The Consumer Financial Protection Bureau (CFPB) – the self-proclaimed “cop on the beat” dedicated to policing unfair, deceptive, and abusive financial services – fell victim to the consequences of the relentless fundraising demanded by our money-dominated political system.
With the nomination of Richard Cordray, President Obama bypassed Elizabeth Warren, who, as the Nation put it, has “done more than anyone since Ralph Nader to put consumer protection on the national agenda.” Warren was the driving force behind the CFPB’s creation and was appointed interim director last fall after a public campaign on her behalf. Yet despite these qualifications, Obama chose not to nominate her.
It is hard to believe that such a decision reflects qualifications or “confirmability,” as has been claimed, as much as a cold financial calculus. In the 2008 election cycle, Obama received $26 million from banks and financial services companies and employees – more than any other presidential candidate in history, according to the Center for Responsive Politics. Facing a potentially rocky road to reelection, Obama is seeking to raise another $750 million for his reelection campaign, and potential bank contributions represent a significant chunk of that total. (Obama collected $86 million for his re-election campaign and the Democratic Party combined for just the three months ending in June, according to the Associated Press.) Given the fierce opposition of banks and financial services groups to the CFPB in general and to the appointment of Warren in particular, it’s easy to infer the campaign funds at stake in the decision.
It costs hundreds of millions of dollars to run for president. The top source of these campaign funds: interests who receive a financial return on their campaign investments. Industries that gain or lose billions from government decisions don’t think twice about investing hundreds of millions to buy themselves influence. Obama's decision not to appoint Warren will surely be blamed on her lack of “confirmability.” But given her qualifications, what would make her unconfirmable? Consider the $95 million that the financial sector has given to current members of the Senate since 2005.
$52 million of those funds to senators were given to Republicans, who have claimed they will not confirm any CFPB head unless there are substantial changes in the structure of the CFPB, such as replacing the position of a strong agency director with a board of directors, and making the agency’s budget subject to annual appropriations by Congress.
Obama faced a critical choice: buck the banks by appointing Warren, and risk seeing $26 million in reelection funds dry up – or toe the industry line and let stronger consumer protections, the end of predatory lending, fair mortgage rules, and other promised protections fall through the cracks. Fundraising once again trumped policy.
The new Consumer Financial Protection Bureau has a charge to represent citizens’ interests in the financial transactions that affect all of our lives intimately – the homes we live in, the amounts we earn and save. In 2009, Obama stated that the CFPB “will have just one mission: to look out for the financial interests of ordinary Americans…We have already seen and lived the consequences of what happens when there is too little accountability on Wall Street and too little protection for Main Street, and I will not allow this country to go back there.” But the agency is not really for ordinary Americans when the President who chooses its leader must kneel to the checkbooks of the bankers to have enough money to run for office in our democracy.
Daniel Newman is the Co-founder and Executive Director of MapLight, a nonpartisan political money tracker.
Versions of this article appeared in the San Jose Mercury News and other newspapers.