Vetting the Regulators

In Washington, Supreme Court nominations have become campaigns in and of themselves, with staff detailed to nominees, extensive congressional vetting, and outside groups spending on ads to defeat or confirm the nominee in question.

The process has damaged the deliberative nature of judicial appointments and creates an incentive for lawyers who aspire to the highest court in the land to be as boring as possible. But the hoopla around the nomination process -- frequently cited as a failure of our democracy -- does ensure that the president and Congress take judicial appointments and their political consequences seriously. Regulatory appointees deserve the same scrutiny and public attention -- as much as the Court matters, regulators play a more immediate role in our economy.

The current stakes couldn't be higher: Congress is about to pass the Dodd-Frank bill, financial-reform legislation that grants regulators the power to break up banks, restrict derivatives, limit risk, and even liquidate failing banks. Ensuring that regulators will use those powers, especially in the face of regulatory capture and deep industry influence, begins with vetting the leaders of the regulatory agencies.

Travis Plunkett of the Consumer Federation of America has an apt comparison: Unlike battles in Congress, where organizers have a short time to exert political pressure, rule-making is a war of attrition in the trenches, often over years. Without someone at the top committed to real reform in the agencies, reformers don't have a chance.

Luckily, there are several opportunities for progressives to make their voice heard this summer: A new national bank regulator will be appointed to replace John Dugan, the much-vilified head of the Office of the Comptroller of Currency. There are also nominees for the three vacancies on the board of the Federal Reserve: Maryland regulator Sarah Bloom Raskin, Massachusetts Institute of Technology economist Peter Diamond, and San Francisco Fed President Janet Yellen. Finally, once the Dodd-Frank bill passes, the president will have the chance to appoint the founding leader of a critical new federal bureau to protect consumers from financial abuse.

What's needed now is an organization to play the role People For The American Way has traditionally performed around judicial nominations: serve as an independent voice that vets nominees' past performance, encourages them to outline a specific agenda for their agencies, and organizes political support to help get qualified nominees confirmed -- or pernicious nominees blocked.

The future of Americans for Financial Reform, the coalition that fought for the Dodd-Frank bill, is unclear; the group may not have the funding it needs to step forward. While its member organizations are committed to continuing their work, they need an umbrella group to focus it. Though individual groups, from unions to consumer advocates, are consulted by the Congress and the White House on these appointments, only by leveraging their combined grassroots support and the legitimacy of their expertise can they support the strongest nominees.

Of the upcoming nominations, the most important is the head of the Consumer Financial Protection Bureau, the new, independent office dedicated to safeguarding consumers. Its leader will have the opportunity to set the tone for generations, as Joseph Kennedy did as the first Securities and Exchange Commission director. The unsurpassed favorite for this position is Elizabeth Warren, the Harvard Law professor turned public watchdog. It remains to be seen whether the administration will nominate the outspoken thinker who authored the first serious plan for the new bureau just three years ago. If another name is proffered, disappointed reformers should secure a promise of strict efforts to protect consumers.

The director of the OCC is the primary national bank supervisor but also serves as a member of the newly formed Systemic Risk Council. The council will make decisions about how to treat the biggest banks and has the power to overrule the CFPB. While it is unclear who will be nominated for the position -- perhaps Michael Barr, the assistant Treasury secretary who was the administration's regulatory point man, or North Carolina Banking Commissioner Joseph Smith -- they must have a history of standing up for the public interest and explain how they would limit pernicious business practices. There should be no Kagan-esque ambiguity around the nominee, even if raising public attention now has the result of making future nominees more anodyne.

Finally, while the three Fed nominees have a history of supporting progressive economic policy, they should also be encouraged not to obfuscate their views during the nomination process. Laying out as clear an agenda as possible will enable confirmed nominees to bring a mandate to their agencies, key for the bureaucratic battles to come.

The rule-making process these officials will helm is now the last resort of reformers, barring a future congressional push (don't anticipate one for at least a few years). The Obama administration has, with the exception of Ben Bernanke's reappointment, promoted strong regulators: Gary Gensler, a former Goldman Sachs banker, has turned into the strongest advocate for tough measures against the banks, and Sheila Bair, a Republican appointee kept on at the Federal Deposit Insurance Corporation, has repeatedly demonstrated her commitment to transparency and reform. With increasing political pressure on the administration in the run-up to the 2010 elections, now is the time to push against any return to the status quo.

Indeed, the politics of these appointments ought to benefit Democrats -- should they appoint strong regulators and face opposition, they can draw a clear contrast between themselves and Republicans. Further, by nominating Warren, who is acclaimed by Democratic activists, the president would give base voters a reason to turn out in a year when voter enthusiasm is critical.

On the left, so much organizing has been dedicated to ensuring that the courts protect our fundamental rights, whether reproductive, civil, or environmental. Now we need to do the same for regulators, because economic justice is just as fundamental to the liberal vision. Our political leaders won't take regulators seriously until we do.

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