07/21/2011 02:26 pm ET Updated Sep 20, 2011

Bungling the Bureau: The Consumer Financial Protection Mess Is Another Lost Opportunity

Today is C-Day. It's the grand launch of the Consumer Financial Protection Bureau, an entity that was created nearly two years ago as part of the Dodd-Frank legislation, as regulatory fervor was surging in the post-meltdown, populist ether.

Unbridled banking testosterone was the enemy, with convenient expostulations from both parties declaiming the desperate need to safeguard consumers from the predatory scoundrels; in the exhausted cliché, Wall Street wouldn't have Main Street to kick around any more.

So this should be a big day, then, for the Obama administration. A huge win. For the first time, we have a federal bureau with no other responsibility than to regulate lenders who seduce consumers into poison-pill mortgages with tiny traps of escalation buried in great wafts of legalese, like slivers of glass in a carpet that go unrecognized until stepped upon.

And there are other firsts, as well. The bureau was created to regulate credit card companies, so-called "non-bank" payday lenders, indeed the entire treacherous landscape of financial services "providers" -- a rigged world in which naïve and vulnerable consumers are routinely tricked by duplicitous banking slicksters, a minefield of not just three- but four- and five-card monte hustlers, lawyered up to find and fortify loopholes.

At last, the Masters of Opacity have met their match! That was the sales opportunity for the administration. So obvious, so simple, so pure. We had just seen the carnage of an under-regulated industry. Surely, when you put the average consumer in the ring with any bank or credit card company or insurance company, there is no chance of fair fight.

Had this easy sell to the American people gone the way it should have, today would have handed President Obama some much-needed goodwill in his battle with Republicans over the debt ceiling struggle. He could point to the enormous victory this represents for every American who needs a mortgage, who applies for a credit card, who lives from paycheck to paycheck and gets stuck in slime and ooze of payday lenders and their usurious rates.

Instead, we don't even have a director for this new bureau, and the Republicans are seeking legislation to trim its regulatory sails.

What went wrong? It started when the president named Elizabeth Warren as a "special advisor" to get the agency going in September of 2010. Warren, a Harvard Law Professor, is a fierce consumer advocate who gleefully takes on the industry. I have the utmost respect for her. She would have been a great leader of the new bureau. But Obama knew that the banking lobby, the Chamber of Commerce and Republicans would fight her tooth, nail and disclaimer.

So the president delayed the ultimate decision about whether or not to name her as director. This vacuum allowed Republicans to not only bludgeon her, but to go after the legitimacy of the bureau itself, to question the concentration of power in a single director, and to work with ferocious intensity on emasculating the bureau before it had even left the womb.

The Republicans did what they are best at, and the president granted them carte blanche to practice their black art of re-framing. They couldn't make it an argument about the wisdom of allowing banks to continue to make billions of dollars based on marketing and pricing strategies that plunge Americans into debt.

So they turned it into an attack on over-zealous regulators and the creation of a giant new bureaucracy run by clueless technocrats. It was the same strategy as the health care debate, when the Republicans claimed that the Democrats were taking away "choice." Here, opponents of the bureau argued that Americans would end up with one kind of mortgage, and one kind of credit card to choose from. It was the same "competitiveness" argument that the Republicans always use -- a gross exaggeration of what the bureau's regulatory goal was all about -- but a meme that sticks.

In short order, the debate over Elizabeth Warren and the bureau itself blended into a political swirl from which the administration wasn't able to extricate itself. It's a symptom of a larger problem for this administration; it can make a case, but it can't sustain a case against the withering and consistent onslaught of Republican attacks.

President Obama should have either had the guts to nominate Warren and take the battle to the American people as an example of how the Republicans are in the silk pocket of the bankers, or he should have nominated a permanent director much earlier in the process.

But he did neither. He essentially hung Warren out to dry. Her Congressional testimony devolved into a petulant debate about whether she had informed the committee about the limitations of her schedule. The president vacillated about whether to give her the permanent job when everyone except Obama itself -- or so it appears -- knew that he wasn't going to do that. Ever. It wasn't until this Monday that he announced that he was going to nominate Richard Cordray, a former Ohio Attorney General, to the top job. He should have appointed Cordray months ago, which would have given him the chance to get confirmed -- or at least have a public confirmation fight that made him the People's Hero -- and get his footing.

But as it stands, the new Consumer Financial Protection Bureau opens for business today, without a full-time leader. One of the most important outcomes of the financial crisis -- a single institutional advocate for American taxpayers -- has been muddied and bloodied.

Americans have a genetic resistance to ruthless bankers. We also have a similar antibody response to regulatory overreach. But this is unique moment in history, the worst financial disaster since the Great Depression. How could the ruthless banker not have emerged as a generational scourge? That's what happened during the Depression, and it resulted in the creation of beloved institutions like FDIC and Social Security, as well pillars of our economic structure like the SEC.

The Consumer Financial Protection Agency should have been a legacy of equal and enduring value. Thursday should have been a day of celebration, with elected Democrats on the federal, state and local level fanning out into communities to bask in the glow, accompanied by sad and wrecked victims of the financial abuse that the new bureau will finally put a stop to.

Riding on that surge of optimism, on a demonstration of what vigorous government action can do, the president would have been in a far stronger position to do battle with Republicans over the deficit. Instead, the new bureau is just another contentious mess, another debacle that dispirits even the optimists.

It demonstrates that while consumers need to be protected from banks, the president needs to be protected from something else: his own instincts for boldness-meets-vascilation.