GOP Budget Plan Would Cut CFPB Funding Nearly In Half [UPDATED]
With reporting by Ryan Grim and Elise Foley
WASHINGTON -- A new federal budget proposal from House Republicans would dramatically restrict the budget of the new Consumer Financial Protection Bureau during its first year of operation.
[UPDATE: An amendment introduced by Rep. Rush Holt (D-N.J.) to restore $63 million in funding to the CFPB failed on Thursday in a 163-265 vote.]
No House Republicans voted for the Wall Street reform bill that created the CFPB, which is currently being set up by consumer watchdog Elizabeth Warren. Several House Republicans have suggested cutting the agency's budget, however, as a method of restricting its capacity to regulate.
The language included in the House GOP's budget proposal for 2011 would restrict the CFPB's annual budget to $80 million-- a major cut from the $143 million the agency expects to spend as it hires staff and implements new systems to get off the ground.
Warren warned Congress against creating a weak agency last summer, as lawmakers sought to placate Wall Street lobbyists. She insisted that the new CFPB must be given the authority and resources to prevent bank abuses. "My first choice is a strong consumer agency," Warren said in an interview with the Huffington Post last year. "My second choice is no agency at all and plenty of blood and teeth left on the floor."
The Republican attack on the CFPB's funding would only apply to this year, but would make launching the new agency very difficult, and send a very aggressive signal about Congress' intent to follow through on the bill it passed in July. Regulations cannot be enforced if regulators do not have the budget to hire staff.
Rep. Barney Frank (D-Mass.), the top Democrat on the House Financial Services Committee, told HuffPost that Democrats would be offering an amendment to strip the CFPB language from the GOP budget plan. The amendment will likely come up for a vote on Thursday.
"When you're talking about $143 million or $80 million you're talking about several multiples of a bank bonus," Frank said. "It just shows the disproportion between what the banks have and what they have."
Last year's Wall Street reform legislation tied the CFPB's budget to the Federal Reserve's operations, requiring 12 percent of all funding for the central bank to be diverted to the CFPB. The new House GOP budget proposal, known as a continuing resolution, or CR, would block the Fed from disbursing more than $80 million during fiscal year 2011, which ends in October. Some estimates suggest that the CFPB could receive as much as $550 million a year under the existing funding structure-- less than half of the Securities and Exchange Commission's current budget. That funding will be needed as the new agency staffs up-- the CFPB is tasked with regulating a broad array of consumer lending, from payday lending to credit cards to mortgages, many of which have been prone to abuses in recent years.
"Remember, the consumer bureau doesn't just deal with credit cards, it's a major way to go after all these unregulated financial industries, payday lenders, check cashers, etcetera," Frank told HuffPost.
Connecting the CFPB's budget to the Fed was a move that consumer advocates hoped would protect the new agency from this type of appropriations gamesmanship. If any new budget law can direct the Fed how to spend its resources, Wall Street-friendly Republicans are likely to continue trying to restrict the CFPB's budget.
Other bank regulators are funded by special taxes they levy against the banks they regulate, known as "assessments," which are not subject to the Congressional appropriations process. In a speech yesterday before the Consumer's Union, Warren warned that, "Politicizing the funding of bank supervision would be a dangerous precedent, and it would deprive the CFPB of the predictable funding it will need to examine large and powerful banks consistently."