Republican members of the House Financial Services Committee have made a lot of noise about finding ways to defund the Consumer Financial Protection Bureau, the new regulatory agency created as part of the Dodd-Frank financial reform law. Incoming Financial Services Committee Chairman Spencer Bachus (R-AL) has said that he wants to, at the very least, subject the Bureau to the annual Congressional appropriations process (whereas the Dodd-Frank law stipulates that the Bureau receive an independent stream of funding from the Federal Reserve).
And it seems that Bachus has earned at least one ally in the upper chamber — outgoing Sen. Judd Gregg (R-NH):
Republicans will “try to take a look at some of this stuff such as the consumer agency for example, making it at least at a minimum subject to appropriation oversight so it’s not a totally independent relative stream of revenue,” said Sen. Judd Gregg, a retiring New Hampshire Republican who serves on the Banking Committee. Gregg said such a move should be popular since lawmakers would prefer having more oversight power. “It shouldn’t be very difficult at all, because why wouldn’t the Congress want oversight of an agency that important?” he said.
Of course, Congress already does have an oversight function when it comes to the Bureau: it has to confirm the Bureau’s director. Harvard Law Professor Elizabeth Warren — who is currently heading the agency as it gets off the ground, under the umbrella of the Treasury Department — is reportedly searching for the person who will become the first official director, and who will have to come before the Senate.
But oversight is very different from politicizing the agency, which could occur if the Bureau were subjected to the annual appropriations process. The rationale for giving the Bureau an independent stream of funding is 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.
There are plenty of other ways in which a regulatory agency can still be rendered useless: the Bush administration, for instance, simply appointed regulators, like former SEC Chairman Chris Cox, who didn’t have any interest in actually regulating. But an independent source of funding at least ensures that an agency doesn’t have to agree to whatever policy prescriptions will please Congress and enable it to keep the lights on.