[This story previously appeared in Securities Regulation Daily.]
By Mark S. Nelson, J.D.
House Financial Services Committee Chairman, Jeb Hensarling (R-Tex.), gave a speech yesterday at The Allan P. Kirby, Jr. Center for Constitutional Studies and Citizenship at Hillsdale College in which he reiterated his worries about the growth of federal regulatory agencies’ power generally, and the emergence of new, less transparent financial regulators. Chairman Hensarling’s remarks singled-out the Financial Stability Oversight Council (FSOC) and the Consumer Financial Protection Bureau (CFPB), both Dodd-Frank Act creations, for his strongest criticism.
Chairman Hensarling called the FSOC the “least transparent” of federal agencies that is not among those handling national security or defense matters. Hensarling said he is concerned about the opaque nature of the FSOC’s mostly closed-door meetings and the potential breadth of its recommendations.
The chairman also said he views the Dodd-Frank Act’s reply to the 2008 financial crisis as moving too far to limit risk. Instead, Hensarling says the government should be promoting entrepreneurial risk-taking.
Said Hensarling: “The raison d’etre of the Dodd-Frank Act was the risk of the ‘shadow banking system.’ Yet a far greater danger is instead posed by the ‘shadow regulatory system.’”
As for the CFPB, the chairman said its “Orwellian” name suggests its wide reach. “Arguably, the Bureau is the single most powerful and least accountable federal agency in our nation’s history,” said Hensarling. He noted the CFPB has one appointed director who lacks accountability to the president or to Congress because he can be removed only for cause, and the CFPB skirts the congressional appropriations process. He also noted that the CFPB by law gets deference from courts.
Chairman Hensarling also said the CFPB is now engaged in a broad effort to gather financial data on consumers. The chairman likened this effort to the recently revealed surveillance efforts of the National Security Agency.
The chairman urged passage of the REINS Act, more aggressive use of the congressional budget process, and renewed efforts to expand federalism via use of the Tenth Amendment.