A watchdog with teeth.
Passing a bill is one thing, writing its rules is another. With President Obama having signed legislation to reform the financial system, the second, equally important, phase begins: crafting the regulations that will guard against a repeat of the financial crisis of 2008. These rules will determine whether the reforms are tight or porous. An important clue about the robustness of the reform will come when the president appoints a director for the new consumer protection finance bureau.
The bureau is the most visible, and potentially the most powerful, entity created by the financial reform legislation. It will have the authority to set rules for all types of credit offered to consumers - credit cards, mortgages, loans and more. The person first appointed to run the bureau will set its tone, determining whether it will become an energetic defender of consumers' interests. The bureau will be lodged in the Federal Reserve, which provides reason for apprehension that it will instead become another layer of protection for already well-padded financial institutions.
One obvious candidate is Elizabeth Warren, the Harvard professor in charge of congressional oversight of the Troubled Asset Relief Program. Creating the consumer bureau was her idea, and in monitoring TARP funds she has consistently made it clear that the government's first priority must be the well-being of average citizens. There are other candidates, but the banking industry has made its opposition to Warren clear. That's a good sign. If the banks applaud Obama's choice, consumers will know not to expect much from the new bureau.