Last week, at her first Senate Banking Committee Hearing, Senator Elizabeth Warren excoriated regulators for entering into settlements with big banks rather than bringing them to trial. Also last week, Ms. Warren called for a vote to confirm Richard Cordray as director of the Consumer Financial Protection Bureau, a role in which he is already serving by virtue of a recess appointment of questionable legality.
Setting aside the senator's odd emphasis on trials as the only means to punish banks, the juxtaposition of these two events is interesting. On the one hand, Ms. Warren clearly relishes her new oversight role. On the other hand, she is insisting on the enshrinement of a regulator over whom she will not be able to exert effective oversight. If Mr. Cordray doesn't embrace the litigate-because-it-looks-tough approach--and so far he too has entered into settlements with big banks--there will be little she can do to hold him accountable besides public shaming. Under the institutional design blessed by Ms. Warren, the CFPB director has a free hand to do whatever he wants to do, even over the objections of members of Congress, the president, and the American people.