Barney Frank and Brad Miller tried to shake up a House Financial Services Committee hearing yesterday. As per usual, Republicans wanted to go after the CFPB’s funding and subject it to the appropriations process. As it stands, CFPB derives its funding from a portion of the funding of the Federal Reserve, which comes from sources independent of Congress. The argument goes, why should CFPB be exempt from Congressional oversight in terms of its funding? The real agenda is that Republicans would then squeeze funding for CFPB to render them ineffective, or attach strings to the funding, either explicitly or implicitly.
Very well then, said Frank and Miller. They offered up amendments saying that, if CFPB funding must come from the hands of Congress, then so should money from other banking regulators, like the OCC and the Fed.
Interestingly, the CFPB isn’t the only Federal banking regulator that has its own dedicated revenue stream free from Congressional pressure. In fact, they all do. The Office of the Comptroller of the Currency, for instance, is funded via assessments on banks, or “clients”, as OCC Chief Counsel Julie Williams calls them (or so I’m told). Williams is the key villain behind most bank-friendly regulatory decisions over the past two decades, but her general anti-consumer and predatory behavior is baked into the DNA of the regulator [...]
And then there’s the big enchilada, the Federal Reserve, which is of course not subject to Congressional appropriations because of its vaunted “independence”. Interestingly, the Fed, when it was officially controlled by Treasury in the 1930s and 1940s (up until the mostly unknown and critical fight with Truman that produced the Fed-Treasury Accord), financed the New Deal, World War II, and saw unemployment drop to 1% as inequality collapsed and America became a middle class nation. The Fed finances itself through interest on the bonds in its portfolio, essentially printing money to do so. The Fed’s reserve banks are still private entities, and they still pay dividends to member banks. No member of Congress can do anything to the Fed, it’s an unaccountable set of quasi-private banks that often respond to Wall Street.
This can all change if Congress wants it to, and that process starts with the budgeting recommendations put out by the Financial Services Committee. Frank and Miller are responding to the Republicans in a partisan fashion – you want the CFPB funded by Congress? Fine, we’ll put that on the OCC and the Fed, as well. These proposals, while they are in some ways kabuki, are fundamentally getting at the undemocratic nature of our banking regulators. The Republicans have a point – the CFPB shouldn’t be funded without guidance from Congress. But there’s a much more significant problem here – the far more powerful and important OCC and Federal Reserve should also be subject to some sort of democratic check on their power. I’d take the trade on all of these regulators – subject them all to Congressional appropriations.
Both measures failed, sadly. Frank’s amendment to subject the Fed to the appropriations process failed 24-33, though he did pick up two Republican votes (Steve Stivers and Lynn Westmoreland). Ron Paul was on the campaign trail and didn’t vote. I suspect it would have been a far different scenario then. On the Democratic side, Joe Donnelly, Jim Himes, Gary Peters and Chris Carney voted against it. Flip those four and it’s within one vote of passing. Miller’s amendment on OCC got one more Republican (Huizenga – not familiar with him), but lost more Democrats and failed 22-35.
The best that can be said is that we’re clear now who wants to keep banking regulation in the hands of unaccountable elites responsible for complete incompetence during the financial crisis.
With all the fireworks around CFPB funding, not a peep was uttered about the cancellation of HAMP. Even the most partisan Democrats wouldn’t defend the program.
Democrats did not take any steps on Wednesday to protect the centerpiece of the Obama administration’s housing effort—the Home Affordable Modification Program—as Republicans moved to eliminate the initiative.
The effort to kill HAMP came during a House Financial Services Committee markup of a broader package of proposals designed to reduce the budget deficit and prevent automatic defense cuts from going into effect.
While committee members spent nearly two hours arguing fiercely over a Republican proposal to strip one of the core provisions from the Dodd-Frank financial reform law, no debate followed when the chairman opened the discussion of HAMP. No amendments were put forward and no one on either side of the aisle said a word, despite the presence of several members, including ranking member Barney Frank, D-Mass.
The debate then quickly moved onto another tense fight over subjecting the Consumer Financial Protection Bureau to the appropriations process.
The House already passed a bill killing HAMP, which died in the Senate. But the lack of support for it from the Democratic side is striking. Nobody’s going to stick out their neck for a failed program.