The Consumer Financial Protection Bureau, a central component of the financial reform legislation passed last year, opened for business on July 21. It was met with hostility among Congressional Republicans, who voted a measure through the House that would make it easier to overturn the CFPB's regulations, and with confusion from the public, 80 percent of whom said in a CNN/ORC International poll that they didn't know enough about the bureau to offer an opinion on it.
The CFPB was also met with trepidation on Wall Street, where its job, after all, is to lay down the law. But Moody's Investors Service, one of the world's most closely-watched credit rating agencies, has said that the Bureau will ultimately be a good thing for the financial industry, The New York Times reports.
In a recent note, Moody's called the CFPB "medicine" for U.S. banks and wrote that "the stricter policing of consumer lending products and services will ultimately make banks safer by steering them away from riskier products such as subprime mortgages."
President Obama has nominated Richard Cordray, a former Ohio attorney general, to head the CFPB. It's far from clear whether Cordray will be confirmed -- Senate Republicans have said they will close ranks against him until a number of structural changes are made to the Bureau -- but should he become head of the agency, Cordray is expected to take a firm hand in regulating Wall Street.
While attorney general, Cordray was aggressive in prosecuting financial misconduct. Forbes notes that during his single term, he sued Bank of America and American International Group; he also sued Moody's itself, and its fellow credit-rating agency Standard & Poor's, for awarding AAA ratings to undeserving mortgage-back investments, which resulted in millions in lost pension funds for Ohio workers.
In spite of Moody's prediction that the Bureau will benefit banks -- in part because it will "level the playing field" by applying the same set of oversight standards to nonbanks -- the banking lobby is reportedly pushing for changes to the CFPB, including a five-member board of directors and a delayed transfer of powers to the agency, that critics say will render it less effective.
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