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81 Geo. Wash. L. Rev. 856 (2013)
The Consumer Financial Protection Bureau: Savior or Menace

handle is hein.journals/gwlr81 and id is 912 raw text is: The Consumer Financial Protection Bureau: Savior or Menace? Todd Zywicki* A centerpiece of the Dodd-Frank financial reform legislation was the cre- ation of a new Federal Consumer Financial Protection Bureau (CFPB) within the Federal Reserve. Few bureaucratic agencies in American history, if any, have combined the vast power and lack of public accountability of the CFPB. It is an independent agency inside another independent agency, pre- sided over by a single director who is insulated from presidential removal. Additionally, the Board is outside of the congressional appropriations pro- cess. Finally, its actions are unreviewable by the Federal Reserve-they can be checked bureaucratically only by a supermajority vote of the Financial Stabil- ity Oversight Council finding that the Board's actions imperil the safety and soundness of the American financial services industry. Proponents of the CFPB argue that extreme independence is justified to insulate it from political pressures. But the history of regulation teaches that insulation can be isolation, resulting in inefficient regulation. Scholars over the past several decades have identified common pathologies associated with bu- reaucratic behavior. The CFPB's structure virtually guarantees the manifesta- tion of those pathologies in practice: excessive risk aversion, agency imperialism, and tunnel vision. Indeed, it is as if the CFPB were an agency frozen in amber during the Nixon Administration and thawed out today, com- pletely unaware of the past several decades' lessons on how to structure an effective regulatory strategy. In the end, by manifesting these bureaucratic pathologies, the CFPB is likely to raise the price of and reduce access to credit, thereby harming the very consumers it was founded to protect. TABLE OF CONTENTS INTRODUCTION ................................................. 857 I. THE SHORT HISTORY OF THE CFPB ......... ...... 860 11. CONSUMER CREDIT REGULATION AND REGULATORY THEORY IN AMERICAN HISTORY ....................... 864 A. Consumer Credit Regulation: The Lessons of History. .................................... 864 B. Bureaucratic Agency Design: The Lessons of History ..................................... 869 * George Mason University Foundation Professor of Law, George Mason University School of Law; Senior Scholar, Mercatus Center. I would like to thank Vanessa Shakib and Ben Sperry, George Mason University School of Law Class of 2012, for their excellent research assis- tance. I would like to thank the Law and Economics Center at George Mason University and the Mercatus Center for providing financial support for this project. April 2013 Vol. 81 No. 3 856

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