Republicans on the House Financial Services Committee have already made it quite clear that they intend to attempt to defund the newly created Consumer Financial Protection Bureau if the GOP gains control of the lower chamber. Rep. Jeb Hensarling (R-TX), one of the top Republicans on the committee, has explicitly announced his intention to defund the agency, as he believes it “assaults the liberties of the consumer.”
But denying the CFPB funds may not be the only way in which Republicans look to kneecap the new agency. Rep. Ed Royce (R-TX), who has been floated as a possible challenger to Rep. Spencer Bachus (R-AL) for the Financial Services chairmanship, told American Banker that he also wants to give bank regulators direct veto power over the CFPB’s rulemaking:
“If the Consumer Financial Protection Bureau can trump the safety and soundness regulator, you run the risk of creating the same type of environment that was created with the government-sponsored enterprises in which you created moral hazard in the system,” he said. “We need to address giving the regulators for safety and soundness the ability to trump the actions on consumer protection if they threaten safety and soundness. Safety and soundness has to be our fundamental concern.“
This “safety and soundness” talking point was constantly employed by Republicans during the debate over financial regulatory reform, showing that they care more about a bank’s ability to make a profit than the government’s responsibility to protect consumers from financial shenanigans. And Royce is evidently not ready to give it up.
But the CFPB is already subject to veto by the bank regulators. A two-thirds vote of the Financial Stability Oversight Council — a nine member board composed of the heads of the bank regulators, the Treasury Secretary, and an “insurance expert” — can nullify any CFPB regulation.
Is Royce suggesting that the individual bank regulators have veto power over rules that affect the insitutions that they regulate? If so, such a move would be incredibly destructive, as those agencies have already shown that they are easily co-opted by the firms they oversee. The entire point of creating the CFPB was to level the playing field a bit between the banks and consumers. Giving the bank regulators a straight veto would effectively put the consumer protection system right back where it was before the Dodd-Frank financial reform bill passed.
In an interview with National Journal, CFPB head Elizabeth Warren said that the agency will be bolstered by crowd-sourcing, collecting stories from the public’s interactions with the financial system. Evidently Royce wants the crowd to be composed solely of bankers.