A House Financial Services Subcommittee yesterday approved three bills that would change the structure of the newly-created Consumer Financial Protection Bureau in such a way that its independence — a key feature — would be undermined. Republicans claim that these bills are necessary to reduce the Bureau’s power, even though the Bureau can already be overruled by a two-thirds vote of the Financial Stability Oversight Council (a panel of regulators charged with policing systemic risk in the financial system).

The three separate measures would, respectively: replace the Bureau’s director with a five-member commission; make it easier for bank regulators to veto the Bureau’s rules; and delay the date on which the Bureau officially stands on its own (currently July 21). The second, sponsored by Rep. Sean Duffy (R-WI) and co-sponsored by House Financial Services Chairman Spencer Bachus (R-AL) and Rep. Shelley Moore Capito (R-WV), would lower the threshold for the FSOC to veto a Bureau rule from a two-thirds vote to a simple majority vote, and remove the CPFB director from his/her seat on the FSOC.

This is a move backed by, among others, the American Bankers Association, which donated $10,000 to all three of the GOP sponsors during the 2010 election campaign. In fact, all three of the Republican sponsors of this bill received significant amounts of money from the financial services industry during the 2010 election cycle*:

REP. SPENCER BACHUS (R-AL): Bachus received nearly $400,000 from the finance industry (including commercial banks, securities firms, and investment banks), including $10,400 from Goldman Sachs, and $10,000 each from the American Bankers Association, Bank of America, Wells Fargo, and Morgan Stanley.

REP. SHELLEY MOORE CAPITO (R-WV): Capito received nearly $118,000 from the finance industry, including $10,250 from JP Morgan Chase, $10,000 each from the American Bankers Association and Goldman Sachs, and $5,000 each from Bank of America and Citigroup.

REP. SEAN DUFFY (R-WI): Duffy received nearly $110,000 from the finance industry, including $10,000 from the American Bankers Association, $5,250 from JP Morgan Chase, and $3,000 from the Financial Services Roundtable.

All told, Republican members of just the subcommittee that advanced these bills yesterday received $1.6 million from the finance industry during the 2010 election cycle.

Bachus said back in December that Congress’ role is to “serve the banks.” His committee has certainly taken that to heart with its action today to kneecap the one agency within the financial regulatory system explicitly tasked with protecting consumers from the financial industry’s excess.

*Totals compiled by ThinkProgress from data from the Center for Responsive Politics.

House Financial Services Chairman Spencer Bachus explained back in December that he believes the role of Congress is “to serve the banks.” During his tenure, he has certainly followed through on that philosophy, proposing several pieces of legislation that would roll back key parts of the Dodd-Frank financial reform law.

One of Bachus’ top targets has been the newly-created Consumer Financial Protection Bureau (CFPB), the agency meant to enforce consumer protection in the financial services market (which no agency before now was solely tasked with). Bachus has introduced a bill that would change the structure of the agency from one with a director to one with a five-person board.

He has insisted that this is out of legitimate concern that the agency is too powerful, and not part of the Republican campaign to prevent Harvard Law professor Elizabeth Warren from taking the reins at the agency. (Warren is currently setting up the agency as an Assistant to the President.) “This is not about Elizabeth Warren,” Bachus insisted early last month. However, yesterday, during a speech before the Independent Community Bankers of America, a trade group, Bachus added a line to his pronouncement:

Bachus introduced a bill in March that would replace the post of director with a five-member bipartisan commission, saying the structure imposed by Dodd-Frank places too much power in the hands of one person.

“It has nothing to do with Elizabeth Warren, it really has nothing to do with her,” Bachus said.

After a pause, Bachus drew laughs from the bankers when he said, “I will not take a lie detector test.”

Republicans have crusaded against Warren receiving the nomination to be the agency’s first director, due to her long, impressive record as a consumer advocate. The financial services industry wants to kneecap the CFPB, and neutering the ability of the director to take action, be it Warren or someone else, is on top of the wish-list. But even if Bachus is genuine in his intentions, the notion that the CFPB is too powerful is absurd.

After all, plenty of agencies, including the banking regulators at the Office of the Comptroller of the Currency, the IRS, and many of the cabinet agencies, have a single administrator. And unlike those agencies, the CFPB has a board above it — the Financial Stability Oversight Council — that can veto CFPB rules.

The CFPB is intended as a vital counterweight to banking regulators that are focused on keeping banks profitable (even if that profitability comes from ripping off consumers). Bachus, in his effort to serve the banks, is trying to undermine that important mission.

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.

In two days, Gregg will become a former senator, and he’s using his final days in office to take one last whack at a good law that he fought strenuously against.

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.

