Jim Lardner is the communications director at Americans for Financial Reform, a coalition of more than 250 civil rights, consumer, labor, business, investor and other groups working for a strong, stable and ethical financial system.
Forty–three Senators will soon get the chance to reconsider their assault on the Consumer Financial Protection Bureau. They should take a moment, along with the rest of us, to look at what this agency – created after the financial meltdown of 2008 to set basic rules of the road for the banking and lending world – has done so far.
Among other things, it has formed a team of investigators and advocates to guard members of the military against illegal foreclosures and other scams; warned auto lenders that they will be held accountable for practices that lead to more expensive credit for African–Americans, Latinos, women or seniors; and laid down rules to end the era of mortgages designed to rake in up–front fees before they self–destruct.
The Bureau has also filed criminal charges against two debt–relief companies over illegal advance fees extracted from borrowers at the end of their rope and returned nearly half a billion dollars to consumers cheated by credit card companies including Discover and American Express.
In short, it has begun to be what Elizabeth Warren envisioned when (before she became a Senator) she first proposed the idea: a financial watchdog with the sole mission of protecting consumers.
That is a mission that most Americans, regardless of party, can get behind. And the Bureau has won wide support for its thoughtful and open approach under former Ohio Attorney General Richard Cordray, who has held the job of Director since his recess appointment at the beginning of 2012. In January, when the Bureau came out with new rules for the mortgage industry, the head of the Mortgage Bankers Association praised not only the rules themselves, but also the bureau's "deliberative, inclusive, transparent process."
Nevertheless, with a vote on Cordray's nomination to a full term set for consideration by the Senate (after the Banking Committee approved it on a party line vote), 43 of the 45 Republicans in that chamber have pledged to not even allow an up or down vote .
What gives? It's nothing personal, they say; in fact, it's not about the nominee at all. "I think you have done a wonderful job so far in carrying out your duties," Senator Tom Coburn, R–Okla., told Cordray at his confirmation hearing.
No, their grievance is with the agency itself. Four years ago, they came up with a demonized vision of the Consumer Bureau at the behest of Wall Street megabanks and lenders big and small, who were battling for the right to go on enriching themselves through the sort of tricks and traps that it was meant to prevent.
The industry and its friends in public office argued that traditional bank regulators, in the words of the Financial Services Roundtable, "were best positioned to monitor and enforce consumer protection " – despite their glaring failure to do so in the past. They denounced the Consumer Bureau, before it had even opened its doors, as an over–powerful regulator that would churn out pointless rules and trample on liberties . Senator Lindsey Graham, R–S.C., described it as "something out of the Stalinist Era."
And now, stuck on auto–pilot, they are using their power to advise and consent (and filibuster) to demand "reforms" that would undermine the Bureau's authority and independence.
Above all, they are after two changes that are a well–known Washington formula for gridlock and ineffectuality: they want the bureau placed under a commission chosen by party leaders and they want it funded through annual congressional appropriations rather than (as the law currently provides) out of a fraction of the budget of the Federal Reserve .
Cordray and the Bureau have mostly tuned out the attacks and gone about their business. Just in the past month, the bureau released a major study of payday lending and put out a report on student debt as a barrier to economic opportunity, incidentally giving more than 28,000 people the chance to tell their stories and propose remedies for those trapped in high–cost private education loans. Both these initiatives point toward sorely needed policy changes that the bureau can help bring about in months to come .
But in the long run, having a confirmed director matters. Cordray's recess appointment runs out at the end of 2013, and faces a court challenge to boot. Under the terms of the Dodd–Frank financial reform law, which established the Bureau, it could lose some of its authority over nonbanks if it has to function without a director. That would put banks in the uncomfortable position of being governed by rules that their storefront competitors could ignore – a scenario that has led to speculation that bankers and bank lobbyists may eventually tire of this fight.
Certainly, financial consumers – all of us, that is – have a stake in persuading a crucial few of those 43 Senators to back away from their dogmatic stand. Majority Leader Harry Reid, D–Nev., had planned to bring the issue before the Senate later this week; now he has decided to put it off for a while. That should give the Consumer Bureau's opponents extra time to contemplate the long–term implications of a course of action that promotes abusive lending, Wall Street greed and endless partisanship and obstructionism in a country that is fed up with all those things.
In the scheme of current Washington scandals, this is one that deserves far more attention than it has received. And attention is one key to setting it right.
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