Too Important to Fail

This article about the Consumer Financial Protection Bureau is notable for its description of the way banksters use “big data” and “behavioral economics” to manipulate consumers into taking on more debt in credit cards, for instance. Gravois explains that the CFPB is developing the same methods with the aim of helping consumers. However, he warns “By setting out to match the
analytical prowess of the finandal industry, the CFPB is implicitly giving its assent to a world where finance is governed by complicated models, big data, and the statistical masters of the universe who command them—as opposed to an older world where finance was governed by the personal relationship between a borrower and a lender.

By: John Gravois, Washington Monthly, 00430633, Jul/Aug2012

THE FUTURE OF SUCCESS

PREDATORY LENDING STILL POSES A SYSTEMIC RISK TO THE ECONOMY. WILL OBAMA’S NEW CONSUMER FINANCIAL PROTECTION BUREAU SUCCEED IN TAMING IT, OR WILL THE AGENCY BE STRANGLED IN ITS CRIB?

If you want a hint as to where the battle of the 2012 general election might go, you could do worse than to look at where it started. On the morning of January 4, 2012, in his first official act of the campaign year, President Barack Obama mounted a podium in a packed high school gym outside Cleveland and rolled out an announcement. Blowing past months of GOP filibustering, he declared his recess appointment of Richard Cordray, a mild-mannered former Ohio attorney general, to serve as the first head of the Consumer Financial Protection Bureau, a powerful new regulatory agency created by the Dodd-Frank law. Back in Washington, GOP leaders, who had held Congress open in a pro-forma session during the Christmas break precisely to block such a recess appointment, went into fits of televised dudgeon, calling the move “arrogant,” “unconstitutional,” and–this from Mitt Romney himself–“Chicago-style politics at its worst.”

The consumer bureau has provoked virulent opposition from Republicans ever since it emerged as the brainchild of Elizabeth Warren, the Harvard law professor turned progressive folk hero who is now running for Ted Kennedy’s old Senate seat in Massachusetts. Though the GOP couldn’t stop the creation of the CFPB, it did manage to put enough pressure on Obama to make him shrink from nominating Warren to serve at its head, a decision for which he was promptly vilified by liberals. Then, when Obama nominated Cordray, Republicans held the appointment hostage, demanding structural changes to the bureau that would have made it more accountable to congressional committees and the industries that comfortably influence them. Most recently, in May, Glenn Hubbard, a top economic adviser to the Romney campaign, suggested to the Wall Street Journal that defanging the bureau would be a central agenda item in Romney’s economic strategy.

This GOP fury might seem strange, even self-destructive, from afar. After all, the prime mission of the CFPB, which is still just barely up and running, is to crack down on predatory lending–a range of practices epitomized by the sale of the exploding subprime mortgages that hollowed out much of the wealth of America’s middle class and precipitated the Great Recession. Polls show that, though few Americans are yet aware of the CFPB, an overwhelming majority support it once they learn about its mission of protecting consumers from big financial institutions.

Nevertheless, the now-bailed-out financial sector claims that if a strong regulator scrutinizes the safety of its products–as the federal government does with toys, cars, appliances, airlines, food, drugs, and most everything else that’s for sale in our capitalist economy–it will tank the industry. And so it has gone to war.


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