Who To Blame If The Consumer Financial Protection Agency Fails


Over on his Washington Post blog, Ezra Klein has an early obituary for the Consumer Financial Protection Agency, based on a Wall Street Journal report that Banking Committee Chairman Christopher Dodd might not pursue it in the Senate's version of financial reform. Klein compares the CFPA to the health care bill's public option. I think that's actually a pretty valid comparison. He then laments what could have been, if it only weren't for the Republicans. I think a correction is in order, and I'm happy to provide one.

While Klein is right that Republicans make up the larger portion of lawmakers who oppose the CFPA, it's simply incorrect to say that they could be responsible for the proposal's failure. They actually do not have the power to kill it -- Republicans alone lack the votes necessary to even filibuster in the Senate. But let's look at more concrete evidence that there are also Democrats that oppose the measure.

I speculated that the CFPA had a difficult road ahead long before the WSJ's article announced its fate looked bleak. Back when the House's version of financial regulation was being considered, I noted an amendment considered that would have killed the CFPA in the bill. The vote barely failed. 223 Democrats voted to protect the measure -- it survived by a mere 5 votes. What about the other 34 Democrats who could have voted to protect it? Some voted against it, some abstained. So not only Republicans seek to kill the CFPA -- about 13% of House Democrats also don't appear to be crazy about the idea.

In the Senate, you've got a similar situation. They haven't voted on financial reform yet, but the Democrats have 60 votes, if you include independents Joe Lieberman and Bernie Sanders, who both caucus with Democrats. If they both go along, Democrats can avoid Republican filibuster and pass the CFPA without a single Republican vote. Of course, if Brown beats Coakley in Massachusetts, then all bets are off, and Republicans could filibuster. But last year when Senate Democrats could have stepped up to the plate and pushed the CFPA through, Republicans were powerless to stop them.

Yet, Klein says of the CFPA:

Kill it in a back room before the public has even turned their attention to the issue, and no one will know that it ever lived, or that Democrats fought for it and Republicans took directions from the banks and murdered it.

This statement is clearly false. In fact, Democrats would be responsible for its murder. If they all go along, it would pass. As a result, his anger would be better directed at Democrats, who purport to be the party of the people, for going along with the banking lobby.

That's the real story here: the financial lobby's power. While Republicans are certainly more susceptible to the business/banking lobbies, Democrats hardly ignore their campaign contributions and influence. That's why health care was such a challenge, and it's why the CFPA may, indeed, have a similar fate to the public option as Klein anticipates.

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Daniel Indiviglio was an associate editor at The Atlantic from 2009 through 2011. He is now the Washington, D.C.-based columnist for Reuters Breakingviews. He is also a 2011 Robert Novak Journalism Fellow through the Phillips Foundation. More

Indiviglio has also written for Forbes. Prior to becoming a journalist, he spent several years working as an investment banker and a consultant.
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