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  • Warren Rebuffed, but Consumer Finance Bureau Still a Threat

    President Obama will bypass Elizabeth Warren to lead the Consumer Financial Protection Bureau (CFPB) and instead nominate former Ohio attorney general Richard Cordray to the post.

    The White House announcement on Sunday ends months of uncertainty about whether the President would accede to the demands of Warren’s steadfast supporters or acquiesce to staunch critics who vowed to block her Senate confirmation. With that matter now settled, public attention—and that of lawmakers, in particular—should focus on fixing the structural flaws that allow the bureau to exercise excessive regulatory powers without adequate accountability.

    The President’s nomination of Cordray comes just three days before the bureau formally launches. But until he or another nominee is actually confirmed, the CFPB is statutorily barred from imposing new regulations. That does not mean the bureau is impotent, however. With hundreds of staff already in place and a budget of $500 million, the CFPB is busily compiling dossiers on most every type of financial firm and preparing enforcement actions under existing laws.

    Warren was the chief architect of the CFPB and has spent the past year preparing for its launch as a “special aide” to the President and the Department of Treasury. Whether she, Cordray, or anyone else is director, the bureau will exert unparalleled powers, including consolidated and expanded regulatory authority over credit cards, mortgages, student loans, savings and checking accounts, and most every other consumer financial product and service. Essentially, all of Americans’ money falls under bureau purview unless it’s under a mattress.

    The bureau’s sweeping powers is hardly the only problem. Because it is ensconced within the Federal Reserve, its budget is not subject to congressional control. Instead, CFPB funding is set by law at a fixed percentage of the Fed’s operating budget. This budgetary independence limits congressional oversight of the agency. The CFPB’s status within the Fed also effectively precludes presidential oversight, while the Federal Reserve is statutorily prohibited from “intervening” in bureau affairs.

    The bureau’s accountability is also minimized by the vague language of its statutory mandate. It is empowered to punish “unfair, deceptive and abusive” business practices. While unfair and deceptive have been defined in other regulatory contexts, the term abusive is largely undefined, granting the CFPB officials inordinate discretion.

    Bureau proponents deny any lack of accountability, claiming the CFPB can be overruled by the Financial Stability Oversight Council, which is composed of representatives from eight other financial regulatory agencies. However, the council’s oversight authority is narrow, confined by statute to cases in which CFPB actions would endanger the “safety and soundness of the United States banking system or the stability of the financial system of the United States.” Any veto of bureau action would also require the approval of two-thirds of the council’s 10-member board.

    Nominating Cordray is the President’s prerogative, and he will surely be properly vetted by the Senate. But absent structural reform of the CFPB, consumers will begin to experience all too soon the consequences of this unchecked regulatory agency: fewer choices among financial products and services and higher costs for those that are available.

    Senate Minority Leader Mitch McConnell (R–KY) and Senator Richard Shelby (R–AL), ranking Republican on the banking committee, have pledged to block any nominee for director until changes are made. It is a promise they should be held to by consumers across the nation.

     

    Posted in Economics [slideshow_deploy]

    10 Responses to Warren Rebuffed, but Consumer Finance Bureau Still a Threat

    1. evan hurrle says:

      Scare Tactics, plain and simple. We have seen what deregulation leads to, Banks have knowingly and willfully acted against the best interest of their customers. Anyone who says that financial regulation is not necessary is lying to themselves. The only alternative that the GOP and organizations like the heritage foundation have offered is complete deregulation. Perhaps if you guys were serious about protecting American Citizens from predatory banking practices you should have come up with some reasonable alternatives, but all you do is posture and complain. I am thankful that congress does not hold the purse strings to the CPFB as no doubt you would attempt to pull funding and render their authority as useless as you could. The only danger to consumers is that they will fail to inform themselves to the facts, otherwise how can one believe the drivel that you continue to put out. The vast majority of American citizens support the CPFB and financial regulation, the only citizens who believe your blatant and continual falsifications run on blind faith alone.

      • Lance says:

        It is interesting that your view on this Evan is so myopic. You seem to be unaware that the tactics the banks engaged in was only made possible by the machinations of Barney Frank, Clinton, and others in the government to promote and even encourage banks to engage in speculative loans to the poor that were highly unlikely to be paid back. All of the predatory banking practices in this area have their source in the governments attempt to engage in social engineering. IE: The poor deserve to have houses cause owning a house is a right. In order to salvage something out of the practice, Fannie Mae and Freddie Mac under the leadership of Barney Frank and others proposed bundling these risky loans in with less risky loans in packages that the banks used previously to raise their holdings and thereby raise their ability to grant credit. That the house of cards fell down isn't surprising. That the solution is to give these same people in the government the ability to more directly manipulate the system for their own purposes isn't. Where was the concern for the consumers when this all started? Where was Barney Frank and others concern for consumers when they were at Fannie Mae and Freddie Mac when the bundles where proposed and legitimized??? Barney Frank and the others proposing this regulation are actually the source of the problem and you think their proposals are also part of the solution. When has that ever worked???

        • Lance says:

          Furthermore, now with this proposed increased regulation on the banks means far more then you think. Where before Barney and others were limited in what changes they could make to promote their agenda of social engineering, now the government will have control. And you think this is good? You think that they will work on behalf of consumers? Certainly the people in the trenches at this new bureau will, but they are not the ones in control. People like Barney Frank and others who knowingly set up the situation are. They enabled it by making the bundles. Make a crisis by changing proven practices…then propose a solution that grants more power to set up more additional opportunities.

          I can't say I think this is going to end well.

    2. evan hurrle says:

      Scare Tactics, plain and simple. We have seen what deregulation leads to, Banks have knowingly and willfully acted against the best interest of their customers. Anyone who says that financial regulation is not necessary is lying to themselves. The only alternative that the GOP and organizations like the heritage foundation have offered is complete deregulation. Perhaps if you guys were serious about protecting American Citizens from predatory banking pratices you should have come up with some reasonable alternatives, but all you do is posture and complain.

    3. evan hurrle says:

      I am thankful that congress does not hold the purse strings to the CPFB as no doubt they would attempt to pull funding and render their authority as useless as you could. The only danger to consumers is that they will fail to inform themselves to the facts, otherwise how can anyone believe the drivel that you continue to put out. The vast majority of American citizens support the CPFB and financial regulation, the only citizens who believe this drivel run on blind faith alone.

      • Bobbie says:

        gee evan, why do you think at one time America was tops in manufacturing? why not now? No more because of government overregulating!!! CPFB is out of control like most government run programs. Everywhere government uses money outside their constitutional authority shouldn't exist and IS corrupt! Why are you satisfied with that? Recipient? Dependent?

        • arewefree says:

          America was tops and strong because we had regulations. After years of trying the Republicans with the help of a few dems managed to get the oil industry deregulated and in short order gas went from $1 to $5. Without regulation corporate greed will destroy this country.

    4. obamaSucks says:

      Deregulation? Are you mad? There is and never has been deregulation – only bad regulation. Bad regulation is what caused our current mess.

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