Now that Congress has passed legislation creating a new Consumer Financial Protection Bureau in the Treasury Department, attention has shifted to how the Obama Administration will implement the new law.
The issue of who President Obama should appoint to head the new agency is now front and center. Consumer groups and many members of Congress believe that Professor Elizabeth Warren, who came up with the idea for a consumer protection agency for the financial sector and has been an aggressive consumer advocate during the entire financial crisis, should be the President’s choice. The banking industry’s position is “anyone but Warren.”
Elizabeth Warren (who was my colleague at the University of Texas for many years) is the most qualified candidate. Although she would inevitably have to make compromises in launching the new agency, she is a charismatic leader who would remain a strong consumer advocate and will not be bullied or hoodwinked by the banking industry.
As importantly, the appointment will make a strong symbolic statement about the President’s priorities. The appointment offers a unique opportunity for the President to demonstrate to the American public that he is on the side of consumers and not Wall Street.
We should bear in mind, however, that the future of this important agency also depends on other decisions that are being made in the Administration over the next few months. The bureaucratic realities facing a new agency may have as great an impact on its future as the credentials and personality of its first leader.
Full textCross-posted from ACSblog.
The citizens of Minot, North Dakota suffered a grave injustice on January 18, 2002 when a train derailment bathed much of that small town in a toxic cloud of poisonous gas that killed one person and injured almost 1,500 others. A detailed investigation by the National Transportation Safety Board concluded that the derailment was most likely caused by fractures in temporary joints that the railroad had installed to repair the track.
When the victims sued the railroad for damages caused by its negligent maintenance, they found the courthouse doors locked. A federal district court held that their claims were preempted by the Federal Railroad Safety Act (FRSA) of 1970, which contained a "preemption" clause that Congress enacted to prevent states and localities from enacting regulations that were inconsistent with the regulations issued by the Federal Railroad Administration (FRA), the federal agency that Congress created to protect citizens from irresponsible railroads.
The court held that because Congress empowered the FRA to regulate railroad safety, injured citizens could not sue the railroads when they operated their trains unsafely -- whether or not they complied with FRA requirements. Other courts have issued similar decisions in cases involving train collisions, derailments and grade-crossing accidents.
During the Bush Administration, the FRA aggressively asserted its newfound power to protect railroads by preempting state common law. A new white paper issued by the Center for Progressive Reform (which I co-authored) explores the injustice inherent in this interpretation of the statute.
Full textThe debate over whether Congress should create a Consumer Financial Protection Agency, as recommended by President Obama, has recently taken a disturbing turn. Apparently, some congressional Democrats have been receptive to complaints from the big national banks that the current bill does not preempt state laws and regulations that are more stringent than the regulations that the new agency will promulgate.
National banks have traditionally been protected from state regulation by virtue of express preemption clauses in the federal statutes under which federal agencies like the Office of the Comptroller of the Currency provide their charters. This has arguably been a disaster for consumers. For example, when New York Attorney General Andrew Cuomo launched an investigation into discriminatory banking practices, the federal agencies literally cut off the investigation in mid-stride by filing a lawsuit in federal court for injunctive relief, and the Supreme Court agreed with the agencies.
This week the House Financial Services Committee may vote on an amendment offered by Rep. Melissa Bean (D-Ill,) that would similarly preempt more stringent state regulation once the new agency is up and running.
Full textYesterday, the Food and Drug Administration implemented a 2007 food safety statute by promulgating a rule requiring food manufacturers to report instances of foodborne diseases to an electronic database that the agency has just established (the Reportable Food Registry). This long-awaited database will help epidemiologists at the Centers for Disease Control, state health agencies and academia identify "clusters" of illnesses that should contribute to a better assessment of the extent and magnitude of the foodborne disease problem in this country.
More important, the new database may assist epidemiologists in pinpointing the food items that have caused particular outbreaks much more quickly. This is critical to the government's ability to take action to prevent the spread of foodborne diseases before they become full-fledged catastrophes like the recent spinach and peanut butter outbreaks.
In a food distribution system in which ground beef from a single cow can wind up in hamburgers in several states and a single hamburger can be composed of meat from dozens of cows, we need all the information we can get on the nature and extent of the disease outbreaks that occur all too frequently these days. The new system that FDA has just created has the potential to contribute greatly to the available information.
The proof, however, will be in the pudding when the system is fully up and running. It will be awfully easy for a company that receives a complaint from an angry customer who got sick from eating one of its products to conclude that the disease must have had some other cause or was otherwise "idiopathic" and ignore it. The key question as FDA begins to implement the regulations will be the how well the thresholds that the regulations establish for reporting instances of disease work. And, of course, another critical issue will be the seriousness with which the agency goes about enforcing the new regulation. It is much harder to police violations of an affirmative reporting requirement than it is to enforce a prohibition.
FDA is off to a good start. Now it needs to follow through.
For more on the compliance issue, see also Food Poison Journal.
Full textOn Wednesday, Representative Henry Waxman introduced a comprehensive "Food Safety Enhancement Act" (116-page discussion draft) to repair part of a federal food safety protection regime that has been badly broken for several decades. Waxman was joined by Representatives Diana DeGette, John Dingell, Frank Pallone, Bart Stupak, and Betty Sutton; the House Energy and Commerce Committee will hold a hearing on the issue on Wednesday, June 3.
A key problem with the current system is that it employs regulatory tools developed during the early twentieth century to address the risks posed by a radically different twenty-first century food production and delivery system.
The existing regime is built upon the assumption that state and local governments can adequately address the risks of a largely local food supply with occasional assistance from a federal Food and Drug Administration that focuses primarily on animal feeds, food additives and a modest quantity of (mostly exotic) imported food. But we now live in a world in which much of our fresh produce travels long distances (often from other countries) and the processed foods that we consume can come from huge production complexes or tiny "Mom and Pop" facilities located almost anywhere.
Full textOne of the most significant problems with cost-benefit analysis is its tendency to "dwarf soft variables." These "soft variables" are things that have value to all of us but are not typically traded in markets and are therefore difficult to quantify in any rigorous way. A good example of a soft variable is the value of the aquatic organisms that are not directly consumed by humans but will, along with those that are consumed by humans, be destroyed under the technology that EPA approved under the cost-benefit test that it employed. Full text
Center for Progressive Reform Member Scholar Thomas O. McGarity, joined by CPR Policy Analysts Margaret Clune Giblin and Matthew Shudtz, blog on the Bush Administration's push for last minute rulemaking. Full text
Thomas McGarity of the Center for Progressive Reform and the University of Texas Law School blogs on the Wyeth case before the Supreme Court, on preemption and the FDA. Full text
Guest Blogger: Liz Borkowski