Executive Session

Floor Speech

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Mr. CRAPO. Mr. President, both sides agree that everyone benefits from a marketplace free of fraud and other deceptive and exploitative practices. The disagreement is over the best way to structure our Federal regulatory agencies to accomplish this goal and provide accountability.

One of the lessons of the financial crisis is that we need a supervisory program that looks and considers how safety and soundness and consumer protection work together and reinforce better and safer services to banking customers. Far too often, supervision either looked at consumer issues in isolation--promoting access to credit and home ownership--or it looked at safety and soundness in isolation, such as ensuring that customer information was legally accurate but not asking whether it was understandable to bank customers.

We should have strengthened the link and coordination between prudential supervision and consumer protections rather than severing it. Instead Congress institutionalized this separation by creating a Consumer Financial Protection Bureau and blurred the role and accountability of the prudential regulators and the new Bureau.

Mortgage underwriting is a good example of an issue that was found lacking before the financial crisis and has the potential to be subject to an even more bureaucratic regulatory system going forward. I say potential because it is unclear to me where the authority of the Bureau stops and where the authority of the prudential regulators overlaps on several important issues that will likely cause confusion and potentially inconsistent regulatory approaches. Already we are seeing conflicts among regulators with different regulators adopting different consumer protection rules and duplication in examinations.

From my perspective, the new Bureau is a massive, expensive government bureaucracy that is immunized against meaningful oversight by either Congress or the President, and dramatically extends the Federal Government's control over the economy.

According to analysis from Andrew Pincus, a partner in the law firm Mayer Brown LLP:

The Bureau's structure has a number of features that, when taken together, concentrate an amount of unchecked authority in a single individual--the Director--that is unprecedented for a federal agency that regulates private entities and individuals:

First, the Bureau will be headed by a single Director with complete, unilateral authority to make all regulatory and enforcement decisions and to hire and fire all personnel, including his or her own deputy.

Second, the Bureau's Director does not serve at the pleasure of the President. Rather, during his or her five-year term, the Director may be removed only for inefficiency, neglect of duty, or malfeasance in office. That standard eliminates the President's power to remove the Director based on a policy disagreement: once nominated and confirmed, the Director cannot be overruled by the President.

Third, the Bureau is exempt from the congressional appropriations process. It is funded instead by a transfer of money from the Federal Reserve in an amount determined solely by the Director, subject only to a cap that already exceeds $550 million, will increase 10% for the next fiscal year, and is subject to automatic inflation adjustments thereafter.

While I appreciate the willingness of Richard Cordray to serve and answer questions, I can't support the consideration of any nominee to be the Director of the Bureau until the agency is reformed to make it more accountable and transparent.

First, we would establish a board of directors to oversee the Bureau. This would allow for the consideration of multiple viewpoints in decisionmaking and would reduce the potential for the politicization of regulations. A board of directors structure is consistent with the organization of the Federal Reserve
Board, National Credit Union Administration, FDIC, SEC, CFTC, and Federal Trade Commission.
Second, we would subject the Bureau to the congressional appropriations process to ensure that it doesn't engage in wasteful or unnecessary spending. This also gives Congress the ability to ensure that the Bureau is acting in accordance with our legislative intent. The SEC, CFTC, and the Federal Trade Commission have long been subject to the appropriations process for the same reasons.

Finally, we would establish a safety and soundness check. This would strengthen the link and coordination between prudential supervision and consumer protections.

Given the enormous impact the Bureau will have on the economy, it is important for Congress to revisit its structure and authorities to make it more accountable and transparent.

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