The GOP’s new push to defang the CFPB
Republicans couldn’t stop President Obama from installing Richard Cordray as director of the Consumer Financial Protection Bureau. But they hope they can rein the bureau in by passing legislation. The House GOP is now moving forward with bills that would remove the CFPB director from overseeing the Federal Deposit Insurance Company and allow Congress to directly control its funding every year. The bills are DOA in the Democrat-controlled Senate. But the GOP’s new bills provide a clear guide to what is likely to happen to the CFPB if Republicans take full control of Congress and/or the White House.
Even before the Cordray appointment, Republicans objected to the basic structure of the CFPB, which Sen. Richard Shelby described as having “unfettered power over the American people” under the authority of an “unelected, unaccountable bureaucrat.” Under the new bills from Reps. Jim Renacci (R-Ohio) and Randy Neugebauer (R-Tex.), Cordray would be removed from his new seat on the board of the FDIC, and the bureau would be subject to the regular appropriations process under the Treasury Department — handing the purse strings over to Congress. Under Dodd-Frank, which created the bureau, the CFPB is funded by the Federal Reserve, which isn’t subject to congressional appropriations. There’s also a bill to ensure that information collected by the bureau is subject to attorney-client privilege.
At a Wednesday hearing in the House Financial Services Committee, the American Bankers Association — which criticized the recess appointment of Cordray — had ample praise for the GOP legislation. “There needs to be an effective check and balance on the Bureau’s authority,” said Michael Hunter, the ABA’s chief operating officer, according to his prepared remarks. “On funding of the Bureau, we believe that the Bureau should be accountable to Congress to show how it is using its resources.” Hunter also argued that consumer protection was not integral to the FDIC’s mission to support a safe, sound the banking industry. “There is no question that consumer protection policies could be created that act in conflict with safety and soundness,” Hunter said.
Supporters of the CFPB believe the bills are an attempt by Republicans to weaken and defund the CFPB under the guise of reform and good governance. In the last budget, for example, Republicans pushed for big cuts to the Securities and Exchange Commission and the Commodity Futures Trading Commission — two other agencies that are critical to Dodd-Frank — and they’d likely to do the same with the CFPB if Congress were given funding oversight, says Michael Greenberger, a former CFTC official and law professor at the University of Maryland.
Congressional Democrats share similar concerns. “Chairman Johnson has said repeatedly that he is not interested in making structural changes to the Consumer Bureau that would weaken critical new protections that American consumers deserve,” says Sean Oblack, a spokesman for Sen. Tim Johnson, chair of the Senate Banking Committee. (He added, however, that Johnson planned to work with Republicans to make sure information shared with the CFPB “is subject to same privilege-waiver protections” as with other bank regulators.)
In fact, House Republicans passed a bill last summer to restructure the agency, changing the directorship from a single official to a five-member board and creating a new Congressional review process to oversee the CFPB’s newly issued regulations. The bill never went anywhere with the Senate, and the new legislation isn’t likely to either. But having been rolled on Cordray, Republicans are taking up new ways to continue pushing back and lay down a marker should the 2012 elections go in their direction.