Post Warren, the Battle Over the CFPB is Far From Over

H.R. 1315

This bill would increase the power of the Financial Stability Oversight Panel to overrule decisions by the Consumer Financial Protection Bureau. The panel, which consists of the leaders of regulatory bodies including the Securities and Exchange Commission and the Federal Deposit Insurance Corp., was created by the Dodd-Frank Act to monitor the financial services industry for risky trends that could endanger the broader economy. It is specifically empowered to look over the bureau’s shoulder, and make sure that any of the bureau’s decisions regarding consumer protection do not endanger the safety and soundness of systemically important financial institutions or the economy as a whole.

“The consumer agency is the only agency that is subject to a veto by other agencies,” Warren told the House Committee on Oversight and Government Reform last week.

But according to Republicans, the panel is more of a straw man than an actual check on the bureau’s power. That’s because its five-member board must obtain a supermajority before it can actually reverse any of the bureau’s decisions. H.R. 1315 changes that requirement to a simple majority. That’s important, Republicans believe, because the bureau is the only regulator focused on consumer protection.

That narrow focus could prevent it from understanding the broader economic impacts of its decisions, Clarke says. In reality, its check on the bureau’s power may be quite modest.

“It is a constraint, but I think its more theoretical,” says Donald Lamson, who spent 30 years as a bank regulator with the Office of the Comptroller of the Currency, and helped the Treasury department draft its proposal regarding the creation of the bureau. “It provides an incentive for members to provide informal comments and to be collegial.”

Critics say the proposal could significantly weaken the bureau because it gives final authority over consumer protection rules to agencies that failed to protect consumers during the housing bubble and crash.

“We need the CFPB because the current bank regulators never did their consumer protection job,” Mierzwinski says.

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HR 1667

This bill would prevent the Consumer Financial Protection Bureau from becoming operational until it has a Senate-confirmed director in place. Of all the bills introduced, H.R. 1667 best demonstrates Republicans’ efforts to limit the power of the new bureau because if successful, it would place the bureau in a double blind.

The bill bans the bureau from assuming power until a director is approved by the Senate. Simultaneously, Republicans also have vowed to block any nominee to lead any executive agency unless the administration agrees to change the bureau’s leadership structure and get rid of the director’s position altogether.

Which leads to an interesting theoretical question. If HR 1667 were to pass, and the administration caves to Republicans’ demands to change the CFPB’s structure, could the bureau ever legally assume power, since in that case, a director would never be confirmed to a job that doesn’t exist?

Some consumer advocates say that’s exactly the desired effect.

“The folks who are supporting these bills are straightforward about the fact that they want to kill this bureau,” says Lisa Donner, executive director of Americans for Financial Reform. “Separately and combined these are efforts to do that. ”

Supporters of the bill say they’re just trying to promote transparency.

“Allowing the new Bureau to come into existence without a confirmed director in place would open the door to confusion and uncertainty about the focus and direction of the bureau,” Berger wrote in a letter to members of the House Committee on Financial Services.

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