Like the little Dutch boy who puts his finger in the dike to prevent a flood, the battle against a torrent of government red-tape and regulation is a never ending battle. The latest flood of regulations is being held back by Senate Republicans who are refusing to confirm former Ohio Attorney General Richard Cordray to the position of Director of the newly constituted Consumer Financial Protection Bureau (CFPB).
Created by the Dodd-Frank bill, the CFPB is preparing to unleash a new flood of regulations on the economy. At a recent congressional hearing, Raj Date, the interim head of the Bureau unveiled an 802-page document outlining areas where the CFPB will intervene in the market. But due to the undemocratic design of the Bureau, the downpour will have to wait until a director is confirmed by the Senate.
Unlike other government regulatory agencies, the Director of the bureau was given unprecedented power to regulate the economy. There is little congressional oversight, funding from the bureau comes from the Federal Reserve and the Director serves a five year term and can only be replaced by malfeasance. Once confirmed, the Director can pick and choose industries and businesses to regulate and there is little anyone can do about it.
One area that Cordray won’t regulate is the trial lawyers. As Ohio Attorney General, he was the beneficiary of a scheme to allow out of state securities litigators to sue pension funds on behalf of the state. In return, the state Democratic Party’s political funds were flush with political contributions from these firms and their partners. That’s why his nickname has become “Pay to Play Cordray.”
But that incident clearly demonstrates the crony nature of Cordray, the CFPB and the government regulation scam. Some industries will be targeted for regulations and others, often politically connected firms, will be ignored.
Senate Republicans are sticking their finger in the dike and are preventing the Cordray confirmation but some are refusing to help. Massachusetts Sen. Scott Brown (R) has announced his support for the Cordray nomination. Rumors have swirled that Ohio Senator Rob Portman wants a deal to get Cordray confirmed and the two Maine Senators are a concern.
The majority of Republicans are demanding reform of the bureau including creation of institutional checks and balances. A better solution would be repeal of the CFPB and the bill that created the storm – the Dodd-Franks bill. Republicans will share their part of the blame for a flood of new regulations if they fail to hold the line.