Chris Dodd has now formally dropped a free-standing Consumer Financial Protection Agency (CFPA), instead pushing for a new Treasury-housed "Bureau of Financial Protection." Per Bloomberg:
Senate Banking Committee Chairman Christopher Dodd abandoned the Obama administration’s stand- alone consumer financial agency and is proposing a bureau in the Treasury Department, seeking to overcome Republican opposition to legislation overhauling Wall Street regulations.This is a mistake, but not in the way you'd think. I was talking to a friend about this the other day, and he was lamenting the fact that the left has made the CFPA into a litmus test for whether Democrats are serious about financial reform — essentially making it the "public option" of financial reform. A free-standing CFPA never had a chance in hell of making it through the Senate (really, a 0% chance), so setting the CFPA up as a litmus test just guarantees that the left will end up angrily denouncing Senate Dems as sellouts.
The Bureau of Financial Protection would be run by a director appointed by the president, have power to write rules for companies offering financial services and be funded mainly through industry fees, according to a two-page summary the Connecticut Democrat circulated this weekend.
I suggested that since Dodd clearly knows that a free-standing CFPA is out of the question, he should push for whatever he can get in terms of a new division dedicated to consumer protection inside Treasury, but should make absolutely sure that it's called the "Consumer Financial Protection Agency." The vast majority of progressives don't really care about the details of the CFPA, nor could they tell you what specifically they want the CFPA to do (and be able to do). They just want a CFPA. If the new Treasury division is called the CFPA, then a lot of progressives will be happy. It doesn't give journalists — who know even less about the substance of the CFPA — the chance to easily label one proposal as "bad" and the other as "good," but will instead force them to distinguish the proposals by, you know, actually describing the differences (which will likely be minimal). And it'll definitely reduce the likelihood of a free-standing CFPA becoming progressives' next big "line-in-the-sand hissy fit." (Memo to progressives: the time you need to draw a line in the sand is when the DSCC is recruiting candidates for the next Senate races. But once you've let them fill the caucus with Blanche Lincolns and Evan Bayhs, you can't profess to be outraged(!) when we can't push something like a free-standing CFPA through.)
Since I'm talking about political strategy, I should also address Matt Yglesias and Felix Salmon's argument that we should hive off the CFPA from the larger financial reform package, and try to pass a CFPA bill separately. Hiving off the CFPA is a total non-starter — it would be the fastest way to guarantee that nothing resembling the CFPA ever gets passed into law. Now, Salmon is a self-professed political neophyte, but Yglesias has been paying close attention to politics for long enough that he should know this. And I almost spit out my coffee because I was laughing so hard when I read this part of Yglesias' argument:
If Corker doesn't want to vote for a CFPA then let's write a different bill to create a CFPA, have everyone go on TV and talk at rallies about how awesome it is, and maybe a Collins or a Snowe or a Brown will feel compelled to vote for it and it'll pass or maybe they'll all vote no and it won't pass.This is a true fairyland and pixie dust strategy. If we could just explain why creating a free-standing CFPA is such good policy, then Men of Good Will in the Republican Party — known the world over for their intellectual honesty — would agree that we're right and vote for the CFPA bill. (Followed by a Kumbaya sing-along on the Senate floor.) Yeah, because that's absolutely how it works.
Look, there are no Republicans in the Senate who would vote for a free-standing CFPA. That's just a reality. Perhaps you weren't paying attention to the health care and stimulus debates? The CFPA is a partisan, left vs. right issue now (partly because progressives have been stomping their feet so loudly about a free-standing CFPA). Even if there was a Republican who was willing to break ranks on this issue, there are still several
Progressives really do need to face reality here: a free-standing CFPA absolutely, positively cannot pass the Senate. If Corker is willing to go along with Dodd's "Bureau of Financial Protection," and provide (crucial) cover to the moderate Dems to also support it, then progressives should consider that a huge victory. And it would be a huge victory.
As to Yglesias' argument that even if the bill didn't pass, it would at least "clarify who's for it and who's against it," I would ask: are you interested in getting a federal office dedicated to consumer financial protection, or are you just interested in knowing who's for the CFPA and who's against it? Knowing who's for it and who's against it would be the worst consolation prize ever. Honestly, which consolation prize would you rather have:
(a) a new division in the Treasury Department that's only slightly weaker than the House-passed CFPA, can be strengthened/expanded in the future without a huge public fight, and will protect consumers for years to come; orHiving off the CFPA would be tantamount to choosing option (b). If that's what progressives want, then so be it.
(b) the knowledge of which Senators are for a free-standing CFPA and which are against it.