Tuesday, February 15, 2011

Prof. Warren Opposes Placing Bureau of Consumer Financial Protection under Congressional Appropriations Process

The new Bureau of Consumer Financial Protection should not be deprived of the dedicated funding from the Fed as provided by the Dodd-Frank Act, emphasized Professor Elizabeth Warren. In remarks at the Consumers Union, she said that the effort to chip away at the Bureau’s independence by subjecting it entirely to Congressional appropriations is coming from the same people and groups who opposed the very creation of the Bureau. Ms. Warren is currently Assistant to the President and Special Adviser to the Treasury Secretary.

Legislation (HR 557) amending Dodd-Frank to move the Bureau into the Department of the Treasury has been introduced by Rep. Randy Neugebauer (R-TX), Chairman of the Oversight and Investigation Subcommittee of the House Financial Services Committee. According to the Chairman, Dodd-Frank placed the Bureau within the purview of the Federal Reserve Board without any Congressional oversight or financial accountability guiding the Bureau’s actions. Given the significant and perhaps over-regulating powers the Bureau has been given, the Chairman believes that it is imperative that Congress have a say on the appropriation of money funding the Bureau’s operation

Politicizing the funding of the regulation of financial institutions would be a dangerous precedent, Professor Warren noted, and would deprive the CFPB of the predictable funding it will need to examine large and powerful banks consistently and to provide a level playing field with their nonbank competitors. While the banking regulators charged with preserving the safety and soundness of financial institutions and ensuring consumer protection compliance by smaller banks would continue to receive independent funding, she said, the agency in the financial regulatory system with lead responsibility for protecting consumers would face a different set of rules that threaten its independence.

The special adviser also noted that over the past six months the Bureau has been hard at work setting initial priorities, building infrastructure, and engaging with the public and various stakeholders. The Bureau wants transparency on price and risks so that consumers can see what is being offered and decide what products are best for them. While the Bureau wants to see innovations, she observed, the innovations must be linked to real product differences that consumers can see and understand and not around misleading advertising and new tricks buried in the fine print. The Bureau’s goal is for the credit market to work better for consumers, for responsible providers, and for the whole economy.