Federal Reserve Bank of St. Louis President James Bullard said the funding level for the Consumer Financial Protection Bureau to be housed within the Fed appears arbitrary and not necessarily suited to the agency’s needs.
“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,” Bullard said today at a conference at the St. Louis Fed. “Nor is there any mechanism for changing these amounts going forward.”
President Barack Obama signed into law in July a 2,300-page overhaul of financial regulation that gives the government authority to unwind failing financial firms, imposes new rules on derivatives markets and creates a consumer-protection agency in the Fed to monitor loans and services.
The agency is to be funded and housed within the central bank with an independent leader. Obama has named Harvard law professor Elizabeth Warren an adviser to help shape the new consumer agency.
“The Fed’s only engagement with this independent bureau is to fund it,” Bullard said, according to a press release by the district bank. “The law requires that the equivalent of 10 percent of Federal Reserve System expenses be transferred to the CFPB in 2011, 11 percent in 2012, and 12 percent in 2013, where it will stay fixed in perpetuity.”
“I am concerned about this method of funding for the bureau,” he said.
The law aims to prevent a repeat of an economic collapse that led to the failures of Lehman Brothers Holdings Inc. and Washington Mutual Inc. and a $700 billion bailout for companies including Citigroup Inc.
Bullard didn’t comment on the economic outlook or monetary policy in his remarks.