The fight over the Consumer Financial Protection Bureau (CFPB) has dragged on since it was first created in the Dodd-Frank Act (HR 4173 – full text here). The GOP has been successful thus far in preventing this agency from getting off the ground, including blocking the nomination of Elizabeth Warren and Richard Cordray to lead the CFPB. That is, until Barack Obama illegally appointed Cordray this year with a recess appointment. He also did three illegal appointments to the National Labor Relations Board (NLRB) through the same process (the NLRB is a whole other topic). I’ll make this a two-parter, with this post looking at the CFPB’s structure and the second post looking at the (il)legalities of Obama’s appointments.
The Democrats have been complaining about GOP obstructionism and creating the perception that the GOP just wants to stick it to Obama. They’re trying to make the GOP look like they don’t care about protecting consumers and the GOP is just trying to protect “Wall Street”. In essence, they’ve made the GOP appear as though they oppose any CFPB structure rather than the current CFPB structure. The Democrats, to this point, appear largely unwilling to discuss structural issues with the CFPB. They don’t even appear to care why the GOP is opposing it.
The GOP contends there are significant structural flaws in the CFPB that render it largely unaccountable to the American people that must be addressed first. Such structural issues include the fact that the organization would be lead by a single director for a five-year term and the fact that the CFPB would get its funding from the Federal Reserve Board rather than congressional appropriations. Remember, many agencies are led by multi-member boards of directors and are funded through the congressional appropriations process, both of which provide vital checks and balances to reduce abuses.
I think the GOP makes some very valid points, but the Democrats are winning the public relations battle. The GOP has done a terrible job of articulating their reasons for opposing the CFPB’s structure and have allowed the Democrats to control the discussion. That’s a problem because the valid points the GOP is raising are being lost. Let’s leave aside the issue of whether a CFPB is necessary (it probably is in some form because people do not have the financial savvy and responsibility/accountability that they should have, but this is a whole other topic) and examine the structure of the current CFPB.
The current structure of the CFPB basically means that one person would be able to make sweeping decisions effecting the lives of millions of Americans and thousands of businesses with zero accountability, as the legislative branch would have no real oversight and even the executive branch would have very limited oversight. The single-director structure is the most troubling part. I can understand the need to have the CFPB insulated from political considerations to a degree, like the Supreme Court and Federal Reserve are. However, the Supreme Court and Federal Reserve (and even the aforementioned NLRB) are made up of multiple members with appointments by the White House and confirmations by the Senate. Creating such a powerful organization headed by only one person is an unacceptable concentration of government power. It needs to be run by a board of at least five members like we see elsewhere in the executive branch. Even Elizabeth Warren’s original idea for the CFPB revolved around a five-person board.
Addressing this now is just prudent governance. It’s much easier to address problems with a bill before it’s fully implemented than after. I know it’s not the government’s typical mode of operation to try to address problems proactively. I know they prefer to do so reactively (usually only after what was a minor issue turned into a major or even catastrophic problem due to inaction or, even worse, government policies that exacerbate the condition). Besides, it’s not as though legislation is a one-and-done kind of deal. We do have the ability to pass bills that amend or repeal other bills that were previously passed – like we just did with the two-month payroll tax cut extension.
The bottom line is the CFPB has vital structural flaws that must be addressed first. It never should have been structured with a single director and we have the opportunity now to change it to a multi-member board. These issues were present in the original law and should have been dealt with then, but they were not. They must be dealt with now before someone is appointed to lead the bureau. Obama and the Democrats are putting politics above prudent governance by being unwilling to address these issues.
Links:
Full text of Dodd-Frank Wall Street Reform and Consumer Protection Act
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