by Jeff Sovern
Here. To see why it is important to keep the CFPB's budget out of the appropriations process (just as with the other bank regulators), here's an excerpt from one of our posts from 2011 (the more things change, . . . ):
To see why this matters, you have only to read New York Times reporter Gretchen Morgenson's book (written with Joshua Rosner), Reckless Endangerment (2011). The authors explain, at pages 28-29, that when Congress created the Office of Federal Housing Enterprise Oversight (OFHEO) to regulate Fannie and Freddie in 1992, Fannie lobbied to have OFHEO subject to annual appropriations by Congress. The authors state:
The overseer would have to beg for money to operate. . . . [That, together with other constraints,] allowed Fannie to shift the power of oversight to congressional subcommittees, run by members who could be easily swayed by the company's lobbying efforts and campaign contributions. Once his company's oversight was in the hands of Congress, [Fannie chief executive James A.] Johnson knew that he could work behind the scenes to derail any restrictions on the company's activities that OFHEO might suggest.
We all know how that ended. OFHEO's efforts to regulate Fannie Fannie and its fellow enterprise Freddie failed miserably. Fannie and Freddie needed a bailout of something like $160 billion, and OFHEO has since been replaced by a new regulator. So this is really an attempt to enable financial institutions to regulate their regulator, the CFPB, and prevent effective consumer protection.