Tuesday, July 19, 2011

CFPB Director Nomination Hits Strong Opposition in Senate; Legislation Would Change Bureau to Commission Form of Governance

At Senate Banking Committee hearings on consumer financial protection, Senator Jerry Moran (R-Kansas) said that the President’s nomination of Richard Cordray to be the Director of the Bureau of Consumer Financial Protection is DOA in the US Senate. The Committee’s Ranking Member, Senator Richard Shelby (R-ALA) emphasized the May 5 letter to the President signed by 44 Senators stating that the governance structure of the Bureau must be changed to a Commission similar to the SEC and CFTC. Senator Shelby said that the goal is to make the Bureau more accountable to Congress. The Dodd-Frank Act has built a wall around the Bureau with no checks on the authority of the Director and no congressional oversight, emphasized Senator Shelby, and this must be corrected.

Sen. Moran said that he has introduced legislation to reform the structure of the CFPB. The Responsible Consumer Financial Protection Regulations Act of 2011, S. 737, would replace the single CFPB Director with a Senate-confirmed multi-person commission similar to the leadership structure of the SEC, CFTC and FTC. The legislation would also subject the CFPB to the regular appropriations process like most federal agencies. This legislation would essentially codify the May 5 letter. Responding to the assertion that changing the Bureau’s governance structure to a Commission from a Director would weaken the Bureau, Senator Moran said that the Bureau will be an incredibly powerful agency even under a Commission form of governance. He urged people to ask SEC Chair Mary Schapiro and CFTC Chair Gary Gensler if their agencies have been weakened because of a Commission structure.

Senator Shelby said that the key issue is making the Bureau accountable and not to hinder consumer protection efforts. The Moran bill would not impact the Bureau’s substantive authority, but only change its governance and funding structures and make it more accountable to the prudential regulators. Currently, noted Senator Shelby, we have a Bureau with broad authority and unprecedented autonomy headed by a Director with unfettered power. Essentially, Congress delegated its legislative power to the Bureau and then insulated the Bureau from congressional oversight, said
Senator Shelby, and this situation must be corrected. Noting what he called fundamental flaws in the Bureau’s structure, Senator Shelby urged the Senate not to confirm any person to lead the Bureau until structural reforms are accomplished.

The Dodd-Frank Act currently allows the CFPB director to set his or her annual budget by withdrawing funds directly from the Federal Reserve, rather than going through the annual Congressional appropriations process like most independent agencies. Additionally, Dodd-Frank denies the Federal Reserve any authority to deny or adjust the CFPB director’s request. Senator Moran’s legislation would subject the CFPB to the annual appropriations process, authorizing funding levels for FY 2011 and 2012 equal to the president’s estimate of need