While the nomination of Richard Cordray as director of the Consumer Financial Protection Bureau came with little fanfare, the process of actually installing President Obama's pick will indubitably be loud and contentious. At the heart of the CFPB strife is the most basic of partisan fights, a debate over which is less trustworthy: big government or big business. Even in an election cycle dominated by unemployment and debt ceilings, the bureau may become yet one more way for Republican candidates to prove their conservative credentials.
Proponents of the bureau often point to the financial crisis in which financial institutions' irresponsible sale and management of new and questionable financial products brought the U.S. and global economies to their knees. Elizabeth Warren, the Harvard professor and attorney currently acting as the bureau's director has likened some of the corporations facing regulation to "snake oil" salesmen, hawking untested and potentially dangerous products to an unsuspecting public. Many opponents of the bureau, meanwhile, focus their criticism on its structure, arguing that an agency headed by a single presidential appointee, serving a five-year term, might be too influential and prone to politics. On the Senate floor on Monday, Senate Minority Leader Mitch McConnell reiterated the Republican pledge to block Cordray's confirmation. "I would remind [Obama] that Senate Republicans still aren't interested in approving anyone to the position until the president agrees to make this massive new government bureaucracy more accountable and transparent to the American people," said McConnell, referring to the May 5 letter signed by 44 GOP senators, vowing to not support any nominee without CFPB reform.
Poll numbers suggest that the American public is open to both arguments. According to a Gallup poll released April 14, 54 percent of respondents trusted business leaders "a great deal" or "a fair amount" to do the right thing for the economy. Ben Bernanke and Tim Geithner were much farther down the list, with 41 and 39 percent of trust, respectively. Yet another poll released that same week showed that 67 percent of Americans believed that "major corporations," as well as "banks and financial institutions," have too much power, compared to 58 percent who believed that the government does.
According to Jess Sharp, executive director for the Center for Capital Markets Competitiveness at the U.S. Chamber of Commerce, the CFPB would be better off with a board of directors, a leadership arrangement less likely to become politicized and as a result over-regulate financial products at the expense of U.S. entrepreneurs. "These are products that individuals and small businesses use to borrow," he says. "If the bureau begins to take actions with no real oversight that increase the cost of credit or ban products...is that good for the borrowing picture in this country? Is that something we want the government to be doing?" says Sharp.
Bartlett Naylor, financial policy advocate at consumer advocacy group Public Citizen, believes that such an argument is disingenuous and loses sight of the CFPB's broader mission of making financial markets safer. "Because the crash is so relatively recent and the bailout is so relatively recent, you often don't see Citicorp or Bank of America being used as a victim of Dodd-Frank. What you see is some small bank from Vermont," says Naylor. "But let's not be confused."
Republicans, as the self-proclaimed party of limited government, may naturally be opposed to any additional regulation, but given Americans' animosity toward large banks in the wake of the financial crisis, opposition to the CFPB seems politically unwise at first blush, says Doug Elliott, a fellow at the Brookings Institution. "I guess I would have thought the populist response here is to want to limit the ability of the bankers to do things and not to worry about whether you seem to be punishing them in some sense," says Elliott. But he adds, "If you frame the question as, 'Do you support this very large government effort?' you get a lot of people to say 'No.'"