Politics & MoneyMortgage

Mulvaney asks Congress to dramatically reduce CFPBÕ independence

Wants agency funded through Congress, new rules approved by Congress

Mick Mulvaney continued his push to substantially alter the operations of a federal agency that he once called a “sick, sad joke” by asking Congress Monday to significantly increase its oversight of the Consumer Financial Protection Bureau.

On Monday, the CFPB issued its first semi-annual report to Congress since Mulvaney took over as acting director of the agency last year.

In the report, Mulvaney asked Congress to enact four major reforms that would considerably cut the CFPB’s independence.

“The Bureau is far too powerful, with precious little oversight of its activities,” Mulvaney said in a statement.

“The power wielded by the Director of the Bureau could all too easily be used to harm consumers, destroy businesses, or arbitrarily remake American financial markets,” Mulvaney continued. “I’m requesting that Congress make four changes to the law to establish meaningful accountability for the Bureau. I look forward to discussing these changes with Congressional members.”

The CFPB, as created by the Dodd-Frank Wall Street Reform and Consumer Protection Act, operates independently of much federal oversight.

The agency gets its funding directly from the Federal Reserve, rather than through the congressional appropriations process, a condition that has long drawn the ire of Republicans.

The agency also operates independently in that it is able to set new rules for the financial markets without Congress’ involvement, outside of the Congressional Review Act, which allows Congress to overturn certain regulatory rules issued by federal agencies by within 60 days of the rules being announced.

Last year, Congress used the Congressional Review Act to overturn the CFPB’s highly contested arbitration rule, for example.

But if Mulvaney gets his way, both of these tenets of the CFPB’s operation will be done away with.

In the report, Mulvaney asks Congress to make four changes to the law to “establish meaningful accountability” for the CFPB.

Mulvaney’s first requested change would alter the rules surrounding the funding of the CFPB to bring the bureau’s budget into the Congressional appropriations process.

If enacted, that would mean that Congress would control the CFPB’s budget, rather than the bureau asking for and receiving money directly from the Federal Reserve.

Second, Mulvaney asks Congress to require legislative approval for “major” CFPB rules.

The report does not specifically identify which types of rules qualify as “major,” but the report does tag its now-overturned arbitration rule and the controversial payday lending rule with the label “significant rules.”

And those aren’t the only changes that Mulvaney calls for.

Mulvaney also asks Congress “ensure that the Director answers to the President in the exercise of executive authority.”

Mulvaney also wants Congress to create an independent inspector general that would oversee the CFPB’s operations.

In his letter, Mulvaney notes how much power he currently wields as the bureau’s acting director, power that was celebrated by Democrats and loathed by Republicans when Democrat Richard Cordray served as the bureau’s director.

Now, as Mulvaney puts it, the shoe is on the other foot, with Democrats bemoaning the actions he’s permitted to take as the bureau’s director thanks to the way that the Dodd-Frank Act was written.

“As has been evident since the enactment of the Dodd-Frank Act, the Bureau is far too powerful, and with precious little oversight of its activities. Per the statute, in the normal course the Bureau’s Director simultaneously serves in three roles: as a one-man legislature empowered to write rules to bind parties in new ways; as an executive officer subject to limited control by the President; and as an appellate judge presiding over the Bureau’s in-house court-like adjudications,” Mulvaney writes in his letter to Congress.

Mulvaney then goes on to quote James Madison’s writing in the Federalist Papers: “In Federalist No. 47, James Madison famously wrote that ‘[t]he accumulation of all powers, legislative, executive, and judiciary, in the same hands … may justly be pronounced the very definition of tyranny,’” Mulvaney writes.

"Constitutional separation of powers and related checks and balances protect us from government overreach. And while Congress may not have transgressed any constraints established by the Supreme Court, the structure and powers of this agency are not something the Founders and Framers would recognize. By structuring the Bureau the way it has, Congress established an agency primed to ignore due process and abandon the rule of law in favor of bureaucratic fiat and administrative absolutism,” Mulvaney continues.

Mulvaney then gets downright philosophical about need for the CFPB to have its independence taken away.

“The best that any Bureau Director can do on his own is to fulfill his responsibilities with humility and prudence, and to temper his decisions with the knowledge that the power he wields could all too easily be used to harm consumers, destroy businesses, or arbitrarily remake American financial markets,” Mulvaney writes.

“But all human beings are imperfect, and history shows that the temptation of power is strong,” Mulvaney continues. “Our laws should be written to restrain that human weakness, not empower it.”

As Mulvaney puts it, the cycle of Democrats not liking what a Republican CFPB director does and Republicans not liking what a Democrat CFPB director does will continue into perpetuity without change.

“I have no doubt that many Members of Congress disagree with my actions as the Acting Director of the Bureau, just as many Members disagreed with the actions of my predecessor,” Mulvaney writes.

“Such continued frustration with the Bureau’s lack of accountability to any representative branch of government should be a warning sign that a lapse in democratic structure and republican principles has occurred,” Mulvaney adds. “This cycle will repeat ad infinitum unless Congress acts to make it accountable to the American people.”

Therefore, Mulvaney is asking Congress to make the following changes:

  • Fund the bureau through congressional appropriations
  • Require legislative approval of major bureau rules
  • Ensure that the director answers to the president in the exercise of executive authority
  • Create an independent inspector general for the bureau

To read the full semi-annual report from the CFPB, click here.

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