Wednesday, September 15, 2010

Rumor Has It...

Rumors are flying that President Obama is about to appoint Linda Warren, Harvard Law Professor and Chair of the TARP Oversight Committee to be the new head of the Consumer Financial Protection Bureau. Supporters of the Bureau applaud Ms. Warren's possible nomination, since she is vocally on the side of consumer advocates and against the lending and credit industries.  Ms. Warren's anti-business and anti lending positions seem to conflict somewhat with her position as chair of TARP oversight where she was responsible for handing out bailouts to the very banking giants whom she claimed needed policing.  Still, the White House seems committed to its choice--so much so that President Obama may appoint Warren as an interim chair so that she can avoid the Senate confirmation process.

Senator Jeff Merkley (D- Oregon) posted an article on Huffington Post yesterday defending Warren.  "The new consumer watchdog will only be effective, however, if it has strong leadership.  There is no doubt in my mind that Elizabeth Warren is that leader.  She has been America's leading voice on behalf of financial fairness for families and the driving force behind the creation of the Consumer Financial Protection Bureau."  Not everyone in the Senate is such a fan, however.  Even Chris Dodd, for whom the Dodd Frank Financial bill is named, says that the votes may not be there to get Warren confirmed.  Senator Richard Shelby, (R Tx) wants a confirmation process so that Warren can be questioned and vetted  properly before the Senate turns over to her the responsibility for such a huge, powerful new agency.

My issue with Warren and, others like her, is that, political differences aside, she is an academic.  Rather than having our laws and policies written by business people, many of the new rules coming out of Washington are being written by professional politicians and university professors.  Teaching law at Harvard does not qualify any individual to head a major agency that writes rules for business.  In fact, in my opinion, it does not qualify an individual for anything except going into legal practice or being appointed to a judgeship.

The Consumer Financial Protection Bureau is going to have broad, sweeping powers to write whatever regulations it sees fit to govern and regulate all types of lending transactions including mortgages and credit cards.  It will have life and death power over many different types of businesses, from very tiny mortgage companies like mine to huge banking centers with assets of over $10 billion.  It will track consumer spending habits and purchases, and will determine what types of credit cards we can have and what types of mortgages are available.  It has not only the right, but the responsibility, to call in the IRS on any business that it supervises which it suspects might not be paying its taxes properly.  It seems to me that if such an agency is going to exist at all, it should be headed by an individual with many years of real world business and lending experience.  The director should be someone who knows in practical terms what works and what does not work in lending and credit.  He or she should be a person who understands the possible unintended consequences of legislation that might sound good but may end up costing the consumer a lot more money or might lead to even more credit restriction. 

To me this is one of the greatest problems with our country right now.  We have people with a lot of theory about how the economy should be run but no practical experience, so when their ideas do not work in the real world, they are shocked.  The politicians simply do not know how to react to real world crises that do not line up with their theoretical ideas.

Chris Dodd has warned the White House that if the President appoints Warren as interim director to sidestep the Senate confirmation process, Congress and the Senate may retaliate by de-funding the Consumer Financial Protection Bureau, essentially killing it before it has a chance to be born.  If that happens, Warren's appointment will have been responsible for the death of her beloved newly formed agency, and many businesses in this country will have dodged a bullet.  Maybe I was wrong--maybe the president should go ahead with his plans to appoint Warren after all.

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