Master of Puppets*

           In the world of financial reform, there is no doubt that the creation of the Bureau of Consumer Financial Protection is the topic of the moment, with President Barrack Obama’s hard fisted appointment of Elizabeth Warren to her new advisory position. Some critics question when the director of the BCFP will be chosen and if political opposition from Republicans discouraged the president from pressuring Congress to put Warren into the top spot. Among those urging the placement of a director is Sen. Christopher Dodd who co-authored the Dodd-Frank Act regulating the creation of the BCFP. But a quick perusal of the act indicates the new law grants the director with extensive power to regulate the lending market. With such extensive powers granted to the Yet-To-Be-Appointed Director, it is no wonder Republicans and some Democrats are reluctant to hand the strings of power over to Warren, a key player in Obama’s circus.

            As I spend my Sunday morning pursuing through Title X of Dodd-Frank, the section of the act outlining the creation of the BCFP were several sections that caught my eye. But one in particular seemed to grant the BCFP with an extraordinary amount of power over the regulation of United States lending practices. Sec. 1024, p. 1669 reads “With respect to any person described in subsection (a)(1) …The Bureau shall have exclusive authority to enforce that Federal consumer financial law.” As per Dodd-Frank Sec. 1001, “Federal consumer financial law” refers to Title X of Dodd-Frank, more than two dozen existing federal laws, and any laws “prescribed by the Bureau.” The “person” described in subsection (a)(1) refers to lenders extending second mortgages, student loan providers, pay day lenders and a variety of other major financial service providers. This section does exclude banks, credit unions and savings associations, which is regulated further down in the bill.

            This seems particularly onerous when taking into account Subsection B of the Act, in which this section is included, also grants the director of the BCFP the power to create rules to carry out these laws (Sec. 1022 (b)(1)) and the power to exempt certain financial products and providers from these regulations (Sec. 1022 (b)(3)). With these three capacities combined, the new director will have the authority to be a key player in shaping the stability of national and global economy but also the right to be open to the lobbying of special interest groups and the authority to execute a great deal of corruption.

            Yet, as reported by Dow Jones Newswires,   Sen. Dodd warned the Obama administration that the BCFP could be threatened or eliminated all together if they do not select an official director soon. According to the article, written by Victoria McGrane, Dodd warned if the director was not selected by the November election, there could be a push to scrap the agency all together. Whether Dodd’s prediction is accurate or just a political play to spur action before the November election, losing the BCFP would be a major setback in Warren and Obama’s fight for consumer protection. It would also be a setback for the consumer as Dodd-Frank lays out several strategies including consumer education, increased transparency and a call for streamlining the lending process, that if properly executed could certainly promote market stability. But just handing to post to a Warren-Obama approved candidate to avoid possibly increased political opposition in a post-election, possibly more Republican climate just reeks of the cronyism that makes such a powerful position so dangerous. The new director, under the guidance of Warren, will have the ability to shape exactly how and even which lenders and brokers are allowed to serve consumers and how consumers are allowed to consume. Warren’s close ties with Obama will ensure the regulations will unfold in a way that will suit his needs, whether ideologically, politically or financially. 

* In 1986, Metallica released their third album, "Master of Puppets." And while the title track of the song seemed to indicate drugs as the "master" of the user or "the puppet," writer and vocalist James Hetfeld's song created the perfect analogy for not just President Obama but many many politicians. Perhaps if we continue to hand over so much power to a single government entity, we could change our national anthem to such a cheerful tune.