WASHINGTON — Elizabeth Warren, the Obama administration official in charge of setting up the Consumer Financial Protection Bureau, attacked Republican efforts to cut the agency's funding, while also previewing efforts to reform credit card disclosures.
At a speech before the Consumers Union's 75th-anniversary event Tuesday in New York, Warren said cutting CFPB's budget would threaten its independence and undermine its effectiveness.
"Many of those who have opposed the CFPB are still trying to chip away at its independence by subjecting it entirely to Congressional appropriations without any dedicated funding from the Federal Reserve," Warren said. "Politicizing the funding of bank supervision would be a dangerous precedent, and it would deprive the CFPB of the predictable funding it will need to examine large and powerful banks consistently and to provide a level playing field with their nonbank competitors."
Warren noted that none of the three bank regulators receive their funding from the appropriations process.
"While the banking regulators charged with preserving the safety and soundness of financial institutions and ensuring consumer protection compliance by smaller banks would continue to receive independent funding, the agency in the financial regulatory system with lead responsibility for protecting consumers would face a different set of rules — rules that threaten its independence," Warren said.
Rep. Randy Neugebauer, R-Texas, has introduced a bill that would move the CFPB into the Treasury Department and subject it to appropriations. The CFPB is funded through the Federal Reserve but can ask Congress for additional money if needed.
Warren said it is dangerous to endanger the CFPB's funding in a time of budget cuts.
"Under the caps on dedicated funding that currently govern the CFPB, it would take nearly 20 years to invest as much money in protecting consumers and consumer financial markets as it cost the government to resolve IndyMac — a single institution that failed in the financial crisis of 2008," Warren said. "Reducing the CFPB's funding is asking the American people to believe that a pound of cure is worth an ounce of prevention. Increasing the risk of financial crisis won't reduce our deficits."
Warren's comments came even as House Financial Services Committee Chairman Spencer Bachus questioned Warren's role at the CFPB. Speaking to the Women in Housing and Finance, Bachus noted that he had concerns with Warren hiring all of the new agency's staff.
"Elizabeth Warren has been in my office," he said. "She has tremendous charisma. She's a person you admire, you like. She has ability. But she's hiring everyone over there and they will all have her philosophy and we don't know exactly what that philosophy is but it concerns us."
Bachus said he fears Warren "will make decisions that borrowers and lenders ought to make," including "that … certain products shouldn't be offered."
"Now, I guess I agree with all of that on a general scale, but if you said the government will approve all products — do you agree with that?" he said. "I don't agree with that. I don't believe that everything ought to be approved by the government. What if every car you produced had to be approved by the government?"
Warren also used her speech to preview a credit card summit she is hosting on Feb. 22.
Warren has called for simpler credit card agreements, but the industry has argued such changes come too soon after passage of the CARD Act and other regulatory alterations. Warren said she plans to examine what has changed since the CARD Act's implementation and needs updating.
"To do that, we are going to take a hard look at the data — interest rates, repricing and the like," she said. "We will bring together academics, industry leaders, consumer advocates, and voices from within government to look at the data from multiple directions, and to analyze how the industry has reacted and how consumers are responding. The idea is to establish a fact base upon which the CFPB can improve our understanding of the impact of the CARD Act and to help us understand how we can make credit markets work better."
