Senate Republicans say no CFPB director until power is checked

[Update 1: White House responds] A group of 44 Republican senators sent a letter to President Obama Thursday vowing not to confirm any nominee for director of the Consumer Financial Protection Bureau until structural changes are made. The White House released a statement Thursday defending the bureau. The CFPB was created under the Dodd-Frank Act and is scheduled to open July 21. It will become the main regulator for the mortgage industry and will oversee how loans are written and sold to consumers. But, nearly two months out, there is still no director. Republicans in both the House of Representatives and Senate want to restrict the bureau and establish more checks and balances before it gets underway. According to the letter, lead by Sen. Mitch McConnell (R-Ky.) and Sen. Richard Shelby (R-Ala.), the eventual 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.'” “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 letter reads. Republicans want to establish a board of directors instead of appointing a single individual. They also pushed to subject the bureau to the appropriations process undergone by the Securities and Exchange Commission, among other bodies. And the lawmakers want to establish what they call a “safety-and-soundness check.” “Federal bank regulators should be given meaningful tools to prevent the CFPB’s regulations from needlessly causing a bank failure,” the letter reads. But the White House said the CFPB will be vital to catching lending abuses in the future, according to a statement sent to HousingWire Thursday. “For far too long, American consumers have fallen victim to fraud, misleading claims, and powerful special interests and the President believes that American families who were the hardest hit by this financial crisis deserve an independent watchdog to protect consumers and prevent predatory lending and other abuses in the future,” said Amy Brundage, a White House spokeswoman. Elizabeth Warren, the special adviser to the Treasury Department, the architect of the bureau and the White House’s likely nominee for the director role, has long said the bureau will be one of the most scrutinized in the country. The Dodd-Frank Act requires that the CFPB to submit annual financial reports to Congress, twice each year to justify its budget from the previous year. And the director is required to testify before and report to Congress twice each year regarding the CFPB’s activities. The Government Accountability Office will conduct an audit each year on the bureau’s expenditures and submits a report to Congress. And the CFPB must submit its financial operating plans, forecasts and quarterly financial reports to the Office of Management and Budget. A separate council of federal regulators, called the Financial Oversight Stability Council, can overrule the CFPB with a vote as well, Warren has pointed out. On Tuesday, Warren took it a step further and accused lawmakers of merely trying to delay and defund the agency before it even gets started, and that they are ignoring how quickly financial threats to consumers can emerge. Republicans balked at the claims. They said in the letter that no agency or institution, including Congress, can review the CFPB budget. And while the council could vote to overrule the bureau, the circumstances are so narrow, Senators called the check “illusory.” The overruling only comes in when a regulation puts at risk the entire U.S. banking system, Republicans said, and the requirements for such a vote are so high “it will be practically impossible for the FOSC to overrule the CFPB director.” “As presently organized, far too much power will be vested in the CFPB director without any effective checks and balances,” the letter reads. Write to Jon Prior. Follow him on Twitter @JonAPrior.