Can we spin off a CFPA bill?
Matthew Yglesias proposes a divide-and-conquer strategy when it comes to pushing through financial reform legislation: get the systemic stuff done with the help of Bob Corker, and then draft a second bill, with the help of some other Republican, creating a Consumer Financial Protection Agency.
My problem with this idea is that it’s tantamount to an admission that a CFPA is not a necessary and intrinsic part of the comprehensive regulatory reform this country needs. If put into a bill on its own, it would be easy not only for Republicans but also Democrats to start waxing fiscally responsible about expansion of government and increased bureaucracy.
Yglesias says that “a CFPA isn’t going to regulate systemic risk”, which is true, narrowly speaking — but which is also false, broadly speaking, since a CFPA would actually have been more likely to notice and crack down on the kind of lending which was most systemically damaging than a systemic-risk regulator might have been.
We want to get to a financial world which is safe by dint of being boring, and a CFPA has a key role to play in keeping it boring. Its primary role, yes, it to protect consumers. But the head of the CFPA certainly belongs on any high-level board charged with looking for systemic risks. And might well prove to be a very useful early-warning system.