Crapo Urges Bipartisanship, But Stands Tough on CFPB Fight

WASHINGTON — Sen. Michael Crapo said he wants to usher in a new era of bipartisan cooperation as the Banking Committee's top Republican, a goal that could prove particularly difficult amidst the bitter political battle being waged over the Consumer Financial Protection Bureau.

That issue attracted new attention after a federal appeals court last month overruled several recess appointments President Obama made to the National Labor Relations Board on the same day as CFPB Director Richard Cordray's initial appointment. That opens the door to a legal challenge of Cordray at the same time that he has been re-nominated for the position.

Crapo, who is assuming the role of ranking member from Sen. Richard Shelby, said in an interview last week that he, like many of his GOP colleagues, will continue to object to Cordray's confirmation until changes are made to the structure of the agency. That includes replacing its single director with a commission, a change the Idaho Republican unexpectedly said is needed at the Office of the Comptroller of the Currency as well.

During the interview, Crapo also discussed his other plans for this year, including housing finance reform and tackling changes to the Dodd-Frank Act.

What are your top priorities?

There's a broad array of issues, but I think they could be summarized in terms of focusing on Dodd-Frank related issues both in terms of oversight of the regulatory process of implementation that's ongoing right now and second, GSE reform. Obviously Fannie and Freddie — how can we take them out of receivership and move to the right structure for the GSEs?

And then finally I'm very interesting in capital formation — looking at issues that currently restrict capital formation and access to capital, and focusing on ways to look at not just addressing the hurdles we face but trying to create some on-ramps or other increased efforts to help facilitate capital formation.

What's your goal line on some of those priorities? What would an ideal outcome look like?

I was one of the very strong opponents of Dodd-Frank, so I think personally there should be significant revision of major portions of it. But I recognize in the political climate we have right now, particularly with Democrats in the majority of the Senate and the Republicans in the minority, we need to find those places where we can get common ground and build bipartisan solutions.

The Banking Committee has a long, historical tradition of working together in a bipartisan fashion, and that's fallen apart in the last couple of Congresses, just as it has in all of the other aspects of the operations of the Senate. But I also have a personal friendship and good working relationship with Chairman [Tim] Johnson, so another one of my major objectives and hopes would be to start building a path towards bipartisan solutions again and get the Banking Committee back on track with commonsense bipartisan solutions to issues.

In that context, I think there's a lot of potential in the Dodd-Frank regulatory arena for us to do that. … I think whether it's looking at the rules in many different areas, the implementation of the qualified residential mortgage rules or the mutual fund rules or any other number of rules, I think there's room for oversight of what the agencies are doing in implementation to help get better coordination and higher levels of cost-benefit analysis.

On the legislative front, there's also room. A very good example there is in the derivatives title, where I think it's very clear that Congress did not intend for the derivatives title to apply to end users — that they should have been exempted. I've been pushing legislation on that since the passage of Dodd-Frank. Legislation to accomplish that has passed the House with a vote of 370-24. We need to get to something like that where there's a broad bipartisan basis, and there is broad bipartisan support for that kind of reform in the Senate, where we can find areas where either the congressional intent is not ultimately being played out in the regulatory arena or where there needs to be some fine tuning of Dodd-Frank in order to improve its operation.

What direction would you ideally like to take GSE reform, and in the spirit of bipartisanship, where in any of that can there be a compromise?

Since we haven't gotten too far down that road either at the legislative level or even in negotiations with the White House — I was hoping that during the last Congress we would get much more deeply into the issue than we have — but since those negotiations haven't proceeded far enough yet, it's hard for me to say where we might ultimately be able to end up.

First of all, I think we should not continue with the receivership that we still have. My personal approach would be to move as far as we possibly can into a private sector solution. I think that the capital for the mortgage industry should come from the private sector to maximum extent possible, and that specifically the risk imposed on the taxpayers by Fannie and Freddie should be managed and ultimately eliminated.

What do you think some of the biggest challenges will be both for the committee and for you as a new leader?

I guess I wouldn't call it a challenge, but one of the biggest opportunities that the committee should take on is a return to the historical bipartisan operations that they have had in the past. …

Now clearly, there are going to be areas where we don't agree. One of the current ones is the CFPB, and those issues we're going to have to work through. But even on those kinds of tough issues I think that there may be some kind of room to find some bipartisan progress to move forward.

That being said, I think the specific answer… it would be the kind of things we've already talked about. And I omitted FHA reform, which should be put right into the mix and maybe even earlier than later. But focusing on things like Dodd-Frank implementation and oversight, reform in areas of Dodd-Frank where we can find the common ground to move forward, reform of the GSEs and reform of FHA are some of the key areas for us to focus on.

Speaking of the CFPB, do you think that Cordray is qualified to be its director on the merits?

I don't personally have an objection, and I don't think the issue is Cordray. There's been a high level of concern in many quarters about whoever the director of the CFPB would be. And I think at this point Richard Cordray has — not entirely but to a significant extent — reduced some of the concerns about how aggressive he would be and where he would take the agency.

So to that extent, I would answer your question by saying that my comments about what we should do are not related to what we should do personally about Richard Cordray himself. My comments are related to the structure of the agency and the constitutional issue relating to the separation of powers between the Senate's right to advise and consent and the President's right to nominate.

I object to the Senate's confirmation of any nominee to the CFPB until we have reformed and addressed the key issues relating to it that are so problematic. … One is the agency was set up with one individual controlling all of the power and authority. No commission, no governing board like in the other regulatory agencies. One individual can issue the rules and dictate the activities of the agency. … The second is the funding, and I personally believe that Congress should have oversight of these agencies and in particular the CFPB.

So would you want to see the OCC with a similar commission structure? It also just has a single director.

Yes, I would. I really believe we should have the kind of operations like you see with the SEC, where they operate with a board. First of all, it brings in additional points of view, but it also requires the collaboration from different perspectives that helps you get to the right solution, rather than just having one individual be able to dictate the entire activity. 

What do you say to people who argue that these objections are basically a way to re-litigate Dodd-Frank, essentially taking nominees as "hostages" as some have called it?

I've heard that argument made, but frankly I don't think that's an accurate or appropriate way to view the process. It's very common for the Senate to withhold its confirmation or its advice and consent until concerns that it has with the agency itself are addressed. We recently saw that in terms of Sen. Corker's objection to Carol Galante at the FHA where he was very concerned, and properly so, with FHA reforms that ought to be done. If one were to go back to all the confirmation hearings of people who were brought before the Senate, I think it would be the standard, rather than the exception, to see senators inquiring of the person who is nominated to say, "Here are issues we have with the agency that you are being proposed to the lead. Are you willing to work on these issues … to address our concerns?"

But has it gotten to this point before, where it's led to the inability to get anyone confirmed?

I'm certain that it has. I know there are examples where nominees are held up until issues that the Congress, and particularly the Senate, have with the agency are addressed. And in fact I think that's a very appropriate function of the Senate. We've got to get this agency established and managed in the right fashion before we just go ahead with the implementation of the advice and consent process.  

How do you go forward from here?

There should be a way to move forward and I hope that there will be. But I think it's very important that what we understand here is first, the issue is not specific to this particular nominee Richard Cordray. The issue is specific to the Constitution and the question of whether the Senate has the right to advise and consent to a properly nominated candidate. And then secondly … the structural issues of how we establish and operate the agency. … And I believe that there is a way to accomplish that. Whether we'll get there is another question, but that's an area where I really believe we can move forward.