Lawyers v. Bankers: The New CFPA

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Written by Katie Porter

At a recent FDIC Conference exploring the idea of “Safe Financial Products,” I was struck by the hostility of the representatives of the banking industry to “more law.” I don’t expect businesses to volunteer to take on additional regulatory burden, but it didn’t seem as if that was the motivation for the animus. For example, most scholars think independent banks and credit unions overall would benefit from a new Consumer Financial Protection Agency  (CFPA) because the agency would likely police the big banks in a more rigorous manner, leveling the playing field between financial insitutions with state (often tough) regulators and federal (often easy) regulators. Yet, the Independent Bankers Association generally has been against a CFPA,(see here for an example), although community banks have exemptions from certain provisions in the bill, which has softened their opposition. But the drumbeats from opponents of the Agency continue that more law is bad,  “awyers will just cost everyone money and law is anti-capitalism, and maybe even anti-American.   Some of these attitudes reflect the general anti-law animus in our society today, a state of public opinion that I think law schools should be addressing by explaining the value of law to a society. And some of this anti-lawyer rhetoric might just be thinly-disguished fear that Elizabeth Warren becomes the Director of the CFPA; the financial services industry argued that only a banker should be allowed to be a banking regulator. This argument, of course, ignores that the job is not to be a banker, it’s to be a regulator, a job that lawyers are well-qualified to take on. Keep your eye on the CFPA as it becomes a reality and is staffed; the balance of bankers to lawyers will say something about the seriousness with which the agency might take its regulatory and enforcement duties.