By Congressman French Hill (R-AR)
Washington, D.C.'s idea of government may have changed, but the American people's has not. This is a significant observation I have made since returning to Washington after living and working for 25 years in central Arkansas.
In Washington, accountability has gone from a focal point of governance to a relative afterthought.
The rest of America doesn't approve of Washington's dismissal of accountability. When I'm home in Arkansas, I haven't met very many people--if any--who have told me they don't agree with the idea that our government needs to be accountable to the people; likewise, I haven't met many people who said they disapprove of our constitutional system of checks and balances.
Yet inside "the Beltway" of our federal government, there is this inexplicable movement to enshrine anti-accountability policies and agencies into law. When I was a young Senate staffer in the 1980s, accountability was a fully and wholly bipartisan endeavor. In 2017, now even accountability can have a partisan taste to it, or at least that is what the battle over the Consumer Financial Protection Bureau (CFPB) has shown.
The CFPB has become arguably the least accountable government agency.
The director can be fired only for "inefficiency, neglect of duty, or malfeasance," and because the CFPB is an independent agency located within the Fed--which also amazingly has no authority over the agency--and is not subject to the appropriations process, neither the administration nor Congress has a say over the CFPB's actions.
Last September, a federal appeals court ruled CFPB's organizational structure unconstitutional and said that its unelected director "enjoys more unilateral authority than any other officer in any of the three branches of government of the U.S. government, other than the president."
Consumer protection is of the utmost importance, and prior to the creation of the CFPB, the government at both the state and local level had extensive consumer-protection laws and regulations in place and agencies fully tasked with their enforcement. And never in my long community banking career did I see a financial regulator shirk their consumer protection responsibility.
The massive amounts of raw consumer data the CFPB collects, its foray into areas it was specifically prohibited from regulating including auto lending and the practice of law, and the lavish renovation of its leased headquarters--which is costing taxpayers over $200 million--only underscore the need for intensive accountability and transparency.
But as the evolution of Washington has gone, none of that matters; only messaging matters. Defenders of CFPB essentially argue that with an agency named for consumer financial protection, how could it be anything but a good steward of consumer needs and protections? We don't apply that standard to any other agency in government; having a consumer-friendly name doesn't absolve it from the necessity of standard congressional oversight.
When you pull back the curtain on this perceived irreproachable agency, you see something much uglier than its name might suggest.
But the worst part about the CFPB is that the agency's practices are actually harming consumers. By limiting, eliminating, or increasing costs on products that financial institutions can offer, the CFPB's practices are growing the ranks of unbanked and underbanked Americans. The Dodd-Frank Act and CFPB policies have increased the price of basic banking services and reduced the availability of short-term credit options for low-income Americans, continuing to push them into more expensive--and potentially unregulated--credit options. To illustrate this, before Dodd Frank, 75 percent of consumers could find "free checking." By 2015, just 37 percent of banks offer true "free checking."
CFPB's "Ability to Repay" and "Qualified Mortgage" rules also have made it more difficult for low- and middle-income borrowers to qualify for a mortgage, with some community banks exiting residential lending altogether due to the complexity and burdens of the rules. The "Know Before You Owe" rule, despite its name, has continued to cause consumer confusion and costly delays in the closing process, not to mention the billions of dollars the real estate industry spends in implementing the rule--resources that could have been extended as credit or directed toward product innovation.
Under the leadership of Chairman Jeb Hensarling, the House Financial Services Committee has proposed the Financial CHOICE Act, which will help increase consumer choice and access to affordable credit and capital for all Americans.
One of the main pillars of the CHOICE Act is to bring accountability back to Washington regulators, including the CFPB. The CHOICE Act will provide structural reforms to the CFPB, including making it subject to appropriations and requiring comprehensive cost-benefit analysis for rule-makings.
By creating checks and balances for CFPB, the CHOICE Act will make it more accountable to Congress and the American people so that it can effectively do the job it was designed to do--protect consumers.
Rep. French Hill represents Arkansas' 2nd Congressional District. Read More
The CFPB began an investigation into Wells Fargo only after the bank contacted the agency and the Los Angeles city attorney had filed a civil complaint, according to documents released by the House Financial Services Committee.
Documents released by Chairman Jeb Hensarling included a May 8, 2015, letter from the CFPB to Wells in which the bureau says news reports in the Los Angeles Times and the city complaint have raised “significant concerns and questions” about Wells Fargo’s sales practices.
The letter, signed by CFPB regional director Edwin Chow, asked Wells for details on its sales practices and urged the bank not to destroy any documents.
“What a coincidence,” said Rep. Ann Wagner. “The CFPB was asleep at the wheel.”
Richard Cordray defended the agency during his semi-annual appearance before the committee today.
“We had had previous indications that there had been problems at Wells Fargo,” he said. “It wasn’t the L.A. Times article that tipped us off.”Read More
Los Angeles Times – Republicans Attack Consumer Financial Watchdog as They Push For His Firing
Part of the GOP attack focused on the Wells Fargo case as they argued the watchdog agency “was asleep at the wheel” in identifying that the bank was creating unauthorized accounts and only got involved after the Los Angeles Times and Los Angeles City Attorney Feuer had uncovered the problems.
Politico Pro – CFPB Was Late to Wells Fargo Probe, Letters Suggest
The CFPB began an investigation into Wells Fargo only after the bank contacted the agency and the Los Angeles city attorney had filed a civil complaint, according to documents released by the House Financial Services Committee.
Documents released by Chairman Jeb Hensarling included a May 8, 2015 letter from the CFPB to Wells in which the bureau says news reports in the Los Angeles Times and the city complaint have raised “significant concerns and questions” about Wells Fargo’s sales practices.
Wall Street Journal – Republicans Blast CFPB, Alleging Slow Start to Wells Fargo Probe
The documents unveiled Wednesday showed Wells Fargo notified the CFPB on May 4, 2015, that it had received a civil complaint from the Los Angeles city attorney’s office and that the Los Angeles Times was planning to report on the complaint the following day. On May 8, the CFPB told the bank that it was initiating a supervisory review, saying the materials received from the bank “raised significant concerns and questions about Wells Fargo’s consumer financial services sales practices.”
