Reason discusses the CFPB and the Financia CHOICE Act with John Berlau.
The Consumer Financial Protection Bureau’s days as the federal government’s most uniquely unaccountable regulatory agency might be numbered.
The CFPB, a product of the Dodd-Frank financial regulation package passed in the wake of the 2009 financial collapse, has broad authority to regulate American financial institutions. Unlike other federal regulatory agencies, however, the CFPB does not have to answer to Congress or the president for its actions. It gets its funding directly from the Federal Reserve, and is run by a single director (an unusual arrangement since most regulatory agencies are run by a bipartisan group of three or five individuals) who serves a 10–year term and cannot be removed from office before that time.
Even though the budget is unlikely to get much consideration from Congress until later this summer, the first major step towards restructuring the CFPB could happen as soon as next week.
Part of the Financial CHOICE (Creating Hope and Opportunity for Investors, Consumer and Entrepreneurs) Act, sponsored by Rep. Jeb Hensarling (R-Texas), would allow the president to remove the director of the CFPB at will. The bill would also force the bureau to go through the congressional appropriations process, give the bureau a Senate-confirmed inspector general, require cost-benefit analyses of regulatory proposals, and prevent the CFPB from collecting consumers’ financial information without permission (something that it has a history of doing). A separate but no less important element of the bill would create a new subchapter of the federal bankruptcy code for large financial institutions—those with more than $50 billion in assets—as an alternative to providing taxpayer-funded bailouts.
A wide range of conservative and libertarian groups have lined up to support the passage of the bill, which moved out of the House Financial Services Committee on May 25. Progressive groups and several major players in the financial industry, including American Express and Chase Bank, oppose the bill.
The bill could come up for a vote in the full House as early as next week. Assuming the bill passes the House, a potential stumbling block awaits in the Senate, where Democrats would be able to prevent the Republicans from getting the requisite 60 votes to pass the Financial CHOICE Act and restructure the CFPB.
If that happens, Republicans could try to use the reconciliation process, a little used Senate tactic that requires only 51 votes to pass legislation that addresses revenue, spending, or the federal deficit (most famously used in 2010 to get the final version of Obamacare across the finish line). Whether they would be allowed to use reconciliation to pass the Financial CHOICE Act would be up to the Senate parliamentarian, but reform advocates believe there is a strong case to be made.
“That’s something that could be, and should be, passed via reconciliation,” says John Berlau, a senior fellow for the Competitive Enterprise Institute, a free market think tank based in Washington, D.C., told Reason this week.
Read the full article at Reason.