The Corner

Time for Accountability at the CFPB

The president stepped off his tour bus in Kansas this week and said that, “We shouldn’t be weakening oversight and accountability. We should be strengthening oversight and accountability.” Which is why I’m mystified that the president refuses to bring much-needed oversight and accountability to the massive new bureaucracy created under the onerous Dodd-Frank law that established the Consumer Financial Protection Bureau (CFPB).

Today the Senate will consider a nominee to head this agency. While I have no problem with the nominee, I do have problems with the structure of this new bureaucracy, which lacks critical transparency and which, with only minor bipartisan effort, can easily be reformed. Regrettably, the president has chosen to play politics rather than so much as placing a telephone call to Congress.

This new bureaucracy possesses massive and wide-ranging powers to regulate any person or business offering or selling a “financial product or service” used by Americans without adequate checks, balances, oversight, or accountability. 

The CFPB has been given unprecedented authority over financial institutions and Main Street businesses offering financial services. Once confirmed, whoever becomes the CFPB director essentially answers to no one and cannot be removed even for poor performance, including unbalanced regulations.

It also has been given significant power to regulate, but there’s no check and balance if those regulations go too far.

Furthermore, the CFPB is funded directly by the Federal Reserve — not through the standard congressionally approved spending process. That means little to no oversight of this new bureaucracy.  

In an attempt to force the administration to make some key changes, I joined 43 of my Senate colleagues in trying to change the CFPB into something better equipped to provide consumer protection while, at the same time, being accountable to Congress and taxpayers about new regulations and the use of taxpayer resources.

Led by the Senate Banking Committee’s Ranking Member, Senator Shelby, we tried to bring commonsense reforms of the structure of the CFPB before anyone takes the helm. What we were asking for just makes sense. 

First, we were trying to establish a board of directors to oversee and limit the unbridled power of the CFPB.

Second, we were working to establish a safety-and-soundness check on CFPB’s rules and regulations in order to ensure the very financial health of these institutions is adequately considered. This new bureaucracy shouldn’t cause businesses to fail, but that’s a real potential threat given how it’s currently structured. 

And lastly, we wanted to subject the CFPB to the ordinary congressional appropriations process to ensure proper oversight and accountability.

Our concerns are real and aren’t just political obstruction. For example, even senior officials at the Fed are worried about the unprecedented way of financing an independent regulatory bureau. #more#

As the president of the Federal Reserve Bank of St. Louis put it: “I am concerned about this method of funding the Bureau. The amount of money allocated in the law is not based on any careful assessment of what the needs of the Bureau will be as it attempts to fulfill the mandate of the Congress with regard to consumer protection. Nor is there any mechanism for changing these amounts going forward, should market conditions change, or if the needs of the Bureau change.”

At a time when we should be encouraging oversight and accountability, as the president argues, this new government bureaucracy is structured with virtually none of those attributes. The new consumer protection bureaucracy has almost free rein to impose whatever costly regulations it desires, without attention even to whether financial service providers would be driven to failure as a result. The only thing that could stop a bad regulation from flowing out of the CFPB is, according to the Dodd-Frank Act, if it “would put the safety and soundness of the United States banking system or the stability of the financial system of the United States at risk.” That is an incredible and unparalleled high bar, allowing a check on a bad regulation if, and only if, it threatens the entire stability of our nation’s financial system. 

The president had the opportunity to address these concerns and work in a bipartisan way to help us change the agency into something that could potentially be accountable to the American taxpayer. And, these are easy fixes. Unfortunately, the Obama administration once again made a political decision, took a left turn, and it is the American public, small businesses, and consumers of financial services who will stand to suffer.

Sen. Orrin Hatch is a Republican from Utah.

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