Financial Reform Watch : Financial Services News & Information : Blank Rome Government Relations Lobbying Firm : Government Relations, Corporate Governance : Financial Reform Watch Law Blog

On Thursday, all 10 Republican members of the Senate Banking, Housing and Urban Affairs Committee—led by Sen. Bob Corker (R-TN)—wrote a letter to committee chairman Tim Johnson (D-SD) urging him to “hold hearings and a mark-up as soon as reasonably possible on legislation to establish an accountable governance structure for the Bureau of Consumer Financial Protection.”

This latest action follows a May 2 letter signed by 44 Senate Republicans to President Obama that threatened to block any CFPB director nominee—regardless of party affiliation—unless appropriate accountability mechanisms for the CFPB are addressed by Congress. In both instances, Senate Republicans are calling for the adoption of three specific CFPB reforms, including:

1. altering the CFPB’s leadership structure from that of a single director to a board of directors, similar to the Federal Deposit Insurance Corporation (FDIC), Federal Reserve Board, or Securities and Exchange Commission (SEC);
2. subjecting the CFPB to the congressional appropriations process; and
3. providing prudential bank regulators with stronger tools to prevent CFPB regulations that may impact the safety-and-soundness of banks.

The tactic is clearly an attempt to force the hands of President Obama and Senate Democrats by using the confirmation process as a leverage point. Unless President Obama chooses to circumvent the Senate confirmation process through a recess appointment—a move deemed by many as politically controversial—he and Chairman Johnson will be forced to recognize many of the Senate GOP’s demands for CFPB reform. The House Financial Services Committee has already passed three bills that nearly mirror the Senate proposals.

Also in the House, senior House Financial Services Committee member Carolyn Maloney (D-NY) has circulated a “Dear Colleague” letter requesting that House members sign a letter to President Obama urging him to appoint Elizabeth Warren to the CFPB director position during one of the upcoming congressional recesses.

“Since Republican senators have said that no one is acceptable unless the law is weakened, we would urge you to nominate Professor Warren as the CFPB’s first director anyway,” says Maloney’s letter to President Obama.
 

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Federal regulators are continuing to field an array of questions and concerns from lawmakers surrounding the implementation of Dodd-Frank’s derivatives provisions (Title VII) – and it’s not just coming from House Republicans.

In a letter sent on Tuesday to Federal Reserve Chairman Ben Bernanke, Federal Deposit Insurance Corporation (FDIC) Chairwoman Sheila Bair, Commodity Futures Trading Commission (CFTC) Chairman Gary Gensler and acting Comptroller of the Currency John Walsh, New York’s two Democratic Senators and 16 of New York’s 29 Representatives expressed concerns that a proposed rule applying margin requirements to derivatives between non-U.S. subsidiaries of U.S. entities and non-U.S. counterparties would create a significant competitive disadvantage for U.S. firms operating internationally.

The letter, signed by 12 Democrats and 6 Republicans, went on to state that “disparate treatment of U.S. firms will only encourage participants in the derivatives markets to do business with non-U.S. firms,” and asked that U.S. regulators work with their international counterparts to ensure that the international regulations “perfectly mirror the U.S. rules.” Senate Agriculture, Nutrition and Forestry Committee Chairwoman Debbie Stabenow (D-MI) expressed similar concerns during a Senate hearing on March 3, stating that “having a different set of rules that govern similar transactions [internationally] could have negative impacts in the markets.”

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With near-perfect unity, Senate Republicans joined their House counterparts this week in calling for significant structural reforms to the new Consumer Financial Protection Bureau (CFPB). And unlike the House, the Senate can take hostages.

On Monday, 44 Republican Senators sent a letter to President Obama threatening to block any CFPB director nominee—regardless of party affiliation—unless their concerns regarding the new agency’s structure and lack of appropriate accountability mechanisms are addressed by Congress. Senators Scott Brown (MA) and Lisa Murkowski (AK) were the only Republicans not to sign the letter.

Specifically, the GOP letter calls for the adoption of reforms in three main areas, including:

• Leadership Structure - Alter the CFPB’s leadership structure from that of a single director to a board of directors, similar to the Federal Deposit Insurance Corporation (FDIC), Federal Reserve Board, or Securities and Exchange Commission (SEC). GOP senators expressed concern that Dodd-Frank “failed to provide any real checks on the CFPB director’s powers” by providing limited tools for Congress or the administration to remove a director for poor performance and granting the director with “unfettered authority” over the CFPB’s annual budget.

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