In late July, President Obama signed into law a bill that will create the new consumer watchdog agency called the Consumer Financial Protection Bureau. Born out of the financial meltdown, the bureau will have broad authority to regulate credit cards and mortgages, which is seen as a benefit to consumers.
The new entity will be officially housed within the Federal Reserve, an agreed-upon concession toward the system of checks and balances. Many believe that this new entity represents a fundamental shift in the way large financial institutions are going to do business.
Now that consumer advocates have won the battle over the creation of the agency, the fight continues over who will run it. Elizabeth Warren stands out as President Obama's pick and many agree that she is the perfect choice. The Harvard professor was the chair of the Congressional Oversight Panel that was created to investigate the Troubled Assets Relief Program, or TARP. The Consumer Financial Protection Bureau was largely her idea, and she has pushed hard for stricter regulation of the "too big to fail" banks.
As a bankruptcy professor, Warren stated that banks and businesses fail all the time and that rules should be put into place so that a taxpayer bailout of massive banks or insurance companies will never again be an option.
Warren has spent her career studying and writing about money and the middle class, and it's this background in consumer advocacy that concerns some in the banking industry. Already worried about a new regulatory agency with a $400 million dollar budget, opponents of Warren fear that she will be an activist-style regulator who will harm the economy.
Whoever wins the confirmation will have broad authority to shape the policy and the agenda new agency. Drafters of the new law and the Obama administration hope that the creation of the bureau will prevent another economic catastrophe and will give consumers more protection and power over their financial lives.
