Budget may starve watchdog agency
The Trump administration’s proposed budget would essentially kill the watchdog agency established to protect consumers from unscrupulous financial companies by eliminating its funding.
The budget plan, submitted to Congress on Tuesday, contains no money for the Consumer Financial Protection Bureau, created in the wake of the 2008 financial crisis after millions of Americans fell victim to predatory mortgage lending. The agency scrutinizes banks, payday lenders, debt collectors and other financial services on behalf of consumers.
The Consumer Financial Protection Bureau, however, has drawn the ire of industry since its founding in 2011 for fining bad actors and writing tough new rules on lending practices. Republicans have said they want to “rein in” the agency.
The bureau is funded by the Federal Reserve System according to a preset formula, as well as through fees and legal settlements. Republicans have proposed
subjecting the agency to congressional appropriation to have more control over its budget and operations.
Trump’s budget adopts the approach of the Republicans who control Congress and then proposes wiping out the $650 million per year appropriation the Consumer Financial Protection Bureau needs to operate. The Trump administration, in its drive to cut taxes, increase military spending and balance the budget in 10 years, claims savings of $6.8 billion by 2027, since the appropriation escalates over the years.
In a statement, the Office of Management and Budget said that subjecting the agency to the congressional appropriations process would “provide the oversight necessary to impose financial discipline and prevent future overreach of the agency into consumer advocacy and activism.”
OMB did not respond to requests to explain how the agency would operate without funding.
The president’s budget is only a wish list, and the House and the Senate will draw up their own spending plans. Even congressional Republicans say they don’t want to ax the Consumer Financial Protection Bureau entirely in their bill that overhauls the broader financial reform law known as Dodd-Frank that created the CFPB.
The Republican bill “reestablishes the CFPB as a civil enforcement agency responsible for enforcing consumer protection laws so, yes, it will need to be funded,” said Jeff Emerson, a spokesman for the House Financial Services Committee, which is led by Dallas Republican Jeb Hensarling.
Still, Emerson declined to specify what the Consumer Financial Protection Bureau’s budget should be and said he didn’t know the details of the O MB proposal.
“Republicans and Democrats in Congress will determinethe appropriate level of funding,”hesaid.
The CFPB and the office of Massachusetts Sen. Elizabeth Warren, who conceived the bureau and pushed for its creation, declined to comment. Rep. Maxine Waters of California, the House Financial Services Committee’ s ranking Democrat, issued a statement slamming the cuts.
“The budget proposes to functionally terminate the Consumer Financial Protection Bureau, the only federal agency with the sole purpose of protecting consumers, and once again expose communities across the country to predatory financial institutions ,” Waters said. lydia.depillis@chron.com twitter.com/lydiadepillis