In his press conference today, the President spoke primarily about what we can do to create jobs and boost the economy right now, but he also took some time to discuss his efforts to fix the problems in our financial sector that precipitated this economic downturn:
And what we’ve seen over the last year is not only did the financial sector -- with the Republican Party in Congress -- fight us every inch of the way, but now you’ve got these same folks suggesting that we should roll back all those reforms and go back to the way it was before the crisis.
As he also explained, his nominee to be the first head of the Consumer Financial Protection Bureau, former Ohio Treasurer and Attorney General Rich Cordray, is being blocked from office, noting that “Republicans have threatened not to confirm him not because of anything he’s done, but because they want to roll back the whole notion of having a consumer watchdog.”
Not surprisingly, those Republicans in Congress have looked for any excuse to avoid admitting that they are seeking to weaken these consumer protections – here are the facts behind their attacks on this important new watchdog for consumers:
Fiction: The CFPB is not accountable to Congress or the American public.
Fact: The CFPB is subject to oversight and constraints, including new constraints that do not apply to any other federal banking regulator.
- FSOC Veto: The Financial Stability Oversight Council (FSOC) may, at the request of a member agency, review regulations issued by the CFPB and, in some cases, even reject the consumer bureau’s regulations – this FSOC authority applies only to the CFPB’s regulations and not those of any other banking regulator.
- Capped Funding: The CFPB is the only banking regulator with a cap on its independent funding. For additional funding, the CFPB must request an appropriation from Congress rather than levy fees on banks, as the other banking regulators may do.
- Small Business Cost Assessment: For each rule, the CFPB is the only financial regulator that must assess possible increases in the cost of credit for small businesses and consider alternatives that could minimize those costs.
- Small Business Panels: The CFPB is the only federal banking regulator required to obtain extensive feedback from small businesses on certain rules that will significantly impact them before even proposing the rule.
Fiction: Subjecting the CFPB to the appropriations process will make the agency more accountable.
Fact: All federal banking agencies are funded independently, outside of the appropriations process.
Congress has consistently provided for independent funding for banking regulators to allow for long-term planning and to ensure that banks are examined regularly, thoroughly, and in a manner that is insulated from political influence.
- Banking supervisors cannot do their job if they are worried that their next examination report will lead to political retribution and funding losses.
- As numerous Republicans and Democrats have noted, moving Fannie Mae’s and Freddie Mac’s regulator into the appropriations process crippled its ability to make politically difficult yet necessary decisions, which contributed to their failure when the financial crisis hit.
Fact: The CFPB is the only banking regulator with a statutory cap on its primary source of independent funding.
- Whereas other banking regulators can raise more money independently, the CFPB has to seek additional funding through the appropriations process.
Fiction: the government is spending too much money on Consumer Protection
Fact: It would take nearly 15 years of operation for CFPB to spend as much money as it cost the government to resolve IndyMac – a single institution that failed during the financial crisis of 2008.
Fiction: Congress has no meaningful oversight over the CFPB.
Fact: Congress has ample oversight through hearings, reports, and audits that are required by law.
- The CFPB must submit annual financial reports and semi-annual budget justifications to Congress, report before the relevant House and Senate committees at least twice a year, and receive a yearly Government Accountability Office audit.
- Congress may also overturn any CFPB regulation through legislation if it disagrees with the CFPB’s judgment.
- An independent Inspector General reviews the CFPB’s activities and informs Congress and the public about the CFPB’s programs and activities.
Fiction: Regulators have no ability to prevent CFPB mandates that threaten the financial health of banks.
Fact: Other banking regulators possess multiple checks over the CFPB.
- Unlike any other financial regulator, CFPB’s rules are subject to review and rejection by the FSOC on grounds that they threaten the safety and soundness or stability of the U.S. financial system.
- Before issuing the report of an examination of a depository institution, the CFPB is required to share a draft of its report with the prudential regulator and take into account any comments received from the prudential regulator.
- For rules that the CFPB writes under consumer financial laws, the CFPB must consult with the appropriate federal banking regulators and respond to any written objections they raise.
Fiction: The CFPB’s structure provides the CFPB’s Director with unprecedented power.
Fact: The CFPB is led by an individual, just as the OCC has been for more than 100 years.
- The OCC, the agency charged with overseeing the safety and soundness of national banks, is led by a single Comptroller.
Fiction: There are no effective checks and balances against the CFPB Director’s power.
Fact: There are a number of checks and balances on the CFPB’s Director.
- The Director is subject to congressional oversight and required to testify at least twice annually.
- CFPB’s regulations are subject to FSOC review (as described above).
- CFPB’s regulatory actions can be overturned by Congress or judicial review.