On March 3, 2016, the CFPB informed Wells Fargo that it had decided to initiate an enforcement process, a day after the bank started settlement negotiations with Los Angeles officials.
Ann Wagner, head of the panel's oversight subcommittee, painted the CFPB as a latecomer in uncovering Wells Fargo's fraudulent sales practices. She repeatedly pressed Cordray to specify about when he prompted the agency's staff to begin its investigation of the San Francisco-based bank, suggesting the agency was "asleep at the wheel" until press reports emerged.
Other GOP lawmakers, including Sean Duffy and Hensarling, also chastised Cordray for failing to reply to dozens of subpoena requests, including one tied to Ally Financial for discriminatory pricing in the lender's auto loans, and for not certifying compliance with lawmakers' requests.
Morning Consult – Republicans Build Case Against CFPB’s Cordray, Cite Wells Fargo Scandal
Congressional Republicans on Wednesday ramped up their criticism of Consumer Financial Protection Bureau Director Richard Cordray, citing previously undisclosed documents they say contradict his timeline of the agency’s investigation of Wells Fargo & Co.’s consumer fraud scandal.
Wagner’s questioning focused on a previously undisclosed letter dated May 8, 2015, where the CFPB referred to an earlier civil complaint by the Los Angeles city attorney and a Los Angeles Times news story about Wells Fargo’s fake accounts. That letter, she said, shows that the CFPB failed to take a leading role in addressing Wells Fargo’s issues.
Republicans spent the more than five hours of the hearing making the case for Cordray’s dismissal. They argued that Cordray’s CFPB routinely overstepped legal and jurisdictional boundaries and prized flashy, expensive fines over consumer freedom.
Multiple Republicans argued that the CFPB ignored signs of fraud at Wells Fargo before fining the bank more than $180 million last September for opening more than 2 million unauthorized accounts.
Republicans claimed the agency failed to detect wrongdoing at Wells Fargo & Co, relying on outside investigators and news reports to point out widespread problems with improper account creation.
“The CFPB was asleep at the wheel!” said Ann Wagner, a Missouri Republican. The earliest the committee could determine the CFPB began to examine Wells Fargo was in May 2015, after the bank notified the regulator that the Los Angeles City Attorney was already pursuing a civil case, she said.
Yet the CFPB was front and center in September 2016 when the high-profile $185 million multi-agency settlement was announced.
This semiannual hearing happened in the midst of controversy around the bureau and Cordray’s position.
Rep. Sean Duffy, R-Wisc., interrogated Cordray on his tenure at the CFPB, bringing up the fact that Cordray has already been at the bureau for five years and three months…meaning he will actually serve longer than his five-year term, which officially ends in July 2018.
Credit Union Times – Hensarling to Cordray: You Should Be Fired
He said that under Cordray’s direction, the CFPB has shown an “utter disregard” for protecting markets and has made credit more expensive.
“For conducting unlawful activities, abusing his authority and denying market participants due process, Richard Cordray should be dismissed by our President,” the chairman said.
A congressional panel has found signs of “suspicious trading” in the stock of the nation’s largest student loan servicing company before the firm was hit with a federal lawsuit that might have sent shares plunging…Rep. Patrick McHenry, R-N.C., the vice chairman of the House Financial Services Committee, made the disclosure during a politically-charged session on the performance of the Consumer Financial Protection Bureau.
“Unfortunately, committee staff has learned of suspicious trading activity for the Navient Corporation the morning before the announcement of CFPB’s enforcement action,” McHenry said. The disclosure came after McHenry asked CFPB Director Richard Cordray if he know of “any confidential leaks” that “led to insider trading.”
Boston Herald – House GOP Turns Up Heat on Elizabeth Warren’s Consumer Bureau
Hensarling and other lawmakers accused Cordray of failed leadership at an agency they said stifles business and is slow to respond to actual wrongdoing. The hearing comes as a federal appellate court in Washington reconsiders a ruling last year that the structure of the agency — which is headed by a director who can only be removed by the president for cause — is unconstitutional.
“You have a rotting agency,” said Rep. Sean Duffy, R-Wisc., referring to 2014 congressional testimony by CFPB employees claiming racial and sex discrimination and retaliation.
Rep. Ann Wagner, R-Mo., angrily accused Cordray of dragging his feet in probing claims of fraudulent practices at Wells Fargo, which resulted in the bank paying $185 million in fines last year. She noted that the CFPB’s involvement came after news reports and a separate probe by Los Angeles officials.
“The CFPB was asleep at the wheel — asleep at the wheel, Director Cordray — under your leadership!” Wagner said.
Since I was first elected to Congress, I have fought to hold government agencies and Washington bureaucrats more accountable to Floridians and all Americans. Unfortunately, the Consumer Financial Protection Bureau (CFPB) continues to operate in a manner unaccountable to Congress, the president and American taxpayers.
You don’t have to take my word on this.
On October 11, 2016, the D.C. U.S. Circuit Court of Appeals found the CFPB’s leadership structure unconstitutional. In its decision, the court stated, “The [CFPB] Director enjoys significantly more unilateral power than any single member of any other independent agency[,] . . . power that is not checked by the President or by other colleagues. Indeed, other than the President, the Director of the CFPB is the single most powerful official in the entire United States Government . . . .”
This unsettling unilateral power, coupled with the inability for other arms of the federal government to review or disapprove of the CFPB’s actions, not only flies in the face of our government’s system of checks and balances, but also promotes rogue operations and regulations that have the potential to grossly alter our economy and harm the livelihoods of millions of Americans.
