Chairman Chaffetz, Ranking Member Cummings, and honorable members of the Committee, thank you for this opportunity to present testimony on behalf of my organization, the Competitive Enterprise Institute (CEI). CEI is a Washington-based free-market think tank that studies the effects of all types of regulation on job growth and economic well-being. We propose ideas to “regulate the regulators” and hold them accountable so that innovation and job growth can flourish in all sectors.
A first step toward such accountability is for government agencies that exercise power over American entrepreneurs, investors, and consumers to be as transparent as possible. How can citizens hold these agencies accountable if we cannot see what they are doing? That is why my colleagues at CEI and I have long sought to bring sunshine to regulatory agencies through Freedom of Information Act (FOIA) requests and insistence on public meetings.
I am pleased that the bills and legislative proposals being discussed at the hearing today—including the bipartisan Open Government Data Act and Federal Reserve Transparency Act as well as the chairman’s own Fannie Mae and Freddie Mac Transparency Act—take significant steps to move transparency laws into the 21st century by ensuring that new technologies are used to enhance government transparency rather than to evade it. These bills should begin to correct the major problem of the excessive secrecy we have seen at federal financial regulatory and housing agencies over the last decade.
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 promised to bring accountability to the financial sector. However, it created new bureaucracies that are unaccountable to the President and Congress—and have been able to skirt some of Congress’ basic laws for openness.
The powerful Consumer Financial Protection Bureau (CFPB), which was created by Dodd-Frank, claimed exemption from the Federal Advisory Committee Act (FACA), which mandates that task forces convened by the government with participants from the private sector must open their meetings to the public and produce thorough public records of those meetings. The CFPB has held meetings in various cities throughout the country, but has closed them to the public, casting doubt on its stated mission to produce a more transparent marketplace for consumers. Fortunately, in late 2015, President Obama signed a bill formally subjecting the CFPB to the Federal Advisory Committee Act. We will continue to monitor to ensure the CFPB complies with this law and has open meetings with diligent records kept.
Unfortunately, other affronts to transparency in Dodd-Frank still stand uncorrected. Dodd-Frank still exempts the Financial Stability Oversight Council, which it also created, from FACA and gives the Council vast leeway to hold meetings closed to the public and shield details of those meetings from the public. The Council is tasked with designating firms as “systemically important”—essentially “too big to fail.” It keeps only minimal records of its meetings and provides virtually no information as to how it designates financial firms as “systemically important,” even though such decisions can dramatically affect financial markets and the wider economy.
Legislation requiring openness in policy deliberations about the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac, such as that proposed by Chairman Chaffetz, is especially important. These are corporations chartered by Congress that are now under the conservatorship of the federal government. Taxpayers have propped them up after the housing collapse to the tune of $185 billion. As long as they remain under a government conservatorship or receivership, taxpayers deserve some sunshine in return for the money they have spent on these two entities.
Government officials’ deliberations on the fate of the GSEs must also be made public. The Obama administration claimed executive privilege when private sector shareholders of Fannie and Freddie asked for information regarding the Treasury Department’s Third Amendment of 2012, in which the government began to confiscate all the GSE profits even after the GSEs paid the government back for bailing them out.
We have urged the Trump administration to reverse its predecessor’s unprecedented use of executive privilege, which should be reserved only for rare information requests that compromise national security. We also urge the committee to investigate the Obama administration’s secretive practices in this regard. Finally, we urge passage of transparency legislation.
Thank you again for inviting me to testify. I look forward to your questions.
John Berlau, “Mnuchin Must Bring Transparency to Fannie Mae and Freddie Mac,” Competitive Enterprise Institute, February 20, 2017, https://cei.org/blog/mnuchin-must-bring-transparency-fannie-mae-and-freddie-mac
 Christopher C. Horner, “FOIA Productions: An Incomplete Story,” Competitive Enterprise Institute, March 2, 2017, https://cei.org/blog/foia-productions-incomplete-story
 Hester Peirce and Robert Greene, “A New Year for Unaccountable Financial Regulators,” RealClear Markets, January 17, 2013, http://www.realclearmarkets.com/articles/2013/01/17/a_new_year_for_unaccountable_financial_regulators_100094.html
 Matthew Orso and Joshua Davey, “Chipping Away At the CFPB’s Clandestine Activities, Law360, May 4, 2015 https://www.law360.com/articles/648299/chipping-away-at-the-cfpb-s-clandestine-activities
 Aaron Klein and Justin Schardin, “UK Regulator’s Transparency Should Be a Model for U.S. FSOC,” Bipartisan Policy Center, July 10, 2015, https://bipartisanpolicy.org/blog/uk-regulators-transparency-should-be-a-model-for-u-s-fsoc/
 See Appendix.