One measure proposed by panel chairman Spencer Bachus, R.-Ala., a longtime ally of Wall Street, would replace the bureau's single director with a five-person bipartisan commission. The others would make it easier for other financial regulators to override the CFPB's rules; delay when the bureau can begin regulating banks; and block it from working until the Senate has confirmed a director.
The goal isn't only to destroy the CFPB's independence -- it's to subordinate the bureau's mission of protecting consumers from financial abuse to other financial regulators' mandate to ensure that banks stay profitable. These are very different objectives. For instance, preventing a financial crisis might occasionally require telling banks that they can't peddle millions of crummy loans, CDOs and other products even if they are making money for the moment. This is not something banking agencies have excelled at over the years.
Georgetown University law professor Adam Levitin, who testified at the hearing, remarked on the irony of Republicans wanting to run the CFPB by commission, noting wryly that this is exactly the kind of "bloated, big government structure favored by Progressives and New Dealers."
By contrast, a single agency head can move more decisively and is easier to hold accountable. That's because a CFPB director who overstepped her authority or failed to protect consumers would find it harder to deflect blame. Levitin also said the bureau will have more constraints on its power than any other federal agency, adding:
When viewed against this backdrop of multiple safeguards against arbitrary and capricious agency action, it becomes apparent that changing the CFPB from a unitary directorship to a five-member panel would add little. Instead, switching to a five-member panel would tilt the balance at the agency to gridlock and inaction, would add unnecessary big government bloat, and would reduce accountability.Countervailing force
Another reason we need a strong, independent commission is to counter the OCC -- the Office of the Comptroller of the Currency, for those playing along at home. The lead regulator for national banks -- which is led by a single director -- has consistently sided with the banks over the years and generally done a terrible job of looking out for the interests of consumers. Said Levitin:
The overpowering logic for creating a CFPB was that a counterweight was necessary to the OCC in order to protect consumers' interests; the OCC has amply proven that when tasked with both bank safety-and-soundness -- that is profitability -- and consumer protection, it will always favor banks over consumers. If CFPB is to be an effective counterweight to the OCC, it needs a parallel structure that will allow it to act quickly and forcefully when necessary. The CFPB's current single-director structure is necessary to ensure that it can protect the interests of consumers and the overall economy.Even if Republicans succeed in throwing a rope around the CFPB in the House, they're likely to fail in the Senate, where Banking Committee chairman Tim Johnson, D-S.D., has said he opposes the Bachus bill.
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