The CFPB was created by Democrats in response to the 2008 financial crisis as a provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank). This 2,300 page piece of legislation was sold to the public as a means to hold bad financial actors accountable, prevent future systemic failures of our financial system, and provide increased transparency and consumer protections for investors. President Obama promised Dodd-Frank would “lift the economy,” but once again, he gave the American people false hope.
Instead, in the years since it was enacted, the big banks have grown bigger, while community financial institutions are disappearing at an average rate of one per day. Consumer credit has tightened up, and low and middle-income borrowers are feeling these effects more than most.
Although many financial service providers are already regulated at a state and federal level, CFPB creates excessive red-tape for industries across the entire financial services spectrum without accountability to Congress. Dodd-Frank completely disregarded the important congressional appropriations process and specifically allowed the CFPB to receive its funding directly from the Federal Reserve’s operating expenses so the CFPB could operate outside of congressional oversight.
The CFPB’s authority to regulate financial services transactions is so expansive it goes well beyond banks and other depository institutions. The sole director is appointed to a five-year term and, once appointed, can set implement policies in whatever way he or she sees fit. To make matters worse, the CFPB lacks the internal checks and balances to which other independent regulatory agencies are subject to.
Instead of issuing clear and specific guidance, the CFPB uses enforcement tactics that financial institutions have to measure against their own practices and then somehow implement, often to the consumers’ detriment.
For example, the CFPB does not distinguish credit unions and community banks from large financial institutions and nonbank lenders. As a result, the CFPB’s broad and overly burdensome regulations are severely impairing these important community-based financial institutions by limiting consumer credit availability and choice, as well as increasing costs for credit union members and community bank customers. Additionally, new CFPB rules and regulations have prevented many new mortgage loans from being made, particularly for low and middle-income borrowers.
There is no question about it, we must start easing the regulatory burdens faced by our community financiers, and reign in the unilateral power the CFPB director has over hardworking taxpayers. As a member of the House Financial Services Committee, I am committed to working with my colleagues to enact legislation that holds the CFPB accountable to all Americans, and to ensure its actions stop harming the consumers it was charged to protect.
U.S. Rep. Dennis Ross, R-Fla., was first elected to Congress in 2010. He is part of the congressional leadership as senior deputy majority whip.
Washington, D.C. is known for many things: Majestic monuments, smoky steakhouses, and wasteful bureaucracy at its worst. From the Environmental Protection Agency's crippling regulations to the Pentagon's $125 billion boondoggle, the swamp is full of critters. But no government agency is creepier or crawlier than the Consumer Financial Protection Bureau (CFPB).
It starts with the CFPB's structure. Normally, government agencies like the State Department and Environmental Protection Agency are overseen by Congress, which determines funding levels and monitors agency leadership for any red flags. Not so with the CFPB.
Created by the Dodd-Frank financial law in 2010, the agency receives its annual funding automatically as a portion of the Federal Reserve's budget, leaving Congress out of the appropriations process. Its director, Richard Cordray (pictured above), is a White House appointee who can only be fired by the president for cause, such as malfeasance or negligence.
Don't just take it from me. The Department of Justice (DOJ) recently filed court papers asking a federal appeals court to order the restructuring of the CFPB. The DOJ argues that the agency’s structure comes into a separation-of-powers issue, since Cordray isn’t sufficiently answerable to the president. In the DOJ’s words: “There is a greater risk that an independent agency headed by a single person will engage in extreme departures from the president’s executive policy.” The Justice Department also argued that the president should be able to fire Cordray at will.
Last year, the U.S. Court of Appeals for the District of Columbia Circuit described the CFPB as “unconstitutionally structured” and a “gross departure from settled historical practice.” The appellate court similarly ruled that Director Cordray possesses too much power. The agency's lack of accountability is so unprecedented that, this month, the House Financial Services Committee held a hearing called “The Bureau of Consumer Financial Protection’s Unconstitutional Design."
Then there's the politics. In 2016, the CFPB sent $16 million to GMMB - a Democratic consulting firm - to publicize the agency’s marketing materials. Jim Margolis, a senior partner for GMMB, served as a senior adviser to President Obama and Hillary Clinton’s 2016 campaign. Contracting almost exclusively through Margolis’ firm, the CFPB’s advertising spending represents 2.5 percent of its annual budget - eclipsing the Food and Drug Administration’s 2 percent annual budget. (Most federal departments and agencies spend less than 1 percent of their budgets on advertising.)
The eight-figure marketing budget makes you wonder: Why do most Americans know nothing about the CFPB? In a recent national telephone survey, 81 percent of respondents claimed they they didn't even know enough about the agency to form an opinion about it. Even Rohit Chopra, a former CFPB assistant director, admits that the agency doesn’t have “the most effective PR strategy.”
But the CFPB marches on, retaining Democratic consultants. Agency staffers are clearly on board: According to a review of Federal Election Commission data, 100 percent of campaign contributions made by the agency’s employees went to Democratic candidates in 2016. Consequently, the CFPB is tied for the country’s most politically biased federal entity - alongside the National Endowment for the Humanities, National Transportation Safety Board, and Peace Corps. Even the Obama administration’s Justice Department was more diverse in its political makeup.
The swamp has no need for rogue bureaucracies. Let's drain it.Read More
As the following article from Real Clear Markets points out, the unaccountable and unconstitutional CFPB shows utter contempt for constitutional due process rights and tramples on the rule of law. This abuse may grab headlines, but it does not achieve justice and ultimately harms the very consumers the Bureau is supposed to protect.
“Prohibited by statute from regulating auto dealers, the agency targeted them anyway”
“Actions that were legal when PHH engaged in them became illegal through some after-the-fact interpretive magic by the bureau”
“CFPB violated due process”
“The bureau assumed away the statute of limitations”
Business As Usual at the CFPB Is Not Good for Consumers
By Hester Peirce & Vera Soliman
Real Clear Markets
There has been quite a bit of buzz surrounding the future of the Bureau of Consumer Financial Protection, or CFPB, as the priorities of the new administration begin to take shape. Some in Congress are calling for the CFPB’s director to be fired, others want to reform the structure and funding of the agency, and still others want to eliminate the agency altogether. Underlying all of these calls for change is the growing realization of just how far off the rails this fledgling agency has gone.
