Bair: One person could lead CFPB

Federal Deposit Insurance Corp. Chairman Sheila Bair told a House subcommittee Thursday she had no reservations about a single director leading the Consumer Financial Protection Bureau. Under the Dodd-Frank Act, the CFPB will open July 21 and become the de facto regulator for the entire mortgage industry, from origination through servicing. The White House has not nominated director, yet. But a recess appointment could be made over the weekend. The leading candidate is Elizabeth Warren, who has served as the special adviser to the Treasury Department to oversee the agency’s build-up. But the House Financial Services Committee approved a bill, among other CFPB reforms, that would establish a five-member committee to oversee rulemaking rather than a single director. Rep. John Carney (D-Del.) asked Bair about the debate and if she was uncomfortable with a single director in charge of the bureau. “Not really, no,” Bair said. “Early on, when Congress was considering this, we were sympathetic to a board approach.” Bair understands regulation via committee. The FDIC board needs at least five votes in favor of a rule proposal or enforcement action before the regulator can act. While the CFPB would not, as currently structured, require such a process, Bair said she has no reservations. “I like boards. I think even though it’s more difficult for me. I’m no dictator. I have to go get my five votes just as a chairman of a committee has to do that. I think it is a good process,” Bair said. “Either way though, you have the OCC with a single-head, so you have both models in the financial regulatory sphere. So, no, I have no reservations.” Republican lawmakers feel differently. A group of Senators sent a letter to President Obama saying they would not give the necessary votes to any CFPB director nominee until the House reforms are signed into law. Bair sees no conflict with the CFPB and other regulators. The CFPB director will actually sit on the board at the FDIC, which Bair said, should give that person the “sensitivity, knowledge and awareness” of its rulemaking. But she added the agency will level the playing field for insured banking institutions. During the run-up to the financial crisis, she said, these banks were pressured to lower underwriting standards and compete with other players under little or no regulation. “You had a lot of nonbank mortgage originators with really no regulation whatsoever and they were selling these loans off to the securitization process and not really retaining any of the risk,” Bair said. “So, I think with more robust regulatory mechanisms, it will help level the competitive playing field to make sure we don’t have competitive pressure on banks to lower their standards.” Write to Jon Prior. Follow him on Twitter @JonAPrior.