House to Vote this Week to Make CFPB Less Effective

by Jeff Sovern

Housing Wire reports in Congressional Republicans mull bill to add CFPB oversight, that the House will vote this week on a bill to replace the CFPB's director with a commission and subject it to the congressional appropriation process.  The bill is not expected to receive a warm welcome in the Senate or at the White House.  Though the bill is described as increasing accountabilty for the Bureau, the effect of the changes would be to reduce the Bureau's ability to protect consumers.  For example, while the proposal to subject the Bureau to the appropriations process sounds unobjectionable, when Fannie and Freddie Mac's regulator were subject to that system, the regulator ended up toothless and unable to prevent the conduct that led to the GSEs needing gigantic bailouts.  Ultimately, the regulator was replaced, as we have previously discussed.   And commission structures, which often require that different commissioners be of different parties, frequently produce deadlocks. Would the CFPB commissioners include bank lobbyists, just as the OCC was formerly led by a bank lobbyist, who sued states to block them from stopping predatory lending (see here)? If so, how much protection would the Bureau provide consumers?

Here is how House Financial Services Chair Jeb Hensarling is quoted in the article as justifying the bill:

“These are modest, common-sense reforms that bring a modicum of accountability and transparency to the CFPB. We know that this is an agency that was designed to be unique, if not perhaps rogue; it is an agency like no other. Arguably it is the single most powerful and least accountable Federal agency in the history of our nation and thus demands rigorous oversight. The American people deserve better,” said House Financial Services Committee Chairman Jeb Hensarling, R-Texas.

“They now have witnessed a failed stimulus plan, trillions of dollars of unsustainable debt… revelations of NSA domestic data collection and a broken promise of ‘if you like your health insurance, you can keep it.’ The American people rightfully demand accountability from this administration, and H.R. 3193 is a step in the right direction,” Hensarling said.

Of course, the items he mentions in the second paragraph have nothing to do with the Bureau or financial regulation and some are inaccurate. As for the first paragraph,the Bureau has less independence than the OCC. It is interesting that Representative Hensarling fails to note that the CFPB was designed to prevent future Great Recessions. If we are worried about rogues, perhaps we should worry about those who destroyed the country's economy more than about those who are merely protecting consumers.  And speaking of rogues, I wonder how Mr. Hensarling feels about Sarah Palin, a self-described rogue.