Don't kill the public option of financial reform
It's disappointing to hear that Chris Dodd is thinking of dropping the Consumer Financial Protection Agency to attract bipartisan support for his financial regulation bill. According to the Wall Street Journal, Dodd's offer is conditional on "a beefed-up consumer-protection division within another federal agency," but the whole point of the CFPA is that those other agencies tend to abandon that mission because it's not core to their responsibility. The Federal Reserve has a lot of consumer protection power, but very little of its was exercised in the run-up to the crisis because the Federal Reserve isn't interested in consumer protection.
More broadly, so what if Republicans refuse to pass financial regulation with the CFPA? At some point, Democrats have to be willing to choose something as a campaign issue. The problem with sacrificing health care for an electoral argument is that a lot of people would die while you waited 15 years for the next shot at reform. The problem with global warming is that the Earth will cook while you hang around for a more enlightened Congress. Not so with financial regulation.
Frankly, we're not even likely to have any quick repeats of the crisis, as Wall Street is being careful now and will probably be careful for awhile. And an insufficient regulatory package is unlikely to prevent the next crash, just like taking a half-cycle of antibiotics won't stop you from getting sick. Meanwhile, Democrats are going to let Republicans kill the CFPA and weaken the bill and then hammer them for being too close to the banks? It's nuts.
The CFPA is the public option of financial reform. It's the only part of it that voters can easily understand. It's the only policy that's popular on its own. It's the only piece of it that you can actually use to message. Kill the CFPA and you're in a morass of arguments about appropriate levels of leverage and transparency. Kill it in a back room before the public has even turned their attention to the issue, and no one will know that it ever lived, or that Democrats fought for it and Republicans took directions from the banks and murdered it.
Photo credit: Larry Downing/Reuters
January 15, 2010; 12:46 PM ET
Categories: Financial Regulation
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