Rocky Road

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As economists begin assessing the strength of President Obama’s plan to overhaul financial regulation, in particular the expansion of responsibility at the Federal Reserve, news reports about the other big chunk of news therein—the proposed creation of the Consumer Financial Protection Agency—have focused largely on the exhilaration that consumer groups have expressed about the victory.

“About time,” read a headline at the Philadelphia Inquirer. The San Francisco Chronicle led with a consumer rights advocate’s sentiment: “I call it a game changer.” “It’s the part of financial regulation that we’ll actually notice,” noted Ezra Klein, blogging at The Washington Post.

To be sure, there’s great symbolism in the agency’s creation; it’s the administration’s most direct response to the plight of the little guy. But a little more skepticism concerning the proposed CFPA wouldn’t be a bad thing.

This is particularly the case because others, predicting a bitter battle, are already casting the opponents—banks v. consumer groups—in unproductive stone. The Los Angeles Times dubbed it one of the “most controversial” provisions in the proposed overhaul, while The Washington Post noted that “opposition is piling up with particular speed” against the idea of the agency.

That’s just it, however. The agency is still just an idea—a heavily symbolic one, but an idea nonetheless—that’ll be tweaked and altered before it’s implemented in any form. Framing it as a pitched summer battle between banks and consumer groups, or as a win for the little guy, obviates too quickly the need for reporting of a more practical strain: analyzing what its existence would mean at varying shades of strength (after Congress and special interests have gotten through with it), and weighing its practical (i.e. actual) impact on consumers’ daily lives.

And let’s not forget that this agency is ultimately the administration’s most popular sell to the American public. NPR discussed yesterday the “built-in public appeal” surrounding the proposed agency, which would (note the verbs and adjectives employed) “not only enforce existing laws, but write new ones to help protect consumers from, for example, predatory lenders and unscrupulous credit card companies.” Purely on a visceral level, the consumer protection agency enjoys a clear public mandate, and in that sense, it’s an easy one to cheer.

But as plenty of voices have noted, its efficacy is still very much a wait-and-see proposition. One of those quoted during the NPR segment is Douglas Elliott, an economist at the Brookings Institution, who said, “[It] can be helpful…but it needs to find the best way to protect consumers while allowing healthy innovation.” And indeed, whether the version that pops out the other side of Congress’s deliberations will have “any teeth,” as Matt Yglesias queried at ThinkProgress, is a valid question that bears more investigation.

Similarly, Pat Garofalo, another TP blogger, warned that the agency “can’t be second tier, without enough resources or stature to do its job effectively.” Simon Johnson at The New Republic called it “potentially powerful in all the right ways,” but said it would depend on “how vigorously Treasury will defend this idea against the financial sector lobbies.” Bob Franken at The Huffington Post, meanwhile, sputtered, “don’t bet on meaningful consumer protection emerging from the legislative garbage heap.” Megan McArdle at The Atlantic wore her skepticism on her sleeve, calling the proposed CFPA “at worst harmless, and at best mildly helpful,” and adding, “I’m skeptical that it will have any effect.”

It would have helped had McArdle fleshed that comment out. But her vein of skepticism is a good one, because it encourages more meted-out and measured reporting after the fact. And that’s particularly good considering that, as Klein, among others, has noted, Congress won’t “really begin considering these reforms until the end of summer or the beginning of fall,” giving banks and other financial companies “months to organize against the provisions they consider most onerous”—including, it seems, the details regarding the creation of the CFPA. Given that, the skepticism seems both warranted and—if it keeps the public debate going with a commitment not to the symbolism, but to the actual architecture of an idea—welcome.

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Jane Kim is a writer in New York.