WASHINGTON -- Congressional Republicans have insisted that their proposals to force the new Consumer Financial Protection Bureau to fight for legislative appropriations every year are grounded in good-governing principles.
But in an interview with The Huffington Post, a top House Republican acknowledged frankly what many political observers have believed for months: that his aim is less to make the nascent agency justify its funding than to defund it to the point where it cannot function.
Under the financial regulation bill signed into law by President Barack Obama last year, the CFPB's budget is tied to that of the Federal Reserve, with the intention of insulating the bureau from annual congressional budget battles and the attendant mountains of lobbying cash. But Rep. Randy Neugebauer (R-Texas)-- who chairs the House Financial Services Subcommittee on Investigations and Oversight and has helped lead previous pushes to cut funding for the CFPB -- said one of the three top priorities for his Republican colleagues this year is to change that status, making the bureau dependent on prevailing sentiments in the legislature.
Only one major federal financial regulator has ever had its budget linked to the Congressional appropriations process -- the Office of Federal Housing Enterprise Oversight, which oversaw Fannie Mae and Freddie Mac during the housing bubble and was unable to rein in the mortgage giants' risk-taking in the face of massive lobbying. When asked how the CFPB could perform its duties under such a funding model, Neugebauer said he didn't expect the agency to be able to operate.
"I don't think they'll work at all," Neugebauer told HuffPost late last week. "I'm just trying to get the ground I can get. I don't like them."
Neugebauer's frankness stands in contrast to the delicate dance by some of his colleagues in discussing the new agency. In seeking to limit or shift CFPB funding, Republicans have tended to employ the language of fiscal responsibility and effective oversight.
Rep. Jo Ann Emerson (R-Mo.), who defended the House GOP's bid to slash the CFPB's funding in its budget proposal last month, argued that $80 million is about what another current bank regulator, the Office of the Comptroller of the Currency (OCC), spends on consumer protection. During debate over a separate plan to cut funding for the SEC, Emerson elaborated on her view, claiming the move was more about improving government efficiency and the pursuit of fiscal responsibility.
"I am not opposed to strong financial regulation," Emerson said last month. "But at a time when we're trying to do more with less, I think it's important for the agencies to do more with less too."
Other Republicans, including House Financial Services Committee Chairman Spencer Bachus (R-Ala.), have voiced opposition to the CFPB on the grounds that it embodies vast, unchecked regulatory powers.
The agency is assuming the existing powers of the OCC and the Federal Reserve, which have largely failed to enforce consumer protection rules for a variety of reasons. The OCC's previous head, John Dugan, was a former bank lobbyist who returned to the bank lobby after five years as a regulator. Both the OCC and the Fed had close relationships with the nation's largest banks, with the OCC even joining bank lobbyists in a lawsuit against state regulators.
Neugebauer reiterated the other principal GOP objections during the interview with HuffPost, calling the CFPB an agency with “a lot of powers but no review process.” But when pressed further, Neugebauer acknowledged that any CFPB rules that threaten bank stability could be vetoed by a council of other regulators, while maintaining his opposition.
“If they start saying, ‘Well, I think a $25 overdraft fee is exorbitant,’ there’s really not any appeal for that," he said. "I’m just not a big fan of CFPB.”
In a Thursday meeting with reporters, senior Treasury officials noted the push against the CFPB, arguing that Wall Street-friendly politicians were attempting to maim the agency to block serious regulation of consumer lending.
Altering its funding stream, however, may not be necessary to crimp the bureau's power. In February, the House GOP passed a short-term budget bill that instructed the Federal Reserve not to transfer more than $80 million for the entire fiscal year to cover the CFPB's operations -- roughly half of what it estimates it needs for that time period. The president has vowed to veto the measure, which did not pass through the Senate.
Bachus and Emerson did not return calls requesting comment.
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