During his testimony before the House Financial Services Committee on Wednesday, U.S. Treasury Secretary Timothy Geithner assured lawmakers that President Barack Obama would nominate a director to head the new Consumer Financial Protection Bureau (CFPB) and would not circumvent a Senate confirmation for that post. This means that Elizabeth Warren, even though she was recently appointed the Assistant to the President and Special Advisor to the Secretary of the Treasury on the CFPB, would have to be confirmed by the Senate if she was nominated.
Geithner was testifying before the Committee regarding international regulatory issues relevant to the implementation of the Dodd-Frank Act. During questioning, Rep. Spencer Bachus, R-Ala., ranking GOP member on the Committee, told Geithner that he believed the CFPB is the “most powerful agency to be formed in the last 30 years” because it has been given the authority to allocate credit and set fees. He asked Geithner point blank whether Obama would circumvent a Senate confirmation to appoint a CFPB chief, and whether Warren would be given executive privilege and therefore not have to testify before Congress.
Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, added that while he supported Warren in her new post, he, too, “would be very unhappy if there were any obstacles to Warren testifying” before Congress.
Geithner replied that the President would not circumvent a Senate confirmation, and would nominate a director for the CFPB. He added: “It is my expectation that she [Warren] would be happy to testify as to her duties at the Treasury” on the initial design of the agency.
Geithner also highlighted the importance of the Basel III agreements that were reached by the Federal Reserve, the OCC and the FDIC with their principal foreign counterparts to “substantially increase” the capital levels that major banks would be required to hold. “The new standards are designed to ensure that major banks hold enough capital to withstand losses as large as what we saw in the depths of this recession and still have the ability to operate without turning to the taxpayer for extraordinary help,” Geithner said.
By forcing financial institutions to hold more capital, he continued, “we will both constrain excessive risk-taking and strengthen banks’ abilities to absorb losses. This agreement is designed to allow banks to meet these more stringent standards gradually over time, so that they can continue to perform their essential function of providing credit to households and businesses.”
These standards, Geithner says, “will help establish a more level playing field around the world. By moving quickly to recapitalize our financial system, we have been in a strong position to insist on tough standards abroad.”
The capital agreement that was just reached, “and other so-called Basel III proposals, must be fully implemented through national regulations by the end of 2012,” he said. “The United States is committed to meeting these deadlines.”