Consumer Law

The Worst Thing About the CFPB

By Jeff Sovern

by Jeff Sovern

Peter J. Wallison of the American Enterprise Institute has written a paper, Will (Should) Dodd-Frank Survive?  Here's part of what he says about the Consumer Financial Protection Bureau:

The worst thing about [the CFPB] is that it will operate independently, without any control by the Fed, Congress, or the president.

Let's break that into parts.  The Fed is itself an independent agency.  So independent, in fact, that some supporters of the first President Bush believe that the Fed's refusal to loosen monetary policy cost him his bid for re-election, and more recently, critics of the Fed have complained that it's too independent and needs to be reined in. So Wallison argues that one problem with the CFPB is that it's so independent it can't be controlled--by another independent agency. 

?Now let's look at Congress.  As we have noted in previous postings, the House of Representatives has voted to cut the CFPB's budget.  Oh, and the House Financial Services Committee has already held a hearing into the functioning of the Bureau and Elizabeth Warren.  And that's before the Bureau is even up and running!  Congress also has the power to overturn Bureau decisions through the legislative process.  So much for lack of control by Congress. 

?As for the President, well, the President gets to appoint the Director of the CFPB.  And if the Bureau attempts to promulgate rules the President doesn't like, the Financial Stability Oversight Council, which includes other presidential appointees, can overrule the Bureau. 

?The Bureau will have considerable independence, just as the Office of the Comptroller of the Currency did when it acted to preempt state predatory lending laws.  We may some day regret that.  But if this is the worst thing about the Bureau, the country is going to be in good shape in consumer protection.  And maybe critics of the agency should move on to a different agency.

Full post as published by CL&P Blog on March 29, 2011 (boomark / email).