Incoming House Financial Services Chairman Spencer Bachus (R-AL) told the Birmingham News this week that “in Washington, the view is that the banks are to be regulated, and my view is that Washington and the regulators are there to serve the banks.” And Bachus plans to provide that service by trying to slow down a whole host of measures being implemented under the Dodd-Frank financial reform law.

One of the targets that Bachus has in his sights is derivatives reform, the title of the Dodd-Frank law that aims to bring some prudent regulation to the currently unregulated derivatives market, which played a significant role in the 2008 financial meltdown. During the debate over Dodd-Frank, Bachus had an utterly incoherent position on derivatives reform, but that hasn’t stopped him from saying that derivatives reform is “one of the job-killing provisions of Dodd-Frank that needs to be addressed.”

And Bachus is getting some help from his fellow Republicans, who are threatening to bog down rule-writing by the Commodity Futures Trading Commission, which is charged with implementing derivatives reform. First, comes Rep. Scott Garrett (R-NJ), who will be chairing the subcommittee on capital markets next year:

“The rule-making bodies, especially the CFTC, seem to be eager to move along at this faster than anyone can keep up with,” said Mr. Garrett, who will try to slow the process with heightened congressional oversight.

And then Reps. Jerry Moran (R-KS) and Frank Lucas (R-OK):

Republicans on the panel said CFTC should move more slowly. Frank Lucas, who will become Agriculture Committee chairman in January, said he was “willing to consider an easing of statutory deadlines.” Jerry Moran, who will become a senator in January, said CFTC was rushing to issue a rule before it has adequate information on market size or appropriate limits.

Michael Greenberger, a former CFTC division director and University of Maryland law professor, called these complaints “a red herring offered by Wall Street to delay implementation.” But it’s not only Congressional Republicans who are trying to slow-walk reform. Republican appointees to the CFTC itself are doing the same thing, according to the Wall Street Journal:

The CFTC’s two Republican commissioners say the agency is moving too fast. Commissioner Jill Sommers said she supports giving the agency another year to write the rules.

The derivatives title is one of the strongest in the Dodd-Frank law, and getting it into place will bring much-needed light to a market that is several times the size of the entire U.S. economy. But Republicans, who did nothing to contribute to the financial reform debate, are trying to throw as many wrenches into the gears as they can, while Wall Street reaps its second-highest amount of revenue ever.

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.

Yesterday, Rep. Ed Royce (R-CA) announced that he is going to challenge Rep. Spencer Bachus (R-AL) for the chairmanship of the House Financial Services Committee. “I think we need a strong chairman in this position,” Royce told Bloomberg News. “I discussed this earlier today with Spencer Bachus and I shared with him that this is nothing personal.”

The prospect of a challenge to his committee leadership may explain why Bachus has been going gangbusters with his rhetoric regarding dismantling the Dodd-Frank financial reform law. And he kept it up yesterday, sending a letter to the newly created Financial Stability Oversight Council scaremongering about the effects of the Volcker rule, which is meant to prevent banks from engaging in risky trading with federally insured dollars:

Bachus says that a ban on proprietary trading – known as the Volcker rule – that was included in the new Dodd-Frank financial reform law will “impose substantial costs on the American economy and market participants” with “doubtful” benefits.” “Depending on how US regulators choose to implement it, the Volcker rule may spark a mass exodus of clients from US banks to banks based abroad.”

In the letter, Bachus casts doubt on the very notion that risky trading had anything to do with the financial mentldown of 2008. But as the Political Economy Research Institute at the University of Massachusetts pointed out “risky proprietary investments by investment banks, along with trading for clients whose decisions were influenced by these banks, was one of the main forces that sustained upward pressure on securities prices in the bubble…Indeed, by running large trading books, banks had inside information on client trading patterns and could use that information to front-run, and thereby help sustain market trends.”

Royce, for his part, is no more sympathetic towards the Dodd-Frank law. Last week, in fact, he said that he would allow bank regulators to have direct veto power over the newly created Consumer Financial Protection Bureau. During the financial reform debate, he was also one of the foremost promulgators of the myth that Fannie Mae and Freddie Mac caused the housing bubble. It should come as no surprise that he has raised far more money from the finance industry than any other business sector during his career.

Even the likely Speaker of the House, Rep. John Boehner (R-OH), is getting into the anti-financial reform game, saying that under his watch, “not only will the Congress understand, but the American people will understand, just what this bill will do to our financial services industry.” So, no matter who takes over the Financial Services Committee, as Barry Ritholz wrote, we should expect “new hearings, new subpoenas, and general harassment of regulators by the House of Representatives.”

