What would Congress do —if anything— to tame Wall Street and the nation’s lenders following the Financial Meltdown of 2008? This nonfiction narrative tells the inside story of how an alliance of consumer, civil rights, labor, fair lending, and other progressive groups emerged to effectively challenge Wall Street and its official protectors and to win substantial new legislative reforms. After decades of declining power on the legislative scene, these citizen campaigners came together to work for the Dodd-Frank bill and create a new financial regulatory with clout – the Consumer Financial Protection Bureau (CFPB).
This book, based largely on extended interviews with over thirty of the leading advocates, introduces readers to the players and follows the uncertain developmental course of the Consumer Financial Protection Board from the initial vision of Elizabeth Warren through the roller-coaster deliberations of a fractious congress, all the way to final passage. As much as anything, the story is a penetrating case history of the revitalization of citizens’ lobbying.
The authors argue that the unusual victory of average citizens over powerful financial interests was achieved by dint of a coalition approach to advocacy, strong congressional leadership, and the salience of the financial crisis to working and middle class Americans. In large part, the campaign victory was driven by an unusually inclusive citizens’ coalition powered by experienced leaders, a savvy, country-wide public communication’s strategy, and sufficient political and financial resources to be heard in the public arena over the din created by well-organized industry voices. The book contributes to scholarly understanding and public debate about the ability of social movements to achieve their goals in today’s politics. It highlights the formation and management of a new form of collective social action -- cross-movement coalitions and campaigns.
The book features a Foreword written by Congressman Barney Frank and an Afterword written by Professor Norman I. Silber, based on an interview with now-Senator Elizabeth Warren.
“An extraordinary accounting of an issue campaign spearheaded by the policy vision of Elizabeth Warren, the organizing skills of Heather Booth and the legislative talents of Barney Frank – and powered by the people. [This book is] essential reading for anyone who wants to learn how victory was achieved and use those lessons to continue the fight for economic justice.” - Congresswoman Jan Schakowsky
“Powerful interest groups seldom lose major battles in Congress, but that is exactly what happened when Congress created the Consumer Financial Protection Bureau in 2010. Larry Kirsch and Robert Mayer have produced … an eminently readable and yet important account of the fight to establish the CFPB. For those who care about consumer protection, want to learn how laws get passed and new agencies created, or just enjoy a good real-life David-and-Goliath struggle, this book is a must-read.” – Prof. Jeff Sovern, St. John’s Law School
“ Financial Justice tells the powerful inside story of how civil rights, consumer, labor and other public interest organizations worked together to play a crucial in role in creating the new Consumer Financial Protection Bureau, with the authority and the mission to stand up for families and protect our financial security. After years of reckless financial industry deregulation and rampant abuse, the fight for the CFPB resulted in a major civil and human rights triumph and a compelling chapter in the evolution of our democracy.” – Wade Henderson, President and CEO, The Leadership Conference on Civil and Human Rights
“The book combines great character portraits of important back-stage players that will interest the most demanding political junkie and meticulous research that will bring class discussions of social movements, interest group politics and consumer law alive.” – Peter Dreier, Dr. E.P. Clapp Distinguished Professor of Politics, Occidental College
“What sets Financial Justice apart from all the other books is its laser-like focus in chronicling the history of how a group of consumer advocacy groups spearheaded by a newly-created organization called Americans for Financial Reform used the economic meltdown to lobby for the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act.” – Alan S. Kaplinsky, Partner in Ballard Spahr law firm and editor of CFPB Monitor
[The book] “tells the gripping inside story of how a group of committed consumer, civil rights, labor, fair lending and other advocates battled Wall Street and its supporters to win substantial new consumer financial reforms for the nation… “Financial Justice” reminds us that a small, committed band ultimately did defeat the Galactic Empire. Whatever the outcome for the CFPB—and we sincerely hope it survives further attacks—“Financial Justice” is an interesting and inspiring read.” – Consumer Action Insider
“Financial Justice explains the strategic decisions and policy choices that AFR had to make to preserve and pass the strongest reforms possible. It has lessons for all activists seeking to fight city hall or evil empires.” – Ed Mierzwinski, U.S. PIRG
“Their book is far from polemic. Instead, it digs in to how the sausage is made in getting a piece of legislation passed through the American political machine, especially when faced with fierce opposition from major financial players. They describe key moments in the creation of the CFPB legislation: the formation of a unified and pragmatic advocacy group called Americans for Financial Reform, the inevitable congressional bargaining and compromise and the media campaign to get Americans on the side of consumer financial reform…[The author make] dry, complicated topics like federal pre-emption and congressional procedure accessible and entertaining. Interviews with important political players provide a good dose of human drama.” – Devon Merling, Deseret News
Financial Justice is a crossover book with appeal to a variety of audiences. For the general reader, the book is similar to bestsellers like Andrew Sorkin’s Too Big To Fail and Neil Irwin’s The Alchemist that provide an insider perspective on efforts to cope with the 2008 Financial Crisis and try to prevent a future debacle. It also complements Robert Kaiser's Act of Congress in telling the story of the Dodd-Frank Act.
