Policy Intern Cassandra LaRussa wrote this post.
On Wednesday, the House Financial Services Subcommittee on Financial Institutions and Consumer Credit met for a hearing on three pieces of legislation intended to improve accountability and oversight of the nascent Consumer Financial Protection Bureau.
Supporters of the three proposed legislative changes used the current popularity of accountability rhetoric in Washington to their advantage, while opponents accused their rivals of hijacking the language in order to weaken an agency they perceive as a potential threat to the financial industry.
Three witnesses expressed support for the proposed legislation, citing financial industry demands for increased oversight of the CFPB, while a fourth witness’s opposition testimony indicated that the legislation would weaken the independent enforcement powers of the CFPB.
Witnesses in support of the legislation included Michael J. Hunter, Chief Operating Officer of the American Bankers Association, Andrew J. Pincus, partner at Mayer Brown LLP representing the U.S. Chamber of Commerce, and Chris Stinebert, President and Chief Executive Officer of the American Financial Services Association. Arthur E. Wilmarth Jr., professor of law at The George Washington University, opposed two of the three bills discussed.
The “Bureau of Consumer Financial Protection Accountability and Transparency Act of 2011,” H.R. 1355, sponsored by Rep. Randy Neugebauer (R-TX), would move the CFPB from its autonomous position under the Federal Reserve to the Department of the Treasury. This would bring the CFPB into the regular Congressional appropriations process.
Supporters of H.R. 1355 argued that the current lack of CFPB oversight is irresponsible and detrimental to the financial industry, and that increased oversight would be beneficial to both the industry and consumers in the long run. Rep. Francisco Canseco (R-TX) called the CFPB a “rogue agency,” subject to the whim of it’s director, Richard Cordray.
Opponents argued that subjecting the CFPB to the highly political appropriations process would weaken its ability to carry out the mission of protecting American consumers. According to Rep. David Scott (D-GA), the bill would put the CFPB in a “straight-jacket” and give those initially opposed to the agency a way to weaken its ability to act as an independent regulator.
Legislation sponsored by Rep. James B. Renacci (R-OH), H.R. 2081, would amend the Federal Deposit Insurance Act to change the composition of the Board of Directors of the Federal Deposit Insurance Corporation, replacing the director of the CFPB with the chairman of the Federal Reserve System.
Supporters of bill H.R. 2081 argued that the consumer protection mandate of the CFPB conflicts with the industry “safety and soundness” mandate of the FDIC. Rep. Renacci, supported by testimony of Michael Hunter, explained that the chairman of the Federal Reserve is better qualified for the position on the Board of Directors of the FDIC. There is no current requirement that the director of the CFPB have banking experience.
However, Professor Arthur Wilmarth argued that the benefits of the current arrangement outweigh any “perceived conflict of interest,” and that interaction between the CFPB director and the rest of the FDIC Board of Directors is beneficial for both the American consumer and the financial industry.
Also discussed was a bill intended to preserve privilege for information submitted to the CFPB, H.R. 3871, introduced by Rep. Bill Huizenga (R-MI). All four witnesses agreed that this would be a positive change, as it would “close a loophole” and allow the CFPB to pursue more thorough examinations of the financial industry by ensuring that documents remain confidential.
Opponents argue that the bill promotes secrecy and is blatantly contrary to the cause of transparency.