The calls for reform have not fazed the CFPB, which has assured the public that nothing has changed. When asked during a Wall Street Journal interview how the new administration might affect the bureau, Director Richard Cordray answered that “it really shouldn’t change the job at all.” A Journal report neatly summarized the sentiment: “CFPB chief Cordray says it’s still business as usual.”
What does business as usual look like? For the CFPB, it often means limiting Americans’ options in the name of consumer protection. The bureau, for example, proposed such onerous restrictions on small-dollar lenders that many of them might simply stop making loans. As our colleagues suggested in a comment letter on the rule, the CFPB would do well to familiarize itself with the deep financial struggles of small-dollar borrowers before further diminishing their already scant credit options.
Business as usual for the CFPB means compromising customer privacy, too. The bureau collects a lot of information from consumers. Its 2016 strategic plan set a goal of maintaining “a credit card database, including both summary and de-identified loan-level data, covering over 80 percent of the credit card marketplace.” There’s no reason to collect so much data, as a much smaller sample would suffice.
Business as usual for the CFPB also means ignoring the legal boundaries Congress set for the agency. Prohibited by statute from regulating auto dealers, the agency targeted them anyway by bringing enforcement actions against the companies to which the dealers sell their car loans. An internal memorandum obtained by Congress shows the CFPB gaming out different options for getting around the statutory prohibition without inviting “legal and political” fallout.
And the CFPB is looking to expand its authority beyond consumer financial products. The bureau is in a dispute with the Accrediting Council for Independent Colleges and Schools, from which it demanded reams of information related to “whether any entity or person has engaged or is engaging in unlawful acts and practices in connection with accrediting for-profit colleges.”
The district court judge, in denying the CFPB’s authority to investigate the accrediting process, cautioned that “Although it is understandable that new agencies like the CFPB will struggle to establish the exact parameters of their authority, they must be especially prudent before choosing to plow head long into fields not clearly ceded to them by Congress.”
The CFPB’s business as usual means changing the rules in the middle of the game. The case that landed the bureau in an ongoing constitutional crisis arose out of its decision to impose on PHH, a mortgage lender, a $109 million fine. To get to such a big number, the bureau reinterpreted the law; actions that were legal when PHH engaged in them became illegal through some after-the-fact interpretive magic by the bureau. The court explained, “even if the CFPB’s new interpretation were consistent with the statute (which it is not), the CFPB violated due process by retroactively applying that new interpretation to PHH’s conduct that occurred before the date of the CFPB’s new interpretation.” To make matters worse, the bureau assumed away the statute of limitations that made much of its case outdated.
Business as usual apparently means politicizing consumer protection as well. Former CFPB enforcement attorney Ronald Rubin described the bureau’s hiring decisions as being driven less by experience and merit than by factors such as the political affiliation of an applicant. Rubin points out that, although the CFPB made much of the Wells Fargo case, the real work was done by Los Angeles journalists and prosecutors. Last year, during a Senate Banking Committee hearing, Chairman Richard Shelby, R-Ala., noted that unauthorized accounts were opened at least as far back as 2011, and aptly asked, “Where were the federal regulators during these years?” He continued, “If there were ever a textbook case where consumers needed protection, this was it. How many millions of unauthorized accounts does it take before the CFPB notices? And while the bureau is billing this as the largest settlement in its history, it’s unclear whether it had any significant role in discovering or investigating the bank’s conduct.”
It’s no surprise that this unique agency—funded outside the appropriations process and led by a single, fixed-term director—finds itself in the middle of a heated debate over its future. For the sake of American consumers, let’s just hope its future is no longer business as usual.
By: Jeb Hensarling
Wall Street Journal
February 9, 2017
The Obama presidency placed no greater burden on America’s growth potential than the avalanche of regulations that smother the U.S. economic system. The most destructive and dangerous of the new regulatory bureaucracies created by the Democrat-dominated 111th Congress is the Consumer Financial Protection Bureau.
The CFPB stands with ObamaCare as a crowning “achievement” of Mr. Obama’s transformation of America. With unprecedented automatic funding provided directly by the Federal Reserve, the agency is unanswerable to anyone. Democrats chose to insulate it from Congress, the president, voters and the democratic process. The U.S. Circuit Court of Appeals for the District of Columbia noted as much in its recent PHH v. CFPB decision, which ruled the bureau’s governing structure unconstitutional. The court said the unelected CFPB director “enjoys more unilateral authority than any other officer in any of the three branches of government of the U.S. Government, other than the President.”
The CFPB is arguably the most powerful, least accountable agency in U.S. history. CFPB zealots have the power to determine the “fairness” of virtually every financial transaction in America. The agency defines its own powers and can launch investigations without cause, imposing virtually any fine or remedy, devoid of due process. It requires lenders essentially to read their clients’ minds, know and weigh their clients’ comprehension levels, and forecast future risk. It can compel the production of reams of data and employ methodologies that “infer” harm without finding any specific instance of harm or knowing violation.
The regulatory web spun by the CFPB can make every provider of financial services guilty until proven innocent, inviting selective enforcement and financial shakedowns. The CFPB is the embodiment of James Madison’s warning in Federalist No. 47 that “the accumulation of all powers, legislative, executive and judiciary, in the same hands . . . may justly be pronounced the very definition of tyranny.”
This tyranny has harmed the very consumers it purports to help. Since the CFPB’s advent, the number of banks offering free checking has drastically declined, while many bank fees have increased. Mortgage originations and auto loans have become more expensive for many Americans.
No corner of American finance is beyond the CFPB’s grasp, even auto dealers—which are specifically excluded from its jurisdiction by the Dodd-Frank Act. To dodge this legal constraint, the CFPB regulates auto dealers through enforcement “bulletins” on auto lenders, employing statistical analysis rather than specific acts to charge lenders with discriminatory lending. The race of borrowers is inferred based on the borrowers’ names and home addresses. Through this ruse they smear and shake down lenders.
