Neal S. Wolin
As the Senate prepares to vote this week on Richard Cordray’s nomination to be the first director of the Consumer Financial Protection Bureau (CFPB), some are attempting to forestall his confirmation by claiming that the CFPB lacks accountability and transparency. These claims do not stand up to scrutiny.
Last year, Congress established the CFPB to help protect consumers from unfair, deceptive, and abusive practices like those that proliferated prior to the financial crisis. In setting up the CFPB, Congress subjected the Bureau to constraints, including ones that do not apply to any other federal banking regulator, to create full accountability and transparency to Congress and the American people.
First, the Financial Stability Oversight Council can review, and even reject, the CFPB’s regulations. No other federal banking regulator is subject to this limitation. Congress may also overturn any CFPB regulation through legislation if it disagrees with the CFPB’s judgment.
The CFPB is also the only banking regulator with a funding cap. While all federal banking agencies are funded outside the appropriations process, the CFPB alone has a statutory cap on its funding. For additional resources, the CFPB must request an appropriation from Congress rather than levy fees on banks, as the other banking regulators may do.
Additionally, Congress exercises oversight over the CFPB through statutorily-required hearings, reports, and audits. Its director, once confirmed, is required to testify before the relevant House and Senate committees at least twice a year, the agency must submit annual financial reports and semi-annual budget justifications to Congress, and the Government Accountability Office performs an annual audit. An independent Inspector General also reviews the CFPB’s activities to inform Congress and the public about the CFPB’s programs and actions.
Finally, one fully accountable director is responsible for leading the CFPB. The director structure is not unusual for financial regulators. The Office of the Comptroller of the Currency (OCC), which has oversight over our national banks, has been led by a single director for more than a century. If this structure presented problems with accountability, it is unlikely that Congress would have chosen to increase the director of the OCC’s authority by merging the OCC with the Office of Thrift Supervision as part of financial reform.
There is also no evidence to suggest that the commission structure for the CFPB for which some have advocated is any more accountable than a single head. In fact, it could likely result in gridlock that leaves the American people vulnerable to some of the same critical gaps in regulation that helped cause the financial crisis.
The CFPB is an accountable, transparent agency that is subject to oversight that goes beyond what other federal banking regulators face. Richard Cordray is exceptionally qualified to serve as its first director. Senators should vote to confirm him without further delay.
Neal S. Wolin is Deputy Secretary of the Treasury.