At the moment, the top two candidates to chair the House Financial Services Committee next year — Reps. Spencer Bachus (R-AL) and Ed Royce (R-CA) — are going back and forth, one-upping each other on who would be most aggressive in rolling back the financial reforms enacted by the Dodd-Frank law. Bachus has announced his intention to deny the new Consumer Financial Protection Bureau funding, roll back the Volcker rule, and remove the government’s new powers to dismantle failing financial firms without using taxpayer dollars.
Today, Royce appeared on CNBC to lay out which sections of Dodd-Frank he wants to “revisit,” and first on the list is the newly-created Consumer Financial Protection Bureau. Royce explained that he wants to revive an amendment he proposed during the financial reform debate that would have allowed bank regulators to veto the Bureau’s rules:
One of the ones that I think is most important that we revisit — and of course, the Democrats had the votes to prevent this — but the prudential regulators, the regulators for safety and soundness warned us, ‘do not set up a Consumer Financial Protection Bureau which is able to trump safety and soundness.’ The safety and soundness regulator needs to have a say, needs to have final say in this. My amendment during the markup on the Dodd-Frank bill would have given the prudential regulator that say in the process, so that we didn’t repeat some of the mistakes that we made with Fannie Mae and Freddie Mac. We have to revisit that issue.
There were clearly rampant consumer protection violations that occurred in the subprime lending market, and the bank regulators were completely disinterested in policing such lending, even when they had the authority to do so. Royce would put those same regulators right back in charge, handcuffing the one agency whose explicit mission is protecting consumers from the banking industry’s excess.
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. Royce is clearly trying to set the bar even higher, giving individual regulators the ability to blunt any rule they don’t like.
In the end, both Royce and Bachus have made it abundantly clear that the next chairman of the Financial Services Committee is going to be interested, first and foremost, in protecting the ability of banks to do whatever they want, regardless of the effect on consumers.