GOP Lawmakers Finally Settle on Who They Want to Lead the CFPB: Nobody

Last Updated Jun 10, 2011 5:14 PM EDT

Republicans in Congress would presumably rather get Che Guevara tattoos than back Elizabeth Warren to head the Consumer Financial Protection Bureau. Ok, so who do they want to lead the new agency?

No one, it turns out. Here's an aide to Senate Minority Leader Mitch McConnell, R-Ky., explaining why the lawmaker is against anyone taking the post:
"It's not sexist. It's not Elizabeth Warren-specific," McConnell spokesman Donald Stewart said. "It's any nominee."
A small measure of comfort to the National Organization of Women, perhaps. As long as the Republican blockade on the CFPB continues, of course, consumers of both sexes are out of luck.

The bureau, formed as part of the Dodd-Frank financial reform law passed last year, was created as a direct response to the sort of home loan abuses that triggered the financial crisis. And despite lacking a director, the CFPB is already paying dividends by, among other things, proposing simplified mortgage disclosure forms that if adopted would greatly help borrowers figure out if they can afford a given loan.

Trampling on the Constitution
As Kevin Drum points out, in refusing to support anyone for the vacant CFPB job, Senate Republicans are effectively abdicating their Constitutional duty. He writes:
The Senate's breakdown over its core function of confirming presidential nominees is now complete: Republicans aren't just filibustering a particular nominee, they're filibustering any nominee as a way of preventing a regulatory agency from doing its job.
In theory, such blanket opposition should free President Obama to ignore Republican objections to Warren and simply appoint her as the first director of the CFPB while Congress is in recess. That may not happen, either. The White House appears to be floating Raj Date, Warren's No. 2 at the bureau, as a possible candidate to lead the agency.

That would be a mistake. Although Date has been critical of Wall Street, his professional background as a former executive with Deutsche Bank (DB) and Capital One (COF) would inevitably cause an outcry among Democrats about a conflict of interest. And simply as a matter of optics, Obama would come off looking weak by bowing to Republican pressure at a time he has little to lose by handing the job to Warren.

Win-win
It's almost beside the point at this stage, given the financial industry's hysteria over the CFPB, but The New Yorker's James Surowiecki makes a point that receives too little attention in discussing the new agency -- namely, as much as bankers despise the bureau, it's good for them, too:
For all the talk of the financial industry's power, its performance over the past decade has actually been dismal. Countless lenders have gone out of business, and many of those still standing saw their stock price decimated after they loaned immense amounts of money to people who couldn't repay it. The banks thought they were taking advantage of uninformed consumers, but they ended up playing themselves. In a more transparent credit market, almost everyone would have been better off.
The only mistake with that analysis is in assuming that the Wall Street banks that pull Republican strings in Congress give a damn if everyone is better off.

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  • Alain Sherter On Twitter»

    Alain Sherter is an award-winning business journalist who has written for The Deal, MarketWatch and Thomson Financial Media.

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