Financial Reform Watch

House, Senate take on CFPB in Heated Hearings

In her last act before leaving Washington this week, Elizabeth Warren, Special Advisor to the Secretary of the Treasury for the Consumer Financial Protection Bureau, testified before the House Oversight and Government Affairs Committee, while the Senate Committee on Banking, Housing and Urban Development also took on the CFPB in its own hearing. At both hearings, Republicans made it clear that they are concerned about the bureau’s lack of accountability. Many reiterated the Republican leadership’s promise to block any nominee for director until the bureau’s management is restructured.

On July 14, Elizabeth Warren testified before the House Committee on Oversight and Government Affairs in a hearing entitled, “Consumer Financial Protection Efforts: Answers Needed.” Twenty-seven Members of the 40-member committee attended the four-hour hearing and questioned Ms. Warren on issues ranging from her vision for the bureau to its budget and oversight authority.

Throughout the hearing, the committee was visibly polarized. On one side, Republicans, led by Committee Chairman Darrell Issa (R-CA), argued that the bureau needs significantly more Congressional oversight and also needs to do more to preserve personal liberty, giving the American people the ability to make financial choices for themselves, rather than forcing them toward “what’s best for them.” On the other side, Democrats, headed by Ranking Member Elijah Cummings (D-MD) insisted that the CFPB is as accountable as any other financial regulator and said that the issue is a matter of putting consumers’ interests above those of big Wall Street banks.

Throughout the hearing, Republicans pressed Ms. Warren on a number of hypothetical powers the bureau could potentially exercise, including influencing interest rates and banning financial products. Ms. Warren said that she does not foresee the CFPB using such powers, but that they are “tools in the toolbox, and that is where they should stay.” Other members expressed concerns about the bureau’s ability to set its own budget and salaries, but Ms. Warren insisted that the CFPB’s budget and hiring practices will be transparent and in line with comparable agencies.

Democratic Members were vocally critical of their Republican colleagues, criticizing them for their at-times harsh treatment of Ms. Warren. Rep. William Lacy Clay (D-MO) said, “ This is the most incredible committee hearing I have ever attended, because the two sides are so far apart.” Rep. Jim Cooper (D-TN) said that this “so-called hearing and partisan food fight” is the reason why Congress and this committee are viewed as “dysfunctional.”

On July 19, on the other side of the Capitol, the Senate Committee on Banking, Housing and Urban Development held a hearing entitled “Enhanced Consumer Protection after the Financial Crisis.” The committee heard testimony from small bankers, an attorney, a legal scholar, the American Bankers Association and the U.S. Chamber of Commerce, but not from anyone currently employed by the Consumer Financial Protection Bureau (CFPB) or the Department of Treasury. The hearing focused on the CFPB’s leadership structure, and the witnesses were split in their views on whether the current structure was appropriate. Though discussion of the nomination of Richard Cordray to serve as director was limited, Senate Republicans said that they will not support his confirmation, with Sen. Moran going as far as to characterize the nomination as “dead on arrival.”

During the hearing, Democrats, led by Committee Chairman Sen. Tim Johnson (D-SD) advocated for the CFPB, saying that undermining this “cornerstone of the Wall Street Reform Act” would be “irresponsible,” while the Republicans, led by Ranking Member Sen. Richard Shelby (R-AL), said the hearing provided a timely opportunity to address “one of the most serious flaws in the Dodd-Frank Act: the leadership structure of the CFPB.”

The most recent round of hearings continue to make it clear that the fight over the CFPB is just beginning. With the nomination of Richard Cordray as director, the battle will shift somewhat to the Senate, where it remains to be seen if Republicans can keep their promise of blocking any nominee until the CFPB’s single director is replaced with a five-member commission. At this point, no confirmation hearings have been scheduled.

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