Although lawmakers were ostensibly supposed to debate ways to overhaul the structure and authority of the Consumer Financial Protection Bureau (CFPB), a hearing Wednesday in a House Financial Services subcommittee was sidetracked by questions over whether the agency should exist at all.
Republicans have introduced four bills that would, among other things, replace the CFPB director with a five-member board, give other regulators more power to overrule the consumer bureau, and delay implementation of its powers until a Senate-confirmed leader is in place.
But lawmakers spent less time discussing those issues, instead focusing on the political and ideological gulf between the two political parties over the bureau's existence.
"I take issue with the title of today's hearing, 'Legislative Proposals to Improve the Consumer Financial Protection Bureau,' because I disagree that these proposals are to improve," said Rep. Carolyn Maloney of New York, the top Democrat on the financial institutions subcommittee. "These proposals we are considering today come from some of the members who last year voted against the Dodd-Frank Financial Protection and Consumer Protection Act, which created the CFPB. Taken together, these proposals will only serve to delay, disrupt the CFPB from being able to fully do its job before it's even opened for business on July 21st."
Adam Levitin, a Georgetown University Law Center professor who testified at the hearing, agreed.
"Let's not escape what this hearing is really about," Levitin said. "The issue presented at this hearing is whether Congress cares more about increasing the profits of the banks or protecting the financial security of American families. … If you want to understand what this hearing is about, look at who is here at this witness table. There are three bankers and me."
But House Financial Services Committee Chairman Spencer Bachus said it wasn't about trying to undercut the new agency.
"Nothing could be further from the truth," he said. "In fact, my bill is for a commission, which is what this House passed. This is what we passed in Dodd-Frank. It was changed in conference to allow one person to run the agency with total discretion. And what we're advancing is not politics, it's the way government has always functioned, and that's not one person with unbridled authority."
Despite his intentions, however, most of the hearing was about whether the CFPB is burdensome and will cut off credit.
Rep. Patrick McHenry, R-N.C., echoed the Republicans' argument, saying that the CFPB is creating too much government.
"Last November, the voters sent a clear message to Washington," he said. "Massive new regulations are creating uncertainty and crippling job creation. With that in mind, I believe the legislation before us today goes — is extremely necessary in order to protect consumers while also making certain that small businesses and individuals aren't limited from accessing the credit that they need."
Industry witnesses said they were being punished with CFPB regulation.
"I remain at a loss as to why my credit union has been placed under a new regulatory regime," Lynette Smith, president and CEO of the Washington Gas Light Federal Credit Union, said on behalf of the National Association of Federal Credit Unions.
Leslie Andersen, president and CEO of Bank of Bennington in Nebraska, speaking on behalf of the American Bankers Association, agreed.
"The new bureau will certainly impose new obligations on all banks, large and small, banks that had nothing to do with the financial crisis and already have a long history of serving consumers fairly in a competitive environment," she said.
Hilary Shelton, director of the National Association for the Advancement of Colored People (NAACP), was one of the few witnesses to defend the bureau and fight efforts to curtail it.
"I would like to state unequivocally for the record that the NAACP staunchly opposes any moves which may weaken or undermine the CFPB or otherwise impede it from reaching its full potential," he said. "Any proposals which would weaken the missions of CFPB would mean fewer protections for American consumers in general and racial and ethnic minorities in particular, as they attempt to manage the often confusing world of finances, mortgages and credit."
Rep. Carolyn McCarthy, D-N.Y., said those opposed to the CFPB are missing a key lesson from the financial crisis.
"We are forgetting why we are putting this together," she said. "Everybody forgot about the consumer. And everybody can blame everybody else, but nobody was there to protect the consumer. No one."
Republicans likely will try to pass their CFPB bills soon. A bill from Reps. Shelley Moore Capito and Spencer Bachus would replace the CFPB director with a five-member board, while another from Rep. Sean Duffy, R-Wis., would give regulators more power to override the bureau. Under the Dodd-Frank Act, which created the CFPB, the Financial Stability Oversight Council may override a CFPB regulation if two-thirds of its members agree the rule would threaten the safety and soundness of the banking system or financial stability. Duffy's bill would lower the standard to a simple majority vote and whether the rule is inconsistent with safe and sound operations of institutions.
Capito has also released two draft bills that would bar the CFPB from participating in bank exams before the July 21 transfer date and prevent that transfer until a CFPB director has been nominated by President Obama and confirmed by the Senate.
Also on Wednesday, Sen. Jerry Moran, R-Kan., ranking member of the Senate Committee on Appropriations Financial Services and General Government Subcommittee, introduced legislation that would replace the CFPB director with a five-person board.
To the extent they discussed the bills directly, lawmakers focused mainly on changing the structure of the CFPB.
"This is a critical change to the structure of the bureau. … This is not unprecedented for a regulatory agency," Capito said. The "Securities and Exchange Commission, the Commodities Futures Trading Commission and the Federal Trade Commission are examples of regulatory agencies led by a commission. Most notably, the Consumer Products Safety Commission, which regulates the safety of thousands of nonconsumer products, is led by a five-member commission. The powers of the bureau are simply too broad for a single director, and the move to put the commission in place, I think, puts an important check on power."
Brad Miller, D-N.C., said the existing director structure at the Office of Comptroller of the Currency has served the industry well.
The CFPB is "certainly not unique in that they have a single director," Miller said. "The OCC, for instance, has a single director, and that has made that a very powerful agency, which has worked greatly to the benefit of the banking interest and greatly to the disadvantage of consumers."
Maloney said moving to a five-member board could be problematic.
"President Obama is having difficulty finding a director that he can get confirmed by the Senate," she said. "One senator can hold up a confirmation. If you had five, you would have more difficulty in moving forward."
The industry backed the Republican efforts. "I think having a commission or a board makes a lot more sense," Andersen said. "They are able to have a broader view."