The House in 2015 voted 332-96—with 88 Democrats in support—to force the CFPB to rescind its auto-lending guidance. Sen. Elizabeth Warren, the intellectual mother of the CFPB, led Senate Democrats’ opposition to the bipartisan bill. This is a sign the 52-member Senate Republican majority probably will be unable to overcome Democrat filibusters on legislation limiting the CFPB’s powers.
President Trump should immediately fire CFPB Director Richard Cordray, citing the president’s constitutional responsibility to take care that the laws are faithfully executed. A new director could first undo all harmful actions taken by the CFPB during the Obama era. He could then implement policies that actually benefit consumers, such as limits on class-action lawsuits wherein plaintiff law firms get fortunes but injured financial consumers get pennies.
The CFPB could also protect Americans from government abuses. A new director could penalize government bond issuers that fail to disclose unfunded pension liabilities. It could also put an end to government accounting and solvency standards that, if adopted by private companies, would result in fines or a firm’s closure.
Yet even with good policy, the CFPB would still be unconstitutional. For those who reject Sen. Warren’s view that the ends justify the means, the agency must be functionally terminated. Consumer protection can instead come through an accountable and constitutional process.
The Senate can achieve this with a simple majority vote. Dodd-Frank requires the Fed to fund all CFPB budget requests automatically—creating an estimated $6.6 billion funding stream over the next 10 years. Under a budget process known as reconciliation, the House Financial Services Committee, which I chair, and the Senate Banking Committee could be mandated to save $6.6 billion over 10 years of the budget. In the ensuing reconciliation bill the two committees could then direct the Fed to terminate CFPB funding. Senate Democrats could not filibuster the bill.
Congress could then transfer the CFPB’s consumer protection role to the Federal Trade Commission or back to traditional banking regulators, where it resided before the CFPB’s creation. A Senate point of order requiring 60 votes could be brought against these provisions, on the ground that they don’t belong in a reconciliation bill. The advantage of putting the restructuring language in the reconciliation bill is that if Democrats use the point of order to strike the language, they—not Republicans—would have elected to end all CFPB funding, leaving the new system of consumer financial protection to be decided in future legislation.
When Democrats sought to take consumer protection outside the democratic process, consumers were harmed by a reduction in competition. With fewer lenders serving fewer borrowers, fewer businesses employed fewer workers. A healthy economy is the first casualty of any war on credit, and a loan denied becomes a job lost. The CFPB has eroded freedom, trampled due process and killed jobs. It must go.
‘Overregulation has caused costs to go through the roof, many banks have been shut down and that has hit small businesses’
‘We can’t afford to keep going the way we’re going’
By Joyce M. Rosenberg
Feb. 8, 2017
Small community banks say Dodd-Frank regulations too much of a burden.
NEW YORK — Community banks that can be vital to many small businesses are hopeful about changes that the Trump administration and Congress have promised to legislation passed after the financial crisis that tightened supervision of Wall Street and the banking industry.
The number of small, local banks has declined since the Great Recession, a change that advocates feel was intensified by the paperwork the increased oversight entails. That's disappointing to many small business owners, who find it easier to form relationships with community bank branch managers and bankers than with those at regional or international banks. A community banker can advise them and steer business their way, for example, connecting a company owner with a new accountant.
"I need someone I can talk to who can understand the dynamics of a small business," says Ken Yager, who owns Newpoint Advisors, a Schaumburg, Illinois-based consulting firm. "With a big bank, you just disappear into an account number."
Jeff Bridgman remembers when his community bank would cover an overdraft for his antiques business, knowing he'd have funds in the account within a few days. He had a close relationship with the employees even as the bank went through several mergers over 15 years. But a staff turnover at the bank, now one of the more than 200 branches of Northwest Bank, left him without the attention and support he had in the past.
"I don't know how a bank could help me today, so I don't even consider them as a tool for growth," says Bridgman, whose eponymous company is located in York, Pennsylvania. "The bank for me today is just a place for money to sit for a couple of days while I write checks."
The U.S. had 5,521 community banks as of Sept. 30, down more than 25 percent from 7,442 at the end of 2008, when the banking crisis was still in its early days, according to the Independent Community Bankers Association, an industry group. The Federal Deposit Insurance Corp. has reported nearly 500 bank failures since 2009, most of them small banks. Others have merged to cut costs and stay in business, but many have struggled even as the economy has recovered.
Industry groups blame increased regulation, including the Dodd-Frank bill passed by Congress in 2010. Last week, President Donald Trump signed an executive order directing the Treasury secretary to review Dodd-Frank and its thousands of regulations. Changes in the law would have to be made by Congress, and House Financial Services Committee Chairman Jeb Hensarling of Texas has proposed modifying portions that affect smaller banks.
Dodd-Frank has created additional procedures and paperwork for all banks, but community banks have a harder time meeting the requirements because they have far smaller staffs than regional or national financial institutions, says Paul Merski, the ICBA's chief economist.
"You can't say which provision it is that's causing you concern. It's more like death by a thousand cuts," says Tim Zimmerman, president of Standard Bank, a Pittsburgh-area community bank with nine branches. "It's exhausting management and staff of community banks around the country."
The ICBA is advocating for several banking laws to be repealed or modified. Among them:
The changes were intended to protect against failures like Lehman Brothers in 2008, and community banks don't pose a similar threat, the ICBA says. Community banks are likely to have several billions of dollars in assets each, according to the FDIC, while regional banks may have assets in the hundreds of billions of dollars and international banks like Bank of America and Wells Fargo have assets into the trillions. Small business advocates say they're feeling the reverberations.
“The overregulation has caused costs to go through the roof, many banks have been shut down and that has hit small businesses," says Javier Palomarez, president of the United States Hispanic Chamber of Commerce.
