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The first director of CFPA—A Commentary by Norman I. Silber

The following commentary was posted on TheHill.com on August 18, 2010.

The first director of CFPA
By Norman I. Silber

The tone reflected by the news stories proceeded much like this:

Landmark legislation can finally protect the public from hidden dangers which might happen to any of us any day. For the first time we have the real prospect that products will be safer and that we will know more about the dangers in store. But this can happen only if the new Agency has an independent and assertive start under an experienced leader with loyalties that run toward the public interest, and not toward special interests who have from the start tried to kill the new authority. The new director will, for better or worse, personify the strength of this new effort. There can hardly be any doubt about who the head of the new agency should be. The question is who will it actually be?
This might sound like today’s debate over the choice of the new director of the Bureau of Consumer Financial Protection—but it is a more accurate reflection of the drama that played out a century ago, in 1906, when the first director of what became the Food and Drug Administration was selected by President Teddy Roosevelt.

The obvious best choice was the famous chemist Dr. Harvey W. Wiley. Beginning in 1882, Dr. Wiley opened up the fight for a Pure Food and Drug Law. Wiley and his “poison squad” of employee-volunteers at the Bureau of Chemistry, in the Agriculture Department, served as “human guinea pigs,” by eating canned soups and preserved meats, publicizing their frequently dangerous ingredients in news stories and scientific journals. By 1906 public respect for Wiley’s qualifications and for his independence from the prepared food manufacturers distinguished him. Congress turned to this chemist in the Agriculture Department to become the first official responsible for enforcing the Pure Food and Drug Law.

Although Dr. Wiley lost a number of battles—and over the years was charged by opponents with biases of his own—he built a skilled and independent, empirically oriented staff. During the crucial initial years, in particular, he built a strong foundation for a great agency that sustained it for the twentieth century. Only in more recent years, as drug companies have exercised greater influence over appointments and the agency’s budget, have questions about the FDA’s independence begun to stick.

Last month, Congress created an independent regulatory body within the Federal Reserve System, a body designed to address consumer financial products. The near-collapse of the banking system, and the economic and human devastation resulting from a dysfunctional lending market, precipitated this reform.

Echoes of the Wiley drama resound in this modern controversy. The question today is whether Professor Elizabeth Warren of the Harvard Law School and Chair of the TARP Congressional Oversight Panel should be appointed (by the President, with the advice and consent of the Senate) as the first Director of the new Bureau of Consumer Financial Protection.

In Wiley’s tradition, Professor Warren conducted empirical research and policy-oriented scholarship to demonstrate the consequences of defective products and deficient regulation. She appeared in documentary films about personal tragedies hastened by under-regulated credit card agreements, and conceived of the new consumer agency to address the matter. She criticized the insufficient use of TARP funds to help homeowners directly. She encouraged legislators to retain the new Bureau as part of the financial reform package.

A comparison between these two reform efforts, a century apart, leads us to consider what skills and qualities a first director should have; and what role those who stand to be regulated should play in the process of choosing their own regulator.

Would the launch of the new Bureau be enhanced by choosing one who helped define its mission and regulatory objectives? Would public confidence be diminished irretrievably if the director is chosen by the affected industry or its allies? Has devotion to the creation of this Bureau compromised Warren because of doubt cast on her detachment and objectivity?

The choice of Wiley greatly enhanced the profile of the FDA as it began its life. Blocking Wiley’s appointment—even if it had led to another, excellent and independent voice—would have demonstrated the persistent muscle of the affected industries, and would have suggested that enforcement and rulemaking authority also would be subject to interference. How much less effective a century of food and drug regulation probably would have been if the food industry played a major role, or exercised a veto, in selecting the first head.

Wiley was perceived as holding a special “bias”. He appeared to care more for the safety of the food supply than for extending product shelf-life of food or the profits of industry. When the manufacturers of such preservatives as borax or additives such as benzoate of soda cried out about economic realities, Wiley typically countered by discussing the danger to one’s kidneys or liver. His response was not perceived as being biased—it just seemed he had a more balanced set of priorities. Today when the economic importance of such innovations as credit card teaser rates have been pled, Professor Warren has countered by addressing the impact of particular debt arrangements and fees on the financial survival and confusion of individual consumers.

In short, there is no substitute for leaving the launch of a new Agency in the hands of those who understand the importance of its mission and care for its future. If the Bureau of Consumer Financial Protection is to be what most of the public hopes for, it should get off to an independent start with a director who is chosen without an industry-encouraged compromise and who is broadly identified with its crucial mission.

Norman I. Silber is a professor at Hofstra Law School and currently a senior research scholar at Yale Law School. He has signed statements of support endorsing the new Bureau and the selection of Professor Warren.