In a statement on the Senate floor opposing a procedural motion regarding the nomination of Richard Cordray to lead the Bureau of Consumer Financial Protection, Senator Richard Shelby (R-ALA) reiterated his opposition to a single Director for the Bureau and called for structural changes to the Bureau to increase its transparency and accountability. At the same time, the House Financial Services Committee released a timeline of the Dodd-Frank Wall Street Reform and Consumer Protection Act showing that, at various stages, the legislation mandated a five-member commission for the Bureau rather than a single Director. Senator Shelby is the Ranking Member on the Senate Banking Committee and a former Chair of the Committee.
Echoing House-passed legislation restructuring the Bureau, Senator Shelby outlined three major structural changes to the Bureau. First, the Bureau should be led by a Board of Directors. Second, the Bureau’s funding should be subject to Congressional appropriations. Currently, the Federal Reserve is required to transfer up to $600 million to the Bureau each year. According to the Ranking Member, diverting this money to fund an unaccountable federal agency sets a dangerous precedent of using the Federal Reserve as an off-budget mechanism for funding programs. In his view, the fiscally-responsible way to fund the Bureau is through the Congressional appropriations process just like every other consumer protection agency is funded.
The third reform is to create an effective safety and soundness check for the prudential bank regulators. Senator Shelby rejected the notion that the Bureau already has a check under the Financial Stability Oversight Council veto. It takes an affirmative vote of at least 2/3 of the Council’s members to set aside one of the Bureau’s rules and the Bureau’s Director is a voting member, he pointed out, adding that the Council can only overturn a Bureau regulation in the extremely rare case that the regulation puts at risk the safety and soundness of the entire U.S. banking system or the stability of the U.S. financial system. Under this construct, reasoned Senator Shelby, a regulation could cause the failure of multiple banks, but the Council still would not have standing to alter it.
The Financial Services Committee timeline reveals that when the House of Representatives passed the Wall Street Reform and Consumer Protection Act (H.R. 4173) on December 11, 2009, the final version of the bill mandated a five-member commission for the Bureau that which would come into existence after the completion of an interim Director’s 30 month term. In addition, a discussion draft of Wall Street reform legislation released a month earlier by Senator Chris Dodd (D-CN), Banking Committee Chair, includesd a five-member Board of Directors for the CFPB.