs The Arena Forum over at Politico, asked for thoughts on the White House decision to skirt Senate conformation for Elizabeth Warren and whether or not she is Pro-Consumer or Anti-Business. Well, those question seem to be worthy of a cable shoutfest.

Here is my (perhaps unfortunately more nuanced) take on the matter which I posted at Politico this morning.

The decision to defer on the formal confirmation process for the inaugural director of the Consumer Financial Protection Bureau is not ideal. But it is understandable.

It turns out there are downsides to having dysfunctional legislative bodies. If the White House can’t get a vote on the long list of non-controversial appointments, it seems reasonable for them to expect the Republicans will make a circus out of the process. And I agree with those that argue that the stakes are too high to delay the agency’s start-up. So, let’s let Treasury, Elizabeth Warren, and the staff get moving on this now because there is much work to be done to rollout a new agency and make sure it has a strong and clear set of marching orders.

Hopefully, this new agency will not prioritize making friends. Some business practices deserve to be shut down. One of the reasons I have been bullish on the creation of a new consumer watchdog is that the recent proliferation of financial scams and gimmicks, typified by the runaway growth of payday lenders, subprime mortgage purveyors and expensive check cashers not only destabilized family balance sheets but undermined the larger economy as a whole. We need a new sheriff with a broad and powerful mandate to make life more difficult for the bad actors. Plenty of business opportunities will remain to provide a broad array of financial services. In fact, increasing consumer protections will be good for business in several fundamental ways.

First, if the new bureau can ensure that future product regulations are governed by the principles of transparency, simplicity and fairness, there is a better chance that consumers will be matched up with more appropriate financial services and products. This can go a long way to bringing trust and integrity back to the Main Street marketplace.

Second, the rise of the alternative financial sector has created a bifurcated financial services system. On the one hand, you had traditional banks and on the other, you had a largely unregulated world of payday lends, car title loan shops, etc. Competitive pressures and uneven standards allowed bad business practices to spread from one sector to another. In the future, consumers should be protected through common oversight of both traditional banks and nonbank financial providers. Cutting down unfair and deceptive practices should level the playing field and create a more predictable regulatory environment, which is a key ingredient for business success that can also strengthen the entire financial sector.

The proverbial win-win.