Rep. Spencer Bachus (R-AL), who will likely be the next chairman of the House Financial Services Committee due to the Republican victory last night, has signaled his intent to weaken a series of provisions in the Dodd-Frank financial reform law, including the Volcker rule and the resolution authority for dismantling failed banks. And he told the Wall Street Journal this morning that he also “plans to rewrite the derivatives provisions” in the law:

“That’s one of the job-killing provisions of Dodd-Frank that needs to be addressed,” the Alabama Republican said in an interview Wednesday morning, calling the provisions “overly expansive.” Mr. Bachus said the new derivatives rules, which will require most routine swaps to be traded on exchanges and routed through clearing houses, will redirect as much as $1 trillion from the U.S. economy, draining capital from the financial system that could be used for loans or job creation.

During the debate over Dodd-Frank, Bachus had an utterly incoherent position on derivatives reform, calling for transparent derivatives markets while opposing all reforms that would increase market transparency. Now, it seems, he’s ready to carry Wall Street’s water by dialing back the requirements designed to bring currently unregulated derivatives trading out of the dark.

This is troubling, as the derivatives title is one of the strongest parts of the Dodd-Frank bill, bringing much needed regulation to a portion of the financial system that suffered from a severe lack of oversight. Remember, it was AIG’s issuing of billion in credit default swaps that it couldn’t honor that led to its downfall; Lehman Brothers was also sunk by exposure to derivatives. The derivatives title of Dodd-Frank — authored by outgoing Sen. Blanche Lincoln (D-AR) — sets up exchanges so that derivatives must be traded publicly (like stocks) and employs clearinghouses to ensure that both parties in a derivatives trade have adequate collateral backing it up.

What House Republicans will likely aim to do — if their rhetoric during the financial reform debate is any indication — is try to grant wide exemptions to the exchange and clearing requirements, letting all sorts of activity that is purely speculative continue unabated.

But Commodity Futures Trading Commission Chairman Gary Gensler, who has been one of the staunchest supporters of strong derivatives reform, is pushing back, saying the election yesterday won’t interrupt the CFTC’s rule-writing effort. “Any regulatory agency is obliged to follow the statute and what Congress wrote, and that’s what we’ll do,” Gensler said.

If Republicans gain a majority in today’s election, Rep. Paul Ryan (R-WI) is in line to take over the gavel of the House Budget Committee. Earlier this year, Republicans were loathe to associate themselves with Ryan’s Roadmap for America’s Future — a plan that purports to balance the budget by slashing entitlement spending — with House Minority Leader John Boehner (R-OH) pointedly refusing to endorse it.

However, on Fox Business yesterday, Rep. Spencer Bachus (R-AL), who is slated to become chairman of the House Financial Services Committee should the GOP take the House, threw his endorsement to Ryan’s plan. Bachus made it clear, though, that he has no idea what the plan actually means, as he ludicrously asserted that it doesn’t entail any benefit cuts:

I endorse Paul Ryan’s budget proposal, which will slow the federal government to 19 percent of our GDP, which is really high by historic channels. And he doesn’t cut any benefits to do that. He gradually raises the retirement age, not for those who are approaching retirement now, and simply gets a handle on accountability. You don’t really have to cut.

Watch it:

Leaving aside the simple matter that raising the retirement age is a benefit cut, Bachus seems to have no grasp at all on what Ryan’s radical Roadmap for America’s Future would mean for the entitlement programs. First, Social Security:

The Ryan plan proposes large cuts in Social Security benefits — roughly 16 percent for the average new retiree in 2050 and 28 percent in 2080 from price indexing alone — and initially diverts most of these savings to help fund private accounts rather than to restore Social Security solvency. Because the plan would divert large sums from Social Security to private accounts, it would leave the program facing insolvency in about 30 years, just as under current law.

And then Medicare:

The Ryan plan would eliminate traditional Medicare, most of Medicaid, and all of the Children’s Health Insurance Program (CHIP), converting these health programs largely to vouchers…By 2080, Medicare would be cut 76 percent below its projected size under current policies, according to CBO. In other words, by 2080, the vouchers that would replace Medicare would receive one-quarter of the resources that Medicare would otherwise use.

As the Center on Budget and Policy Priorities summed up, the Roadmap’s cuts “would be so severe that CBO estimates they would shrink total federal expenditures (other than on interest payments) from roughly 19 percent of GDP in recent years to just 13.8 percent of GDP by 2080. Federal spending has not equaled such a low level of GDP since 1950, when Medicare and Medicaid did not yet exist, Social Security failed to cover many workers, and close to half of the elderly people in the United States lived below the poverty line.”

The whole point of Ryan’s radical plan is to attempt to balance the budget by obliterating entitlements. And even while their social safety net is torn out from under them, the Roadmap would result in 90 percent of Americans paying higher taxes.