For citizen activists, the book tells the inspiring David vs. Goliath story. With leadership from Elizabeth Warren, Heather Booth, and other, organizations drawn from multiple social movements put aside their particularistic interests, forged a powerful coalition, and accomplished the nearly impossible – enact legislation vehemently opposed by the mighty financial services industries. In a larger sense, the book examines whether future campaigns, built on a similar framework, can help refuel a progressive politics in America.
For academic audiences, the book highlights the dynamics of contemporary U.S. social movements and the federal legislative process of which they are a part. The book fits nicely with classes in sociology, political science, law, and consumer affairs.
This chapter serves two purposes. First, it introduces the three main protagonists in the effort to create a new consumer protection agency: Professor Elizabeth Warren, Representative Barney Frank, and veteran social organizer Heather Booth. In 2007, all three saw major cracks in the U.S. economy and had different ideas about what political responses were appropriate. In terms of its second function, the chapter demonstrates the failure of existing regulatory agencies, especially the Federal Reserve, to respond in a timely and effective manner to abuses of consumers in credit markets. This failure was at the heart of Elizabeth Warren’s proposal for a new agency to protection consumers in financial transactions.
This chapter focuses on Elizabeth Warren as a “policy entrepreneur.” It details the process by which she developed the idea of a new agency for consumers, provided it with intellectual underpinnings, and placed it on the political agenda. During the presidential campaign leading up to the November, 2008, elections, Warren gained the endorsement of presidential candidates John Edwards, Hilary Clinton, and Barack Obama for the idea of enhanced consumer protection. Then, shortly after the election, she became chair of the Congressional Oversight Panel to oversee implementation of the $700 billion Troubled Asset Relief Program. This position gave her a highly visible platform from which to advocate for what was eventually dubbed the Consumer Financial Protection Bureau (CFPB).
This chapter details the obstacles and opportunities faced by advocates of financial reform. It begins with the commanding political and economic power of the financial services industry and shows how the concurrent Congressional debate over health care reform threatened to stifle consideration of financial abuses. Yet advocates recognized that political opportunities existed as well. The most obvious was the growing public hostility toward Wall Street and its political backers and the willingness of the White House and the Democratically-controlled Congress to respond. When the idea was floated in early 2009 to create a formal coalition to pursue comprehensive financial reform, progressive social movement organizations from across the spectrum were ready to move.
This chapter describes the recruitment of an accomplished political strategist, Heather Booth, to lead a new coalition of progressive groups -- Americans for Financial Reform (AFR). Booth’s career as a political organizer is a window into virtually all of the most important social movements of the last fifty years, including civil rights, feminism, labor, and anti-war. Booth was perhaps uniquely qualified to gain the trust of a diverse set of high-powered social movement organizations used to operating independently of one another. Indeed, she had first-hand experience melding labor, energy and other diverse groups into a viable coalition. To augment her substantial skills as a political organizer, Booth recruited a small but highly talented staff with experience in economic justice campaigns. Like chapter two focusing on Elizabeth Warren, this chapter provides readers with insight into one of the most fascinating progressive activists of our time.
