U.S. Republican lawmakers are stepping up efforts to restructure the Consumer Financial Protection Bureau, with a key senator declaring a nomination for the agency’s top job “dead on arrival.”
House and Senate members pressed President Barack Obama today to revise the leadership and oversight of the bureau, which he touted as a top achievement of the Dodd-Frank Act. The Republican-led House is set to pass legislation restricting the bureau’s powers, and senators have threatened to block action on Obama’s director nominee until changes are made.
“It is unclear why the centerpiece of the president’s financial reform package has taken so long to materialize, but what is clear is that this nomination is dead on arrival because it does nothing to increase accountability or shed light on the operations of the CFPB,” Senator Jerry Moran said today at a Banking Committee hearing on consumer protection, referring to Obama’s selection of Richard Cordray to serve as the bureau’s director.
Moran, a Kansas Republican who is sponsoring legislation to restructure the bureau, is one of 44 Republicans who signed onto a May letter vowing to block any nominee for the post until the agency is restructured. Cordray, the former Ohio attorney general who is serving as the consumer bureau’s enforcement chief, was nominated yesterday.
Obama signed the Dodd-Frank Act into law last year, in the wake of an economic crisis that lawmakers and regulators said was fueled by predatory lending by financial companies. Under the law, the bureau -- organized and stood up by Harvard Law School Professor Elizabeth Warren -- becomes independent on July 21 of this year.
‘Undermining This Cornerstone’
Senate Banking Committee Chairman Tim Johnson, who has defended the bureau amid Republican criticism of its budget and structure, said today that “undermining this cornerstone of the Wall Street Reform law would be irresponsible.”
Johnson, a South Dakota Democrat who will shepherd Cordray’s nomination through the confirmation process, faces an uphill climb because of rules that will likely require him to secure 60 votes in the 100-member Senate.
House and Senate Republicans have pushed for legislative changes that would place the bureau under the congressional appropriations process and replace the director position with a five-member board. Lawmakers in both chambers have introduced bills to make the changes and the House is scheduled to vote on the legislation this week.
Oversight, Not ‘De-Fanging’
House Financial Services Committee Chairman Spencer Bachus, the sponsor of the bill to replace the director with a commission, said today that the issue was one of oversight, not one of “de-fanging or gutting the agency.”
“Is payback a proper function of legislation?” Bachus, an Alabama Republican, asked a group of reporters today in Washington. “Consumers were abused by financial institutions in a number of ways, but is it proper to undermine the safety and soundness of financial institutions, or is it proper to find a middle ground where consumers are protected in a way that’s not inconsistent with safety and soundness?”
Representatives Shelley Moore Capito of West Virginia and Sean Duffy of Wisconsin will join Bachus with bills on the floor this week.
Capito, who leads a Financial Services subcommittee, has a measure that would postpone the transfer of consumer-protection authority from banking regulators until a director is confirmed. Duffy’s bill would lower the threshold for the Financial Stability Oversight Council to veto rules proposed by the consumer bureau.
Safe and Sound
“We want to protect our consumers, but we also want an industry that’s safe and sound,” Duffy said. “In the end, if we don’t have a safe-and-sound financial industry, it’s the consumers who are going to get hurt.”
Senator Richard Shelby of Alabama, the Banking Committee’s senior Republican, called the new bureau’s current structure “one of the most serious flaws in the Dodd-Frank Act.”
“The issue is whether the bureau is sufficiently accountable to the American people,” Shelby, who opposed Dodd-Frank, said today. “I and 43 of my colleagues believe that it is not.”
Warren organized the bureau while serving as an adviser to Obama and Treasury Secretary Timothy F. Geithner. When it begins operations, the CFPB will be an independent bureau within the Federal Reserve.