There is no body within the federal government that has consumers as its main raison d'etre, which means consumers often come in second, third or last in any discussion of financial institutions. That lack of oversight had a role in creating the worst financial crisis in my, or most Americans', lifetime. And that's what Congress tried to fix with the creation of the Consumer Financial Protection Board (CFPB) as part of the Dodd-Frank reforms last year.
But today, the Financial Institutions & Consumer Credit Subcommittee of the Financial Services Committee will debate legislation that is clearly meant to cripple the CFPB before it even opens its doors.
One bill would convert the leadership of the Bureau to a five-member Commission instead of a single director who can act quickly to changing market conditions. Another would make it easier for the Financial Stability Oversight Council to veto CFPB rules, allowing a single member to petition for an override and lower the vote required for override to a simple majority (from a 2/3 majority). A third bill would delay the Bureau from opening on July 21 until a director has been confirmed by the Senate -- where a single senator of either party can stall any confirmation.
These bills are thinly-veiled attacks on the functioning of the CFPB and its chief proponent, Elizabeth Warren, a consumer finance expert and Harvard Law School professor.
The fact is that Congress has created the CFPB with so much oversight -- from the Financial Stability Oversight Committee overrides to regular annual Government Accountability Office audits to regular GAO audits of the Bureau, among other provisions -- that calls for "improving" the CFPB before it even opens its doors in July are unfair to all of us who use financial services.
We must make the prices -- and the risks -- clear in any financial product. We live in a world where use of financial products has exploded -- whether it's a student loan, or a debit card, or a variable-rate mortgage -- and financial "innovation" all too often means impenetrable financial complexity, which is sold in multi-page, small-type terms and conditions that you have to graduate law school to understand!
I was sitting in the Financial Services Committee room when Ben Bernanke said "disclosure is not enough" when it comes to credit card agreements -- and when Daniel Mudd, the then-CEO of Fannie Mae described reading through his own credit-card agreement, and even he couldn't understand it!
As Elizabeth Warren noted in her original proposal for the creation of a consumer finance agency:
It is impossible to buy a toaster that has a one-in-five chance of bursting into flames and burning down your house. But it is possible to refinance an existing home with a mortgage that has the same one-in-five chance of putting the family out on the street--and the mortgage won't even carry a disclosure of that fact to the homeowner.
Even those in the industry recognize the Bureau's merits. Jamie Dimon -- the chief executive of JP Morgan Chase -- said in his letter to shareholders in their annual report last month:
"...there were many good reasons that led to the creation of the CFPB and [we] believe that if the CFPB does its job well, the agency will benefit American consumers and the system."
And earlier this week, Camden Fine, president and CEO of the Independent Community Bankers of America said that Warren has consistently reached out to many small bankers around the country. "If we take her at her word, and we have no reason not to, she's spoken very favorably about regulatory burden on the smallest banks."
Consumers have been calling for help with financial issues since before the financial crisis. But the bills before us today will do little to help consumers; these bills are transparent attempts to hobble the agency before it has even opened its doors. As the USA Today editorial page put it, "In Washington, when you can't kill an idea you hate, you can always go back and maim it."
I hope the Subcommittee can deal with these bills today and move on to the real needs of our country: getting the economy back on track and Americans back to work -- and allow the CFPB to start work on leveling the playing field on behalf of consumers.
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