The Consumer Financial Protection Bureau: Beating the Devil at His Own Game
Most progressives think of the new Consumer Financial Protection Bureau, if they think of it at all, as a small consolation prize in a larger lost war with the financial services industry; as the legacy of consumer champion Elizabeth Warren, once the CFPB’s intended director and now a Senate candidate; or as the largely symbolic target of conservative and Wall Street rage at the belief that more, not less, regulation is essential to America’s economic future.
But as John Gravois explains in the July/August issue of the Washington Monthly (available in a Sneak Preview today), the CFPB is an institution well worth the political capital the president spent on the recess appointment of its director, former Ohio attorney general Richard Cordray, and well worth a robust progressive defense against GOP efforts to defund or “defang” it. Well-designed, well-staffed, and very aggressive in its start-up efforts, the CFPB aims at changing the dynamics of the financial industry—or at second best, exposing and therefore reducing its predatory tendencies—by thoroughly understanding its use of behavioral economics, data-mining, and other “twenty-first century” strategies that have wreaked havoc on consumers and ultimately the U.S. economy.
Moreover, says Gravoir, the new agency’s DNA is highly resistant to the most effective tactic usually deployed against regulators by the regulated: conquest from within.
The bureau,” says the Harvard political scientist Daniel Carpenter, “is probably the first modern agency designed from the ground up with an eye to preventing regulatory capture and preserving autonomy.”
But CFPB’s efforts to beat the devil at his own game in order to build a financial services industry that competes on the basis of right instead of wrong values does involve acceptance of an awful lot of fire and brimstone:
Throughout the debate over financial reform—and for much longer than that, really—there have been people who believe we should craft sophisticated regulations tailored to the heavily engineered financial system we have; and then there have been those who believe we need to break up that system, shatter the behemoths into smaller pieces, and bring finance back down to human scale. The CFPB does little to satisfy those in the second camp.
It’s all the more reason that all progressives should watch the initial efforts of the CFPB—and the efforts of the one-time Masters of the Universe and their political toadies to neuter it—very carefully. Any way you look at it, the bureau’s success or failure will open a new chapter in an old story.