The Democratic architects of the Dodd-Frank financial services reform bill insisted the new Consumer Financial Protection Bureau, which will soon be setting the rules of the road for financial products ranging from home mortgages to credit card fees to payday lending, remains insulated from meddling by Congress. The law set the agency’s annual budget at 10 percent of the Federal Reserve Board’s revenue, and not subject to an annual appropriation by Congress.
That financing scheme has come under fire from financial service firms, business lobbying groups like the U.S. Chamber of Commerce, and the Republican leadership on Capitol Hill, who want more political control over the agency. They’re also balking at having a single “czar” running the CFPB, preferring a five-member commission made up of political appointees.
The chief focus of their ire has been Elizabeth Warren, the president’s special advisor charged with setting up the CFPB. She is widely seen as the czarina-in-waiting after her listening tour with regional business groups and numerous sit-downs with top financial lobbyists succeeded in dampening the most virulent opposition among business leaders and even some Republicans on the Hill.
But that hasn’t lessened their distaste for seeing a new regulatory agency with far-ranging enforcement powers in Washington, especially one run by Warren, a Harvard law professor whose scholarship before entering government focused on bankruptcy and its impact on low- and moderate-income people. “She gets 10 percent of Fed revenue and gets to spend it any way she wants,” said Tom Donohue, chairman of the U.S. Chamber during his address to the group’s annual capital markets summit on Wednesday. “This has the potential to cause a tremendous amount of collateral damage to organizations who are playing by the rules.”
The House budget bill passed in February called for an end to the agency’s reliance on Fed funding, and slashed its appropriation nearly in half. At Warren’s first hearing on Capitol Hill two weeks ago, House Financial Services Committee Chairman Spencer Bachus, R-Ala., questioned the need for the agency. And in his keynote speech to the U.S. Chamber session today, he touted his bill to create the five-member commission for running the CFPB. “This proposed structure of the CFPB is the same structure that has worked well for nearly every other regulatory body in this country, including the FTC, FDIC and SEC,” he said, referring to the Federal Trade Commission, the Federal Deposit Insurance Corporation and the Security and Exchange Commission.
Warren’s responded in her speech to the group, which she likened to Nixon going to China or Daniel entering the lion’s den. She clearly signaled that the administration has no interest in changing the rules.
“No one other banking regulator is subject to an appropriation,” she said. The fact that any other bank regulator can veto any new rule put out by the CFPB “is an enormous restraint” on its powers, she said. Under the financial overhaul legislation, a Financial Stability Oversight Council has the ability to review rulemaking by the CFPB.
“Big industry groups have extraordinary resources to push back on regulation and make their views known,” she said. “But when we talk about balance in the system and implementing regulations that allows competition to work, we have to think about what a lack of independence would mean.”
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