The Bureau Was Specifically Designed To Be an Independent Financial Regulator So That Compromised Politicians Wouldn’t Be Able to Stop Its Consumer Protection Mission
WASHINGTON, D.C. – Today, the Appropriations Subcommittee of the powerful House Financial Services Committee will be voting on the FY19 Treasury appropriations bill which includes a provision that seeks to hobble the Consumer Financial Protection Bureau’s (CFPB) ability to protect consumers and hold Wall Street special interests accountable. Specifically, the legislation would subject the bureau’s funding to Congressional appropriations thus destroying its budgetary independence, a key element of its financial and regulatory strength.
Under its current structure, the CFPB’s funding comes from profits of the Federal Reserve, not tax dollars. In fact, the bureau has returned nearly $12 billion to more than 29 million Americans directly from financial institutions that have screwed them over. If the bureau’s funding is relegated to the politically-charged Congress, wealthy corporate lobbyists will be able to sabotage the CFPB’s independence and ability to protect vulnerable members of the military, senior citizens, college students, and other consumers.
“The clear mission of the CFPB is to act in the public interest. How in the world can it fulfill that mission if Wall Street lobbyists are able to cajole Congress into cutting the funding it needs to enforce the law and protect consumers?” asked Karl Frisch, executive director of Allied Progress.
He continued, “The CFPB does not use our tax dollars. In fact, it has returned billions of dollars to tens of millions of Americans from the very big banks, predatory lenders, and other financial bad actors that have screwed them over. If Congress gets in the way of that, consumers won’t have anyone fighting these powerful special interests on their behalf.”
What You Need To Know
- The CFPB’s budgetary independence is a key element of its financial regulatory independence. The CFPB’s “budgetary independence…allows the CFPB to be on par with other financial regulators” with independent funding. That independence is “a key element of financial regulatory independence, providing additional freedom to make difficult regulatory decisions.” Fannie Mae and Freddie Mac were less stringently regulated in part because of Congressional pressure on their regulator. [Aaron Klein, “Why the CFPB showdown threatens the independence of financial regulators,“Brookings, 11/28/17]
- Under current law, the Bureau is funded by the self-financed Federal Reserve. “Republicans have cast the project as a misuse of public dollars in a time of tight budgets. ‘The CFPB is funded by the Federal Reserve, which happens to be taxpayer money,’ Hensarling said in a February speech that denounced the renovation. But the Federal Reserve is self-financed, largely with income on securities such as government bonds, so the amount Congress needs to set aside for the office redo is precisely zero.” [Karen Weise, “Republican Attacks on a CFPB Office Renovation Don’t Add Up,” Bloomberg, 07/10/14]
- Giving Congress total control of the CFPB’s funding would “sabotage the CFPB’s independence.” As the National Association of Consumer Advocates noted, giving Congress total control of the CFPB’s funding would “relegate it to the politically charged, corporate lobbyist-influenced congressional appropriations process” and would “sabotage the CFPB’s independence.” Additionally, “The CFPB needs the independence that Federal Reserve funding provides to pursue its public-interest mission to protect the financial markets and its participants. Its independence is critical because the CFPB’s mission and goals often diverge from the rich, politically powerful financial industry interests it oversees.” [Christine Hines, “Congress should not hold CFPB hostage in budget talks,” American Banker, 01/25/18]
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