Elizabeth Warren, chief architect of the Consumer Financial Protection Bureau (CFPB), faced both praise and skepticism from lawmakers about the agency she is constructing during a Wednesday hearing held by the House Financial Services Subcommittee on Financial Institutions and Consumer Credit.
Rep. Spencer Bachus (left), R-Ala., chairman of the House Financial Services Committee, and one of the CFPB’s biggest opponents, said to Warren at the hearing that while “no one questions your commitment to consumer protection,” the CFPB will “make the decision when consumers are protected and when they are not.” Bachus went on to say, once again, that the CFPB is “the most powerful agency in Washington” as it will be allowed to “regulate all consumer financial products and services,” and that the “definition of financial product or service will be defined by whoever is heading the agency.”
Besides mainly Republican lawmakers' worries that the CFPB's mission to protect consumers could trump safety and soundness concerns for financial services firms, they also want to rein in how the CFPB will be funded.
Rep. Ed Royce, R-Calif., argued that the CFPB, which was created under Dodd-Frank, “will be able to act outside the normal appropriations process” as neither the Fed nor Congress will have a say on the agency’s budget, which means the agency “will not be held accountable” for its actions. Congress tried this appropriations model with the government sponsored enterprises (GSEs), Fannie Mae and Freddie Mac, Royce said. “It did not work.”
But Warren (left) countered that in terms of accountability, “Let me remind you of the [agency’s] structure: it is the only agency in all of government whose rules can be overruled, negated by other agencies,” she said. Under Dodd-Frank, “other agencies can come in under the Financial Stability Oversight Council and say, ‘We don’t like that rule.’” The CFPB, she continued, “should have the same independence” as the banking regulators that are funded outside of the political process.
Lawmakers also questioned the merit of one director to lead the CFPB, as opposed to a five-member board. But Warren said she believed Congress “made the right choice” in having one director head the CFPB. As to when a director would officially be named to head the agency come July, Warren said: “I understand there will be a nomination soon.”