The CFPA: How a Crusade to Protect Consumers Lost Its Steam
Washington Post
January 31, 2010
Kaiser, Robert G.
The House of Representatives last month finally endorsed the creation of a Consumer Financial Protection Agency (CFPA), but the Senate Banking Committee is still unable to reach an agreement over the proposed watchdog. Stemming from a plan outlined by Harvard Law professor Elizabeth Warren in 2007, the Obama administration began pushing for the creation of an independent regulatory body that could exact new and more stringent controls on big banks. Senate Banking Committee Chairman Christopher J. Dodd (D-Conn.) said consumer protection would be the committee's first priority and offered full support to the independent agency; but the panel's ranking Republican, Sen. Richard C. Shelby (R-Ala.), called the agency an expression of paternalism that the government should avoid. Warren herself boldly expresses a need for the government to be as tough on risky financial products as it is on dangerous consumer goods and believes the CFPA would focus primarily on the actual lending products rather than on the firms that provide them. Warren's vision was encompassed in initial legislation, which gave the potential CFPA powers to intervene anywhere credit or financial services are provided, but it received harsh criticism from both sides. The language of the proposal was changed, but the recently approved House bill still calls for the creation of a new agency with the authority to ban financial products it deems too risky. However, the criticism has had an effect on the Democrat-dominated House -- an amendment failed by just 223 to 208, as 33 Democrats joined the Republicans to vote for the elimination. Still, Warren remains hopeful for passage in the Senate. "The choice," she says, "is, with teeth or toothless?"
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