One of the most vocal critics of the Consumer Financial Protection Bureau (CFPB) plans to overhaul the oft-controversial agency by gutting the Wall Street reforms that created it.
This week, House Financial Services Committee Chairman Jeb Hensarling (R-TX) unveiled details of the Financial CHOICE Act. An acronym for “Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs,” the Act serves as the Republican plan to replace the Dodd-Frank Act, including the CFPB.
“If we want strong economic growth and more freedom, we must empower Americans, not Washington bureaucrats,” Hensarling said in a prepared statement issued Tuesday. “In a phrase, we need economic growth for all and bank bailouts for none. This is the foundation of the Republican plan to reignite growth by replacing Dodd-Frank with real reforms that work.”
Empowering Americans to achieve financial independence is a key principle of the CHOICE Act. One way to accomplish this, according to Hensarling, would be to fundamentally reform the CFPB, starting with a name change.
The CHOICE Act proposes to rename the CFPB as the “Consumer Financial Opportunity Commission,” and task it with the dual mission of consumer protection and competitive markets, with a cost-benefit analysis of rules performed by an Office of Economic Analysis.
Dodd-Frank represents a “breathtaking, unconstitutional outsourcing of legislative powers to the executive branch, with the Orwellian-named Consumer Financial Protection Bureau and the Financial Stability Oversight Council,” Hensarling said in his prepared remarks to the Economic Club of New York this week.
Hensarling’s reform plans would also alter the structure of the CFPB into a bipartisan, five-member commission which would be subject to congressional oversight and appropriations—something that the CFPB is currently not predisposed to do.
Helmed by a single Director, the CPFB has often faced scrutiny from lawmakers who argue the agency entrusts too much authority to just one person.
In March 2015, Rep. Randy Neugebauer (R-TX) introduced legislation aimed at creating a bipartisan five-person committee to serve as the ruling body of the CFPB. The bill (H.R. 1266) is currently under consideration by the House Financial Services committee.
“The CFPB Director—one man—has the unbridled and unprecedented power to unilaterally declare virtually any mortgage, credit card or bank account ‘unfair’ or ‘abusive’ at which point Americans can’t have it—even if they need it, want it, understand it and can afford it,” Hensarling told the Economic Club.
Apart from overhauling the CFPB, the Financial CHOICE Act also aims to end taxpayer-funded bailouts of large “too big to fail” financial institutions; relieve banks that elect to be strongly capitalized from “growth-stranging regulation”; and impose tougher penalties on those who commit fraud as well as enforce greater accountability on Washington regulators.
“Accountability is at the heart of our Republican reform plan. If we are to successfully protect consumers and grow our economy, we must demand greater accountability from both Washington and Wall Street,” Hensarling said. “Our plan toughens penalties—not out of some idealogical or poll-driven war against Wall Street—but simply to better protect consumers and strengthen their markets. This is key to economic growth.”
Several leading Democrats, however, argue the Dodd-Frank reform plans will pave the way for big banks to return to their pre-recession practices.
During a Senate Banking Committee hearing this week, Senator Elizabeth Warren (D-MA) called the plans Hensarling’s “wet kiss for the Wall Street banks.”
“It’s clear that Congressman Hensarling and his fellow Republicans think that the poor Wall Street banks have suffered too much under the new rules and it’s time for them to return to the good old days before the 2008 crisis, when these banks could run wild,” Warren said.
Within the House Financial Services Committee, top Democrat Rep. Maxine Waters (D-CA) likened Hensarling’s policy to Donald Trump.
“The Chairman’s proposal takes a page from Donald Trump casino playbook by gambling with the American economy,” she said in statement published by The Hill. “We cannot allow Republicans to take us back to the depths of the financial crisis by weakening regulatory oversight and giving banks the tools to game the system once again.”
Hensarling’s camp responded to claims of opponents in a series of refutes issued Wednesday against “left wing” Democrats who are “big on rhetoric, short on facts.”
One of the responses addressed Sen. Warren’s claim that the Financial CHOICE Act is nothing but a “wet kiss” for Wall Street full of “giveaways.”
“We remind Senator Warren that the CEO of Goldman Sachs said his big Wall Street firm would be ‘among the biggest beneficiaries’ of Dodd-Frank and the CEO of JPMorgan Chase said Dodd-Frank benefits Big Banks by creating a ‘bigger moat’ — ‘deterrents for small financial institutions to jump into new business lines and steal market share,'” the Committee said in a written statement.
The Financial CHOICE Act will be introduced as legislation later this month, Hensarling said.
Further details of the Financial CHOICE Act can be found here.
Written by Jason Oliva