Dec 08 2011

Shelby Floor Speech: Make Consumer Bureau Accountable to Those it Seeks to Protect

U.S. Senator Richard Shelby, ranking Republican on the Senate Committee on Banking, Housing and Urban Affairs, today made the following statement on the Senate floor on his decision to oppose a procedural motion regarding the nomination of Richard Cordray to lead the Bureau of Consumer Financial Protection (BCFP).  Senator Shelby was joined by 44 of his Republican colleagues in writing a letter to President Obama vowing that they will not consider any nominee to head up the Bureau until three commonsense, substantive changes are made to the Bureau’s structure in order to make it accountable to the American taxpayers.  Republican leadership has received no correspondence from the White House on this matter.


“The Director of FHFA oversees the regulation of only 14 financial institutions.  He does not have sweeping powers over all consumers and tens of thousands of Main Street businesses like the Director of the Bureau.

“It should be common sense that the more power an agency has the more accountable it needs to be.

“Moreover, rather than attempting to point to other regulators to justify the structure of the Bureau, a more responsible approach would be to make all of our financial regulators more accountable.

“And we should begin with the Bureau.

“To make the Bureau more accountable, we have proposed three common-sense reforms.

“First, the Bureau should be led by a Board of Directors. 

“This is such a common-sense measure that the President and the Democrat-controlled House originally called for the consumer agency to be structured as a commission.

“Second, the Bureau’s funding should be subject to Congressional appropriations. 

“Currently, the Federal Reserve is required to transfer up to $600 million to the Bureau each year.

“These are funds that could otherwise be remitted to Treasury and used for deficit reduction.

“Diverting this money to fund an unaccountable federal agency sets a dangerous precedent of using the Federal Reserve as an off-budget mechanism for funding programs.

“In addition, funding the Bureau through the Fed removes any check on runaway spending.

“The fiscally-responsible way to fund the Bureau is through the Congressional appropriations process just like every other consumer protection agency is funded.

“Our third reform is to create an effective safety and soundness check for the prudential bank regulators.

“Some have said that the Bureau already has a check under the so-called Financial Stability Oversight Council veto.

“However, this veto was designed so that it would never actually constrain the Bureau. 

“The Council can only overturn a rule in an extremely rare case: the rule must put at risk the safety and soundness of the entire U.S. banking system or the stability of the U.S. financial system. 

“Under this construct, a rule could cause the failure of multiple banks, but the Council still would not have standing to alter the rule. 

“Additionally, the procedure is rigged to prevent the Council from acting. It takes an affirmative vote of at least 2/3 of the Council’s members to set aside one of the Bureau’s rules and the Bureau’s Director is a voting member.

“In addition, only three of the Council’s ten members are actually bank prudential regulators.

“This veto is not a check on the powers of the Bureau.  It is a sham.

“Recent history shows that taxpayers are ultimately on the hook for bank failures.  For this reason, consumer protection needs to be carefully coordinated with bank regulation to prevent against unnecessary bank failures. 

“As presently structured, the Bureau can ignore any advice offered by banking regulators, even if it undermines the safety and soundness of banks. 

“Unless this structural flaw is remedied, a real possibility exists that the Bureau will one day cause bank failures that end up harming consumers, taxpayers, and our economy.

“In light of the reasonableness of the reforms we have requested, the question remains: why are the Administration and the Majority so insistent that the Bureau be unaccountable?

“Clearly, they want to use the Bureau as a political issue.

“A second reason is that they believe non-bank financial institutions are not currently regulated.

“This is false.  The Federal Trade Commission, the State Attorneys General, and State financial regulators all have authority over non-banks.

“A more likely reason for today’s vote is that the Bureau will provide funding to key liberal activists, like ACORN. 

“Other agencies must return to the Treasury funds they receive from enforcement actions.

“The Bureau, however, is allowed to dole out money it collects from fines and penalties to liberal consumer groups.

“This reveals why the Administration and the Majority want so desperately for the Bureau to be unaccountable.

“They want the Bureau to be a permanent funding machine for their political allies.

“Finally Mr. President, we are going to hear that our methods to achieve reform are unprecedented in the history of the Senate.

“‘Never before has the consideration of a nominee been conditioned on a change in the law.’  This, of course, is ridiculous on its face.  Nominees are held routinely in the Senate by both parties for any number of reasons including the desire to make changes in existing law.

“The only thing different in this particular case is that it is completely transparent.  No secret backroom deals.

“Mr. President, after all the harm caused to consumers by financial regulators, it is time that the Majority stop using consumer protection as a political football and start  taking actions that actually help consumers.

“We can take the first step by reforming the Bureau to make it accountable to the very consumers it seeks to protect.

“Until that time, however, we cannot, should not, and will not move forward on the nomination of a Director to lead this massive and unaccountable bureaucracy.

“I urge my Democrat colleagues to stop obstructing reform and join with us to move forward on real consumer protection.

“Mr. President, I yield the floor."