Lawmakers Take Aim at Consumer Financial Protection Bureau

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If you can’t beat ’em, starve ’em. It’s become a go-to tactic of the GOP-dominated House of Representatives, and it’s not just for Planned Parenthood anymore. Today, the House Appropriations Committee is expected to advance bank-friendly legislation created and approved by its financial services subcommittee that effectively hamstrings the new Consumer Financial Protection Bureau by blocking its access to funding.

The subcommittee slashed the CFPB’s 2012 fiscal year budget, capping it at $200 million instead of the approximately $498 million for which the Dodd-Frank financial reform legislation made provisions. As if this wouldn’t make it hard enough for the new agency to do things like investigate banks for abuses and rule-breaking, the bill also calls for this reduced amount to be subject to Appropriations Committee approval. In other words, the CFPB would have to come, hat in hand, every year to receive its allowance rather than being funded by the Federal Reserve, as Dodd-Frank spelled out.

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“If their budget is subject to the appropriations process it will be politicized,” says Pamela Banks, senior policy counsel for nonprofit Consumers Union. That’s probably an understatement.

The substantial lobbying muscle the financial industry wields would make it very difficult for funding to be approved. No other banking agency has to go through such a process to receive funding, which makes consumer advocates like Banks charge that the House’s true goal is to shut down the CFPB via back-door maneuverings.¬†Following the Committee vote, the entire House is expected to take up this legislation in mid-July. If it passes, then it will be up to the Senate to preserve the independence of the CFPB by protecting its income stream from undue political influence.

As our colleagues over at Swampland point out, this isn’t the only battle the House is waging against the CFPB. They’re also fighting the appointment of a director for the new agency. Elizabeth Warren, a likely candidate for the top spot, has clashed with subcommittee members, and some lawmakers say they’ll block anyone named for the director’s position on general principle.