Yager, whose firm specializes in helping financially troubled small businesses, uses larger banks for tasks like money transfers, but depends on his community bank for most of his needs. He finds community bankers more willing than larger ones to try to help companies succeed.
"They'll ask questions like, what collateral do you have? Do you have a plan? What have you missed in your business that could help make things better?" he says.
In the meantime, struggling community banks are expected to continue merging. Standard, the Pittsburgh-area bank, is in the process of consolidating with another area community bank, Allegheny Valley Bancorp, which has eight branches.
"We can't afford to keep going the way we're going," Zimmerman says.
Financial Services Committee Chairman Jeb Hensarling (R-TX)
Remarks to the Exchequer Club, Nov. 16, 2016
*As Prepared for Delivery
Good afternoon, everyone. I’m Jeb Hensarling – and I approve this message.
No, I think we’ve all had enough of that to last us for a while. Our long national nightmare is finally over: the 2016 campaign. Don’t worry; it will be at least a couple of weeks before the next campaign season really picks back up again. Just for fun, the other day I googled “2020 presidential election.” It lists 49 potential candidates. So get ready, America! We’ve only got about 1,155 days to Iowa!
Thank you for inviting me to speak today. It’s been a while since I’ve spoken to the Exchequer Club, and it’s been a while since I’ve been in Washington. As all of you know, members of Congress have been back in our home states for several weeks. Some of you may know it as “flyover country.”
But it’s really the Heartland of America. By electing Donald Trump our next president, the people of the Heartland rose up and sent a clear message to the ruling elites last week. They’re not going to take it anymore and they expect change.
And they have every right to be upset. They see themselves working too hard and not getting ahead – like trying to run up the down escalator. This economy is still not working for working people.
They’re upset at seeing their dreams for their children’s future diminished. They’re upset at of seeing their values ridiculed and scorned by the establishment.
And every day they see their liberties and opportunities slipping away as Washington grows larger, more intrusive, more distant, more powerful and more arrogant.
So a hard fought election may be over, but our work is just beginning. We must now help bring our country together and advance the cause of a better, stronger, more prosperous America. I believe if we adhere to the Founders’ principles, we can put in place policies that create the real change Americans so desperately want.
The Founders believed “We the People” were capable of governing ourselves. They distrusted unchecked power, so they limited government and promoted individual freedom, free enterprise and the rule of law.
These principles are what enable equal opportunity, prosperity and civil society to flourish.
And on the Financial Services Committee, these principles are embodied in the proposals we offer and which I’ll discuss later, such as the Financial CHOICE Act to promote economic growth for all and bank bailouts for none, the FORM Act to bring accountability and transparency to the Federal Reserve, the PATH Act to create a sustainable housing finance system, and numerous other ideas to help Americans on Main Street achieve financial independence and a better, more hopeful life.
Regrettably, when Americans look at Washington today, they see our federal government has drifted far from the Founders’ vision. Instead of limited government comprised of three accountable branches, they see power concentrated into a large and intrusive centralized government, ruled not by “we the people” but by so-called experts in a new fourth branch that reaches further and deeper into our lives and tries to make decisions for us.
The rise of this fourth branch of government should concern every American. Because the rise of agency government risks turning our elections into a hollow exercise. As author and scholar Steven Hayward wrote, if we allow government to be run by unaccountable bureaucrats then “elections no longer change the character of…government” because “no matter who wins…the experts in the agencies rule and every day extend their rule further.”
And up until last Tuesday’s election of Donald Trump, millions have felt powerless to change it.
As Professor Jonathan Turley, a nationally recognized legal scholar at George Washington University has pointed out, this unaccountable fourth branch “now has a larger practical impact on the lives of citizens than all the other branches combined.”
Very few government policies, for example, have a more profound impact on the lives of working men and women than those that affect their ability to have a secure retirement.
Yet no one elected by the people had a hand in developing the Department of Labor’s so-called fiduciary rule, which will affect how investment advice is provided to every 401(k) plan, every IRA, and every rollover or distribution to or from either.
Altogether, the rule is going to impact about $3 trillion of hardworking Americans’ retirement assets. It will make access to financial advice more costly and less available to millions of lower and middle income workers -- and no one in Congress voted for it.
The effects are already being felt months ahead of implementation. Merrill Lynch has already announced its clients will no longer be able to buy mutual funds in certain retirement accounts.
Others have protested the rule’s particularly harmful impact on those who work at small businesses.
“This rule would put a significant burden on small businesses and their employees, making it less likely that we will be sufficiently prepared for retirement,” says John Raine, president of a small manufacturing firm in Indiana.
The Trump Administration, working with our Republican majority in Congress, should make sure this harmful, bureaucratic rule does not go into effect as planned in just five months. This is just one example of how unelected, unaccountable government hurts working people.
Another example is the CFPB’s rule that would shut down small dollar lenders without a single vote ever being cast in Congress.
How important is small dollar lending? Let me tell you the story of Robert Sherrill. He was a hardened drug dealer. Eventually his crimes caught up with him and he spent several years in prison, but somehow he emerged with a resolve to build a better life for himself.
The only problem was that no one would take a risk on Robert. He couldn’t get a job. He couldn’t get a loan. He couldn’t even get a bank account. The deck was stacked against him. It was against these odds that Robert decided that if he was going to turn his life around, he needed to start his own business.
Enter a local small dollar lender who understood Robert’s situation and designed a financial product to fit his needs.
“The payday loan I got…was a lifeline. It enabled me to start a business,” Robert said.
Today he employs 20 people. He is a member of his local Chamber of Commerce and Better Business Bureau. He is a productive citizen of his community. He went from serving hard time to making it possible for others to live better times.
And it would not have been possible if he couldn’t access a small dollar loan that the CFPB today essentially wants to outlaw – again, without a vote by Congress. These are just two examples of rule promulgated by the unelected and the unaccountable. These are just two rules that hurt struggling citizens. And these are two examples of rules the House Financial Services Committee, working with a President Trump, hopes to reverse.