This chapter details the process by which Booth and her deputies guided AFR’s member organizations through the critical steps of forming a powerful coalition. These steps included agreeing on a mission and set of concrete policy goals, mustering financial and human resources, developing working rules to prevent organizational fragmentation and policy incoherence, developing a sophisticated inside-outside strategy for exerting political pressure, and smoothing over potential fault lines among diverse organizations. Establishing the CFPB was only part of the larger legislative agenda, including highly-charged issues such as preventing financial institutions from becoming “too big to fail,” regulating the shadowy world of derivatives trading, and capping executive compensation. In this sense, the campaign to establish the CFPB was part of a political battle whose stakes could not have been higher and whose opponents could not have been more motivated.
This chapter chronicles the fate the CFPB proposal as it wound its way through the House of Representatives. Even with liberal Congressman Barney Frank at the helm of the House Committee on Financial Services Committee, the non-governmental advocates of the CFPB had to push their allies in the White House and the U.S. Congress for the strongest possible agency. At the same time, they needed to fend off attacks by the new agency’s opponents. Despite a Democratic majority in the House, passage of financial reform legislative was hardly assured as many centrist Democrats were wary of alienating financial constituencies.
Even after clearing the House, the proposed new agency suffered several near-death experiences in the Senate. Advocates were willing to see no agency passed rather than having one that was weak and largely symbolic. Members of Americans for Financial Reform, Elizabeth Warren, and even some Hollywood stars steeled the resolve of Senator Christopher Dodd. After abandoning unfruitful negotiations with his Republican colleagues on the Senate Banking Committee, he brought a relatively strong bill to the full Senate. There, supporters of the financial reform bill ran headlong into the prospect of a Republican filibuster. Not only did the bill need the votes of a few Republicans; activists had to holdi onto the votes of a few liberal Democrats who viewed the bill as too soft on Wall Street. Moments of high drama ensued, but the Dodd-Frank Wall Street Reform and Consumer Protection was finally passed by the Senate, avoided damaging changes in the House-Senate Conference Committee, and signed by President Obama on July 21, 2010.
This chapter and the one that follows are case studies of specific elements of the CFPB debate that highlighted the possibilities and constraints faced by social movement coalitions in legislative dynamics. Chapter eight focuses on the issue of exemptions from the new agency’s authority on behalf of the politically powerful auto dealers. As one can imagine, each industry potentially subject to the agency’s jurisdiction argued that consumers needed greater protection in general but that their industry served consumers well and did not need any additional regulation. In the end, auto dealers were the only industry to successfully make this argument, but this episode nevertheless reveals the limits of the coalition’s effort to control lenders and persuade politicians.
Chapter nine presents a case study of another hotly-contested issue: the extent to which federal control of lenders would trump or “preempt” the ability of states to regulate financial services. Far from being an abstract or arcane constitutional argument, the fight over preemption engaged a majority of state attorneys general in a desperate effort to retain their ability to serve as laboratories of innovation in the area of consumer financial protection. The preemption battle was resolved largely in favor of the financial reform activists and reveals the importance of grassroots political action.
This chapter addresses two questions: to what extent did the coalition spearheaded by Americans for Financial Reform make a difference in the features and ultimate passage of the Dodd-Frank Act; and by what means did they exert any influence that can be properly attributed to them? Elizabeth Warren and AFR were the two most important non-governmental advocates of reform, and their contributions turned out to be largely complementary and entirely synergistic. It is unlikely that one would have succeeded in creating the CFPB without the other. The chapter also contains the authors’ assessment of ways in which the coalition fell short of its goals. The chapter both synthesizes the keys to the coalition’s successes and examines the implications of its structure and strategy for future attempts to stimulate progressive change.
This chapter gives prominence to the authors' interview of Elizabeth Warren. While previous interviews in the book focus on the campaign to pass the Dodd-Frank Act and establish the CFPB, our interview with Warren also contains her assessment of the new agency’s initial performance and her assessment of its future. The Afterword is written by legal scholar, Professor Norman Silber, who served as a consultant on the overall project and has closely followed Warren’s legal writing and activism.