It what can only be termed a historic bow to the banks over policy the Obama Administration announced yesterday that Elizabeth Warren will not be the head of the Consumer Financial Protection Bureau. Professor Warren essentially invented the CFPB and its creation was one of few bright spots to emerge from Dodd-Frank, as I have discussed here, here, here, here and here. Instead of a tireless academic workhorse intensely focused on the policy implications of exploitative debt from an outsider's perspective President Obama selected a politician from Ohio. Warren terrified the banks and they simply refused to accept Warren so President Obama obliged them. Unfortunately, with an election ahead, the President is more intent on raising funds from the banks instead of battling them over Warren. While Cordray may well be a solid appointment, President Obama's long delay and ultimate refusal to appoint the best candidate signals yet another retreat from sound financial regulation by this administration.
The CFTC announced another such retreat late last week when it delayed derivatives regulation by up to 5 additional months--up until December 31, 2011. This delay arises from the continued starvation of our regulatory agencies by those in Congress who wish to denude financial reform. The SEC currently suffers similar budgetary starvation. Without proper regulatory funding we will continue to face the same financial risks that caused the global financial sector to crater in 2008.
Finally, it appears more litigation challenges will bedevil Dodd-Frank, and at least one high profile scholar predicts the SEC will lose the shareholder proxy access litigation.
Overall, as two debt crises plague global financial markets, the markets seem as vulnerable to a Lehman-style meltdown as in 2008, from a legal and regulatory perspective, and yet all the political pressure favors more dilution of Dodd-Frank. If we tip into the abyss we can blame our dysfunctional money-driven political system, for what that is worth.