by Jeff Sovern
According to Governor Romney's economic adviser Columbia Business School Dean Glenn Hubbard, Romney will soon propose "a new system of consumer financial regulation that either moves the new Consumer Financial Protection Bureau outside of the Federal Reserve or breaks up the new agency and places the powers within existing financial regulators." The full article is here.
If true, this is interesting. Consumer advocates originally wanted the Bureau to be a freestanding agency, so moving the Bureau outside the Fed is unlikely to trouble them, unless the proposal would entail reducing the Bureau's budget (at present, the Bureau's financing draws from the Fed's budget; Congressional Republicans have proposed changing that to subject the Bureau to the annual congressional appropriations process) or changing the Bureau in other ways. But breaking up the Bureau and allocating its powers to existing financial regulators is much more problematic. Before Dodd-Frank, many of the powers the Bureau now has (but not all of them) were in fact exercised by other financial regulators, and of course, the failures of those regulators led to the subprime fiasco. The regulators tended to have other things on their agenda besides consumer protection (e.g., the Fed's failure to use the power Congress granted it in 1994 to prevent unfair and deceptive mortgage lending practices until after the subprime crisis hit) or to have been captured by the banks they were to regulate (e.g., the Office of the Comptroller of the Currency). I hope Governor Romney does not go that route.