Simon Johnson writes that the administration isn't supporting the proposed Consumer Financial Products Agency enough. Since I wrote a piece arguing the exact opposite last week, I thought I'd respond, though I do agree with Simon in so far as he administration could never do too much to support the creation of the agency. Simon's main concern is that the administration isn't launching a "frenzied effort" to build support for the agency among economists, like it did for PPIP. There's a good reason why that is the case: Most of the economists who would listen to Treasury sympathetically already think the CFPA is a good idea. On the other hand, very few of them thought that PPIP was the best approach for the banks. Treasury doesn't need to waste time convincing economists of what they already believe, or keep them from criticizing a proposal they're likely to support. PPIP isn't a good comparison for the effort, anyways: The better legislative baseline is bankruptcy loan modification, a pro-consumer measure killed in the senate when the administration actually failed to support the legislation strongly enough. Simon -- an expert political strategist economist -- also complains about the administration's legislative strategy, suggesting Obama and his team need to start counter-attacking to prevent the financial industry from gaining the upper hand in the debate over the agency. But the administration has been making a series of strategic public appearances and leaks ("Treasury ready to twist arms over consumer agency") as part of their legislative roll-out. Second, the CFPA bill is in the House right now and shouldn't face any trouble -- Barney Frank expects it on the floor by the end of July. But the Senate -- where the real fight will be -- won't take up the legislation until late September or November. Finance Committee Chairman Chris Dodd is too busy subbing for Ted Kennedy on health care reform to do it sooner. So, yes, building a positive narrative early is a good idea, but if you think the administration should be doing a full-court press some three to four months in advance of a vote, I'd say your timing is off.
-- Tim Fernholz
