by Elizabeth Warren At WVFC, we’ve often highlighted the work of Elizabeth Warren, chair of the Congressional Oversight Panel (who’s a Harvard Law professor, teaching contract law, bankruptcy and commercial law, in her copious free time).Via our friends at the financial watchdog

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, today Warren — recently named one of the World's 100 Most Influential People by TIME Magazine —presents the case for the Consumer Financial Protection Agency (CFPDA) now being considered in Congress. The agencies charged with such protection thus far, she explains, have been unwilling or unable to keep up with 21st-century business practices — leaving us all in the lurch; a new, well-funded CFDA can ensure that we’re being treated fairly, as consumers and stockholders, by those with which we do business.

The Federal Reserve, the Office of the Comptroller of the Currency [OTC], and the Office of Thrift Supervision OTS] have had the legal authority to protect consumers for decades. The agencies’ well-documsented refusal to protect consumers — refusal that ultimately jeopardized safety and soundness of financial institutions and that brought the economy to its knees — results from two structural flaws in the current system.

• The first flaw is that financial institutions can choose their own regulators, which causes regulators to under-regulate. By changing from a bank charter to a thrift charter, for example, a financial institution today can change from one regulator to another. In fact, an institution may decide to evade a federal regulator altogether, by housing its operations in the states and forgoing a federal charter. Institutions can shop around for the regulator that provides the most lax oversight, and bank holding companies can shift their business from their regulated subsidiaries to those with no regulation — and no single regulator can stop them. The problem is exacerbated by the funding structure: Regulators’ budgets come in large part from the institutions they regulate. This regulatory arbitrage has triggered a race to the bottom among prudential regulators and has blocked real consumer protection.

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