You see, it places the Consumer Financial Protection Agency (CFPA) in the Federal Reserve, which means that a small regulatory firm intended to defend the consumer is in a really big organization that is intended to defend banks.

Remember: Consumer protection was the Fed’s bailiwick in the run up to the, so this clearly appears to be a sell out, only, as an equally confused Paul Krugman notes:

…But here’s my puzzle: the bill, as I understand it, calls for an independent Consumer Protection Agency, with a director directly appointed by the president, but one that is “housed” at the Fed.

………

Does it mean that the staff will all be long-term Fed employees? Then that would, to at least some degree, compromise the agency’s independence. Or is it purely a cosmetic issue? If so, who exactly is being diverted?

I’m not prejudging this — there’s a lot to look at. But I’m puzzled.

What it does have is:

• The Volker Rule.
• The ability to sue credit ratings agencies.
• He is insisting that the bureau (downgraded from agency) would be, “Autonomous from the Fed,” and just co-located.
• Resolution authority for large institutions.

I think that the real question here is two fold, transparency and independence.

As to transparency, the question is whether Freedom of Information Act laws apply to this organization as they do to other regulatory institutions, or is it a paranoid secret black hole like the Federal Reserve.

As to independence, the question is whether it gets to, under the limitations of civil service regulations, hire its own staff, and draw up its own budget.

If it does not have this authority, it is a paper tiger.