Article One, Section One of our Constitution states “all legislative powers herein granted shall be vested in a Congress.”
It is time for Congress to take greater responsibility for federal regulations, because when Congress allows its legislative authority to be usurped, the people’s right to both self-government and due process is undermined. Instead of being governed by the rule of law, citizens become more and more governed by the rule of rulers.
On the Financial Services Committee, one of our top priorities for the 115th Congress is to arrest this assault on the people’s constitutional right to self-rule. They have been deprived of their voice for too long. We will work to make government accountable again.
Accountability is at the heart of our Republican plan to repeal and replace Dodd-Frank, called the Financial CHOICE Act. It demands greater accountability from both Washington and Wall Street.
It makes sure every financial regulation passes a cost-benefit test, also known as common sense, so we’ll know a proposed rule’s impact on economic growth before it takes effect.
With the exception of the Federal Reserve’s conduct of monetary policy, it puts all financial regulatory agencies on budget, because the bare minimum level of accountability to “We the People” is to have their elected representatives in Congress control the power of the purse.
Our plan also holds Washington accountable by converting financial regulatory agencies presently headed by single directors – the CFPB, the Office of Comptroller of the Currency, and the Federal Housing Finance Agency – into bipartisan commissions. A bipartisan structure will result in better rulemakings as agencies start considering multiple viewpoints and perspectives.
Another critically important provision of the Financial CHOICE Act requires all major financial regulations to first be approved by Congress before they can take effect.
This reform has already passed the House as the REINS Act, and it effectively returns Article 1 lawmaking to its rightful place: Congress.
Next, we repeal the Chevron doctrine. This doctrine allows the bureaucrats to put their thumbs on the scales of justice, making sure the judiciary always gives deference to their interpretation of the law. The Chevron doctrine is unfair, it’s an affront to due process and justice, and if we’re going to make government truly accountable to the people, the Chevron doctrine has got to go.
At the same time the Financial CHOICE Act holds Washington accountable, it also holds Wall Street accountable. It imposes the toughest penalties in history for those who commit financial fraud and deception. We must ensure consumers and investors are protected, treated fairly and have access to competitive, transparent and innovative markets that are vigorously policed for fraud and deception.
In addition to greater accountability, another key part of our committee’s agenda is to end too big to fail once and for all.
Proponents of Dodd-Frank promised it would end too big to fail and taxpayer-funded bailouts. But it did the exact opposite. Dodd-Frank writes too big to fail and taxpayer-funded bailouts into law.
Republicans on the Financial Services Committee offer a simple answer to this problem: bankruptcy, not bailouts.
A new subchapter of the Bankruptcy Code tailored to specifically address the failure of a large, complex financial institution is part of our Financial CHOICE Act. Taxpayer bailouts of financial institutions must end and no company can remain too big to fail.
And while we’re on the subject of bailouts, another major focus for our committee in 2017 will be the reauthorization of the National Flood Insurance Program, which is set to expire at the end of September.
Unfortunately, this government monopoly is beyond broke – it is bailout broke. $23 billion in debt thanks to Byzantine rules, misguided subsidies and zero consumer choice.
To fix this unsustainable situation, we will pass a reauthorization bill that begins the transition to a competitive, innovative and sustainable flood insurance market where consumers have real choices.
At a time when the Richmond Federal Reserve’s “bailout barometer” shows that U.S. taxpayers stand behind 60 percent of all financial system liabilities, ending too big to fail and getting more private capital into the flood insurance program are paramount.
Our committee will also continue working to relieve financial institutions from regulations that create more burden than benefit. Our Financial CHOICE Act replaces growth-strangling red tape with the reliable accountability of higher and simpler capital requirements.
This approach not only helps unleash greater opportunities for small businesses, innovators and job creators, it also stops investors from betting with taxpayer money.
For banks willing to put their investors in front of hardworking taxpayers in the event of a failure, the Republican plan will free banks to help more Americans finance their individual American dreams.
And for millions of Americans, the very definition of the American dream is owning a home of their own.
Regrettably, Dodd-Frank and the CFPB make it harder for Americans to achieve that dream.
They give Washington elites the power to decide who can qualify for a mortgage, and that’s why the Federal Reserve reports one-third of black and Hispanic borrowers will be hurt by the CFPB’s Qualified Mortgage rule when it is fully phased in, based solely on its rigid debt-to-income ratio. And again, all without a vote by Congress.
The American people deserve a better path forward – one that leads to a sustainable and fair housing finance system, so everyone who works hard and plays by the rules can have opportunities and choices to buy homes they can afford to keep.
At its core, the housing market is not fundamentally different from the market for any other asset. Housing is not immune to the economic laws of supply and demand or risk and reward.
Thus, Republicans offered the PATH Act, which principally relies upon private capital and market discipline to create a sustainable housing finance system. The PATH Act includes four fundamental goals essential to the development of any free market.
First, the role of government is clearly defined and limited. Second, artificial barriers to private capital are removed to attract investment and encourage innovation. Third, market participants are given clear, transparent, and enforceable rules to foster competition and restore market discipline. Lastly, consumers are afforded informed choices in determining which mortgage products best suit their needs.
The PATH Act specifically:
It’s been more than 8 years since the financial crisis, which was largely caused by Washington’s misguided housing policies. It’s been more than 6 years since Dodd-Frank failed to do anything about Fannie Mae and Freddie Mac.
It’s not easy; it’s the very definition of a “heavy lift,” but our committee looks forward to working with the Trump administration, to finally building a housing finance system that is sustainable for homeowners, for hardworking taxpayers, and for our economy.
Ladies and gentlemen, free enterprise has made America the fairest, most prosperous, most creative, most generous, and most compassionate society the world has ever known.
Nothing else has lifted more people out of poverty. And no other economic system allows people to earn their success through hard work, personal responsibility and individual initiative.
