May 05 2011

44 U.S. Sens. to Obama: No Accountability, No Confirmation

44 Republican U.S. Senators today sent a letter to President Obama stating that they will not confirm any nominee, regardless of party affiliation, to be the Director of the new Consumer Financial Protection Bureau (CFPB) absent structural changes that will make the Bureau accountable to the American people.  Under the Dodd-Frank financial regulation Act, the Director is given unfettered authority to regulate businesses that extend consumer credit.  Although the Director will also have hundreds of millions of dollars of public money at his or her disposal, no checks and balances are provided on how it is spent.  In light of these facts, the Senators sent today’s letter out of concern that such unchecked authority could be used for political purposes at the expense of access to credit, job creation, economic growth, and financial stability.

In the letter, the Senators call for three specific, common sense reforms to the Bureau’s structure:

  • Replace the single Director with a board to oversee the Bureau.  This would prevent a single person from dominating the Bureau and provide a critical check on the Bureau’s authority. 
  • Subject the Bureau to the Congressional appropriations process.  This would provide oversight and accountability to the American people on how public money is spent. 
  • Establish a safety-and-soundness check for the prudential financial regulators, who oversee the safety and soundness of financial institutions.  This would help ensure that excessive regulations do not needlessly cause bank failures.

President Obama signed the Dodd-Frank Act into law on July 21, 2010.  Although Democrats heralded the Bureau as the centerpiece of their legislation, the President has yet to nominate a Director. 

Republican Leader Mitch McConnell (R-Ken.), a lead signatory on the letter made the following statement: “The CFPB as created by the deeply-flawed Dodd-Frank Act is set to be one of the least accountable and most powerful agencies in Washington.  Today’s letter delivers a commitment by 44 Republican Senators to fix the poorly-thought structure of this agency that will have unprecedented reach and control over individual consumer decisions—but an unprecedented lack of oversight and accountability.  The reforms outlined are necessary before we will consider any nominee to head this agency.”

Senator Richard Shelby (R-Ala.), Ranking Republican on the Committee on Banking, Housing and Urban Affairs and also a lead signatory on the letter, issued the following statement: “This about accountability. The Bureau, as currently structured, lacks any semblance of the checks and balances inherent in the Constitution.  Everyone supports consumer protection, but we should never entrust a single person with this much power and public money.  We are simply asking the President to support common sense reforms that provide the accountability absent in the current structure.”

Senator Jerry Moran, (R-Kan.), who has filed legislation that would enact reforms contained in the letter, made the following remarks: “Allowing a single unelected bureaucrat to define their own jurisdiction and regulate vast segments of our economy without accountability or restraint is a ‘reform’ that should be rejected. My common sense legislation brings a variety of perspectives to the Bureau and gives Congress the oversight authority required for such a powerful agency. We stand ready to work with the president to make certain the CFPB is both effective and accountable.” 

The full text of the letter is provided below.   


The Honorable Barack Obama
The President
The White House
1600 Pennsylvania Avenue
Washington, D.C. 20500-0005

Dear Mr. President:

We write to express our concerns about the lack of accountability in the structure of the Consumer Financial Protection Bureau (CFPB).  As presently organized, far too much power will be vested in the CFPB director without any effective checks and balances.  Accordingly, we will not support the consideration of any nominee, regardless of party affiliation, to be the CFPB director until the structure of the Consumer Financial Protection Bureau is reformed.

The Dodd-Frank Act grants the CFPB director unprecedented authority over financial institutions and main street businesses.  The CFPB director will have vast rulemaking, supervisory, investigative and enforcement powers and the authority to regulate any person or business that offers or sells a “financial product or service.”  This authority will extend to not just traditional financial institutions, but also potentially thousands of entrepreneurs and small businesses. 

This authority will directly affect every American household by limiting their choices when purchasing financial products, restricting the availability of credit to consumers, and increasing the cost of goods or services purchased using credit.  Furthermore, these regulations could put small banks and businesses at a competitive disadvantage to big banks and businesses, which can more easily absorb compliance costs.  How the CFPB director exercises his or her authority therefore will have a profound influence on the future of our economy and job creation.    

Despite this broad mandate the Dodd-Frank Act failed to provide any real checks on the CFPB director’s powers.  Once confirmed, the director effectively answers to no one.  The CFPB director will be appointed for a five year term and can only be removed by the President in cases of “inefficiency, neglect of duty, or malfeasance in office.”  Thus, the director cannot even be removed for poor performance, including enacting ill-conceived regulations.

Moreover, the Dodd-Frank Act grants the director unfettered authority to set the budget of the CFPB.  No agency or institution, including Congress, can review the CFPB budget, and no mechanisms were put in place to ensure that the director is effectively managing public money.

While the Financial Stability Oversight Council (FSOC) could vote to stay or set aside a regulation issued by the director, the circumstances under which the council can take such action are so narrow as to make this check illusory.  The council can act only if the regulation puts at risk the safety and soundness of the entire U.S. banking system or the stability of the U.S. financial system.  Moreover, the procedural requirements for the FSOC to act are so high that it will be practically impossible for the FSOC to overrule the CFPB director.

To be clear, we support strong and effective consumer protection.  The present structure of the Consumer Financial Protection Bureau, however, violates basic principles of accountability and our democratic values.  No person should have the unfettered authority presently granted to the director of the Consumer Financial Protection Bureau.  Therefore, we believe that the Senate should not consider any nominee to be CFPB director until the CFPB is properly reformed.  We urge the adoption of the following reforms:

  • Establish a board of directors to oversee the Consumer Financial Protection Bureau.  To prevent a single individual from dominating the actions of the CFPB it should be governed by a board of directors.  Diversifying the leadership of the CFPB would also reduce the potential for the politicization of the CFPB and ensure the consideration of multiple viewpoints in the CFPB’s decision-making.  This structure is consistent with the organization of the Federal Reserve Board, the Securities and Exchange Commission, and the Federal Deposit Insurance Corporation.


  • Subject the Consumer Financial Protection Bureau to the appropriations process.  To ensure that the CFPB does not engage in wasteful or inappropriate spending and has effective oversight, the CFPB should be subject to the Congressional appropriations process.  The Securities and Exchange Commission, Commodity Futures Trading Commission, and the Federal Trade Commission have long been subject to the appropriations process for the same reasons.


  • Establish a safety-and-soundness check for the prudential regulators.  Federal bank regulators should be given meaningful tools to prevent the CFPB’s regulations from needlessly causing a bank failure.  After all, one of the best consumer protections is a safe and sound bank.  Such a check by the prudential regulators will provide a reasonable restraint on the CFPB’s authority and ensure that the CFPB’s regulations strike the right balance between consumer protection and safety-and-soundness. 


We believe these are commonsense reforms that can be promptly adopted by Congress on a bipartisan basis without having to revisit the numerous other flaws with the underlying legislation.  We look forward to working with you to adopt these consensus reforms.