Wednesday, August 11, 2010

Warren For Consumer Financial Protection

Reid Cramer thinks a vehemently bitter confirmation battle will meet anyone President Obama nominates to head the newly minted Consumer Financial Protection Agency (really, you don't say?). There is in this fight, however, an opportunity to illuminate for the public the fundamental contrasts between the Neo-Republican and the Democratic parties, as they head into an election.  A tough contest could also set the tenor of relations between the new regulator and the regulated, which should not, of course, be a cozy and comfortable one.  It's hard to disagree:
A battle against congressional antagonists and an array of financial firms can readily be turned into political advantage. By creating a clear contrast in which Obama and the Democrats line up on the side of families facing off against financiers, the president can embolden his political supporters and rally the base before the fall elections.

Perhaps more consequentially, a high-profile confirmation battle can serve vital policy goals. This is because effective government oversight requires competence and vigilance, but the essential—often overlooked—ingredient is empowerment. Regulatory agencies have to resist forming cozy relationships. At many turns, regulatory law opts for discretion rather than dictates. This means an agency can turn up the heat or turn it down with a large degree of autonomy. History shows that it takes a large dose of political will for an agency and its officials to resist the dangerous phenomenon of regulatory capture. There may be no better way to demonstrate resolve than by commencing the inevitable battle at the get-go, during the confirmation process...

But the same interest groups will line up against any nominee. And if that’s the case, the show ought to begin with a star. Warren's visibility and public credibility certainly can be tremendous assets in such a clash. She's a highly effective communicator and has received high marks in running the Congressional Oversight Panel (which should mitigate some of the whispers that she doesn't have sufficient management experience). She will garner the full throated endorsements of many ready to back her up during the confirmation battle

Winning this showdown is crucial for getting the policy reform process underway. Whoever is nominated, he or she should be expected to explain clearly how the law establishes a new accountability framework and be prepared to fight in the regulatory trenches to implement it. Exerting authority right out of the gate will make it easier for the new agency to play tough. Issuing cease-and-desist orders, filing lawsuits, and seeking damages should become commonplace and signal that there will be no tolerance for the marketing of financial products deemed unfair or deceptive. A high-profile confirmation battle—supported and waged by the White House—will not only be a clear demonstration there's a new cop on the beat, but that the Obama administration is ready and willing to do what it takes to put the financial pirates out of business for good.  (Reid Cramer's full article here)
There are few in Washington who come across as trustworthy as does Elizabeth Warren.  In fact, indeed I may regret saying this, she sometimes gives me a warm and fuzzy feeling.  She's tough, honest, and can, with ease, communicate the justifications for whatever actions she may take.  That is why Wall-Street is scared of her.  Hopefully they can channel that fear into a proper respect for the new regulations, mild as they may be.

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