But instead of encouraging and helping people earn their success, Washington’s approach to poverty creates dependency on the state. It strips people of the dignity that comes from earning their own way. You would be hard pressed to create a system that is less compassionate.
As the Dalai Lama recently reminded us in the pages of the New York Times: “A compassionate society must protect the vulnerable while ensuring…policies do not trap people in misery and dependence.”
HUD was supposed to be one of Washington’s chief weapons in the War on Poverty launched by President Johnson more than 50 years ago. Yet HUD’s public housing projects are typically any city’s most despairing places, where generations of poverty-stricken families are warehoused and sealed off from the best schools, best job opportunities and safest neighborhoods.
HUD symbolizes the Left’s top-down, command and control, centralized planning approach that measures compassion for the poor based on how many programs Washington creates and how much money it spends.
As chairman of the committee with jurisdiction over HUD, I am committed to bringing new ideas to the table on better ways to fight poverty. There is without a doubt a proper and important role for government assistance. We must always have a strong social safety net below which no one can fall.
But right alongside that safety net, there needs to be – as former HUD Secretary Jack Kemp called it – “a ladder of opportunity on which everyone can climb.”
That ladder of opportunity is work. The best anti-poverty program ever devised is a job, even a part-time job. Of all adults who were living in poverty in 2014, almost two in three were not working at all. Compare that to only 2.7 percent of full-time workers and only 17.5 percent of part-time workers living in poverty.
We have a moral responsibility to lift these Americans up.
Let me tell you another story. I’ll never forget the single mom I met who was working at a retail store in Dallas.
Before getting her job, she told me she had lived her entire life in public housing in New Orleans until Hurricane Katrina hit and, like many, fled to safety in Texas with her children. Away from public housing’s desperate environment for the first time, she was finally able to take control of her life. “Now when there’s food on the table, my sons know I provided it through my hard work. Now when there’s a roof over their heads, they know that’s because of me,” she said.
She reminds us all that a job is more than just a paycheck. It’s about dignity and respect.
And we want all those struggling in poverty to know the pride and dignity that comes with work.
Under the leadership of Speaker Ryan, House Republicans have put forward a far-reaching blueprint to empower all Americans to achieve the American Dream.
I was honored to be part of the task force that developed this plan, which includes reforms to ensure able-bodied adults work or prepare for work in exchange for receiving taxpayer benefits, including housing assistance.
Such reforms are truly compassionate because they aim to liberate the poor from lives of hopeless dependency, to lives of independence and economic opportunity.
And speaking of economic opportunity, our economy would be healthier – and more Americans would have the opportunity to achieve success – if the Federal Reserve did not wander into fiscal policy, and were more predictable in its conduct of monetary policy and more transparent about its decision-making.
Today we’re merely left with so-called “forward guidance,” which is unfortunately amorphous, opaque and improvisational. It leaves hardworking taxpayers uncertain as they attempt to plan their economic future.
History – not theory, but history – shows that when the Fed follows a monetary policy strategy of its own choosing, and transparently communicates that strategy to the rest of us, the economy performs better and more Americans get to wake up in the morning and go to work.
Therefore, reform of the Fed remains a top priority. The House-passed FORM Act protects the Fed’s independence to chart whatever monetary policy course it deems appropriate, but it has to give the American people a greater accounting of its actions.
Lastly, there is one other issue I want to discuss that doesn’t fall exclusively under the jurisdiction of the Financial Services Committee, but is such an enormous threat to the well-being of every American it must be on the agenda of every committee, and that’s our unsustainable national debt.
The number and trends could not be clearer. Under President Obama, our national debt has nearly doubled to an astounding $19.8 trillion. The portion of the debt owed to U.S. and foreign investors now represents the largest share of the economy since 1950 and is on track to hit the highest level in recorded history. GAO reports our debt will grow to three times the size of the economy over the next 20 years.
For over 200 years a core part of our collective American ethos was “we work hard today so our children can have a better life tomorrow.” But Washington’s insatiable greed means we’re letting government live better today, so our children will have to work harder tomorrow.
My children Claire and Travis are the reason why I gave up a career in the private sector to serve in Congress. And I will devote every ounce of my being, my heart and my soul to stopping Washington from mortgaging their futures and forfeiting the torch of liberty that rightfully belongs to my children and yours.
We cannot allow the debt deniers in Congress to make them the first generation of Americans to live with less freedom, less opportunity, and a lower of standard of living.
In Washington, I’ve learned to go to work each day with high hopes and tempered expectations. But the agenda I’ve just outlined – accountability for Washington and Wall Street, economic growth for all, regulatory relief, an end to taxpayer-funded bailouts, helping Americans escape poverty, and confronting the national debt – this should be a bipartisan agenda. Democrats should be just as interested as Republicans in tackling each one of these challenges.
Even though Republicans will be nominally in charge of both ends of Pennsylvania Avenue soon, I remain painfully aware of the Senate’s cloture rules. That means there will continue to be a need to work with the other party. I’m certainly willing to negotiate in good faith on any proposal – from the Financial CHOICE Act to housing finance reform and anything else that comes before our committee. And it is with great pride that I note that during the 114th Congress, our committee has successfully guided 76 bills to House passage. That’s 66 percent of all measures reported out of our committee. 32 committee bills were signed into law, including 9 that make needed changes to Dodd-Frank. All of them had bipartisan support.
I’m told that’s one of the best – if not the best – performance record of any major House committee. With government so divided, that’s not bad at all – and I’m proud of the hard work of so many of our members who reached across the aisle and put forward good, common sense solutions.
I have an open mind, but it is not an empty mind. And I never tire or falter in the advancement of the principles of freedom, free enterprise and limited constitutional government.
Today, millions of our fellow citizens face stagnant wages, excessive tax burdens, rising health care costs, barriers to work and upward mobility, and an economy held back by hyper-regulation, cronyism and unsustainable debt.
The work ahead will be hard and demands the best of us. But that’s exactly what the American people deserve. Let’s get started. Thank you.