Potential Financial Services Chairman Wants To Subject Consumer Bureau To Congress’ Funding Whims

Rep. Spencer Bachus (R-AL)

Rep. Spencer Bachus (R-AL), who will be chairing the House Financial Services committee next year if he can withstand a challenge from Rep. Ed Royce (R-CA), is already gearing up to chip away at the Dodd-Frank financial reform law in any way he can, and one of his targets is the newly-created Consumer Financial Protection Bureau.

Republicans on the Financial Services Committee have already called for the Bureau to be defunded. But defunding is only an effective strategy for holding back the agency until July 2011, when the Bureau will begin to receive an independent funding stream from the Federal Reserve. Bachus, though, wants to ensure that the Bureau is in a constant fight for funding by subjecting it to the annual Congressional appropriations process:

House Republicans are interested in more than tinkering. Spencer Bachus of Alabama, a contender to lead the House Financial Services Committee, has said he would seek to subject the newly created Consumer Financial Protection Bureau to the appropriations process. Under the law, its funding would come from Federal Reserve profits each year.

The rationale for giving the Bureau an independent stream of funding is to isolate it from the whims of Congress and to prevent appropriators from pushing a political agenda through the agency by threatening funding cuts. The Federal Reserve and the Securities and Exchange Commission have independent budgets for the same reason.

Of course, there are plenty of other ways in which a regulatory agency can still be kneecapped: when the Bush administration was in power, it simply appointed regulators who didn’t have any interest in actually regulating. Former SEC Chairman Chris Cox is a prime example of this.

But an independent source of funding at least ensures that an agency won’t have to come before Congress begging for dollars and agreeing to whatever policy prescriptions will enable them to keep the lights on. Of course, that’s precisely the point of the House Republicans’ push: if they can’t repeal the creation of the agency outright, they want to render it as toothless as possible, so that Wall Street can continue to dream up new, expensive consumer products free from oversight.