Bloomberg View columnist Barry Ritholtz today outlines the latest chapter in the war against the Consumer Financial Protection Bureau by the banking industry and its right-wing collaborators.
It’s in the form of a bill innocuously called the “Financial Product Safety Commission Act of 2015” (H.R. 1266), which was voted out of the House Financial Services committee last week.
The driving motivation of the bill is not “financial product safety,” but is, as Ritholtz writes, “a clever attempt to hobble the agency by giving oversight to a five-member board” and by doing so “tie up the CFPB so it is unable to do anything.”
“The financial industry couldn’t stop the creation of the CFPB, the thinking goes, so let’s ensnare it in as much partisan and bureaucratic gridlock as possible,” he writes.
This will look familiar to people who have been following the history of the CFPB, starting with the push by now-Sen. Elizabeth Warren (D-Mass.) to get the agency’s creation written into the Dodd-Frank financial reform law. Republicans then wanted to put the CFPB under a board dominated by agencies that supposedly regulate financial institutions but often draw their leadership from and are consequently captured by banking interests. Under that arrangement it would not be the independent, consumer-focused agency Warren intended and the rest of us needed.
Because it is under the singular leadership of a director, Richard Cordray, it is able to move on such issues as regulating payday lenders and cracking down on credit card fraud.
Compare that to the ability of the financial services lobby to tie the Securities and Exchange Commission in knots over a rule that would require financial advisors to take the best fiduciary interests of their clients into account when offering financial products. Ritholtz writes:
The Securities and Exchange Commission has determined that this standard should be the uniform duty of care owed to clients by anyone working in finance. A specially commissioned research report that was required by the Dodd-Frank Act independently reached that conclusion, as has the SEC’s staff, and a number of professional and academic experts. Yet politically, it has been a nonstarter. The reason? After a fierce and relentless lobbying blitz by the industry, the SEC can’t seem to get the backing of three of its five commissioners.
The Labor Department, on the other hand, is a cabinet-level agency that can issue regulations by design, without a partisan fracas. Hence, the department (which regulates pensions and retirement plans) was able to mandate that 401(k) providers be held to a fiduciary standard, something the SEC has been unable to require of the rest of the financial industry.
The legislation has not yet been scheduled for a vote by the full House, and even if it passes the House (and the Senate, where it has the support of Senate Majority Leader Mitch McConnell) it won’t become law while President Obama is in the White House. Nonetheless, the idea behind the legislation – that the CFPB is an “out-of-control” agency that needs to be reined in – is likely to be written into the political narrative of the 2016 political campaign. Just know that when they say the CFPB is “out of control,” they mean it is out of the control of the Wall Street mavens who don’t have your best interests at heart.