The Treasury Department team charged with setting up the Bureau of Consumer Financial Protection may seek public comment on the new agency’s rules before a chairman is installed, according to a letter sent by the inspectors general of the Treasury and the Federal Reserve.
Treasury officials are considering whether to issue “advance notices of proposed rulemaking” to begin gathering input on possible regulations before the agency officially begins its work on July 21, according to a copy of the Jan. 10 letter that was obtained today by Bloomberg News.
The proposals wouldn’t contain substantive rules, but are “means to gathering information and input, before the transfer date,” according to the letter signed by Eric M. Thorson of the Treasury and Elizabeth Coleman of the Fed.
The letter from Thorson and Coleman was a response to Republican Representatives Spencer Bachus and Judy Biggert, who requested “rigorous” oversight of the consumer bureau in a Nov. 22 letter to the two inspectors general. The lawmakers requested a response from the agencies by Jan. 10.
Bachus, the Alabama lawmaker who leads the House Financial Services Committee, has said he will keep close watch on the new agency after he helped lead Republican opposition to it during debate over what became the Dodd-Frank Act.
In a separate letter sent yesterday to Elizabeth Warren, the Obama administration adviser in charge of setting up the consumer agency, Representative Randy Neugebauer requested her help in efforts to change the bureau’s funding mechanism. Neugebauer, a Texas Republican, leads the Financial Services investigations subcommittee.
Dodd-Frank, the financial-regulation overhaul enacted in July, created the consumer bureau and provided for it to be funded from a percentage of the Fed’s budget, as much as $500 million per year. The bureau’s director will determine how much money the agency needs, leaving the rest with the Fed.
The Treasury Department implementation team has made two requests for funding so far, according to the letter -- an initial $18.4 million on Aug. 11 and a supplemental $14.37 million on Dec. 21. It is “very difficult to estimate the total cost of establishing the bureau because that activity will span several years,” according to the response.
The implementation team’s draft budget for fiscal 2011 and 2012 will be included in the Obama administration’s 2012 budget request, according to the letter.
President Barack Obama in September named Warren as a special adviser to Treasury Secretary Timothy F. Geithner and the White House to help set up the bureau. It will be part of the Treasury Department until July, when it begins work as an independent agency housed at the Fed.
Biggert, of Illinois, said the responses given by the Treasury Department to the inspectors general “raise as many questions as they answer.”
“The Treasury made no attempt to provide an estimate about the cost of establishing the Bureau,” Biggert said today in a statement. “The interim leadership also is moving ahead quickly on plans for proposed rulemaking, but has failed to lay any foundation for evaluating the impact its actions will have on the cost of credit for small businesses.”
The Treasury Department has determined that the bureau, which remains without a Senate-confirmed director, could operate with limited legal authority if there is no director named by the time of transfer, according to the 34-page response.
The letter’s analysis of the bureau’s legal authority also makes clear that it will have virtually no sway over non-bank financial firms before it has a director. Regulation and supervision of non-bank firms is a high priority for community banks, whose support Warren has solicited.
Until a director is confirmed by the Senate, the bureau couldn’t determine which companies are subject to supervision or request “limited reports” to help create the definition. Nor could it outline recordkeeping requirements to make supervision possible or examine books of non-bank firms, the letter said.