Column: Republicans cook up plan to cripple consumer agency
If there’s one thing the financial services industry hates, it’s adult supervision.
Last week, Rep. Jeb Hensarling, a Texas Republican who serves as chairman of the House Financial Services Committee, unveiled a plan that he said would rectify the “grave mistake” that was the 2010 Dodd-Frank Act, which tightened the regulatory screws on financial firms and created the Consumer Financial Protection Bureau as an industry watchdog.
“Dodd-Frank’s false premise is that an alchemy of Wall Street greed, outsized private risk and massive Washington deregulation almost blew up the world economy,” he said in a speech last week to the Economic Club of New York.
“It wasn’t deregulation that caused the financial crisis,” Hensarling said. “It was dumb regulation.”
As for greed, he said, “When hasn’t there been an element of greed on Wall Street?”
Boys will be boys, right?
Hensarling would fix things by throwing out large sections of the law.
“He’d gut Dodd-Frank and gut the Consumer Financial Protection Bureau,” said Deepak Gupta, a Washington lawyer who previously worked as senior counsel for the watchdog agency. “Jeb Hensarling is a wholly owned subsidiary of the financial services industry.”
Too harsh? Not when you consider that, according to the Center for Responsive Politics, Hensarling has received more than $5.5 million from financial firms and industry groups since being elected to the House in 2002. The top two contributors to his political endeavors are JPMorgan Chase ($105,000) and the American Bankers Assn. ($85,000).
In the 2014 election cycle, Hensarling was Congress’ No. 1 recipient of cash from payday lenders ($68,000), which are strongly against proposed rules from the CFPB that would rein in their operations.
Hensarling’s office steered me to the Financial Services Committee for a comment. Jeff Emerson, a committee spokesman, said Hensarling has opposed Dodd-Frank since its introduction and “his record has been consistent and transparent.”
Hensarling’s planned legislation -- the misleadingly titled Financial Choice Act -- would roll back significant portions of Dodd-Frank. Among other things, it would do away with the so-called Volcker Rule, which limits a bank’s ability to use its own accounts to make risky speculative investments.
It would radically revamp the CFPB by renaming it the Consumer Financial Opportunity Commission and replacing its sole director with a five-member bipartisan commission. The commission’s mandate would be not just protecting consumers but also safeguarding the well-being of financial services markets.
Hensarling’s bill would make the rejiggered agency more beholden to Congress by giving lawmakers say over the agency’s funding. Currently, the bureau’s funds come not from Congress but from the Federal Reserve.
“Hensarling and Republicans on the House Financial Services Committee can’t stand this,” Gupta said. “It means they don’t have control over the purse strings.”
A spokesman for the bureau declined to comment.
Of course, the financial services industry is thrilled with Hensarling’s proposals.
“Every law can be improved and Dodd-Frank is no exception,” said Jeff Sigmund, a spokesman for the American Bankers Assn. “Today, it is not unusual to hear bankers from strong, healthy banks say they are ready to sell because the regulatory burden has become too much to manage.”
Tom Quaadman, senior vice president of the U.S. Chamber of Commerce, told me the changes proposed for the CFPB would result in a more effective, more accountable agency.
“Congressional oversight is important to make sure the rights of people and businesses aren’t being trampled upon,” he said.
Consumer advocates see a different agenda at work.
“This plan doesn’t get tough on banks,” the advocacy group Americans for Financial Reform said in a statement. “It gets tough on the regulators policing them.”
Liz Ryan Murray, policy director of the People’s Action Institute, which represents grass-roots organizations, said the millions in contributions showered on Hensarling “bought a really good friend in Congress.”
Is there room for improvement in Dodd-Frank? Yes. Some regulations, such as capital requirements, that are intended to keep big banks healthy might be too stringent for smaller institutions.
But there’s no disputing the success of the CFPB. Since its founding in 2010, the bureau has secured more than $11 billion in relief for more than 25 million consumers harmed by dubious financial practices.
In other words, it made financial firms behave responsibly, in a grown-up fashion.
The industry clearly would prefer to go back to the way things were before.
MORE FROM DAVID LAZARUS