Tomorrow, the Senate Democrats will bring Richard Cordray’s nomination as director of the Consumer Financial Protection Bureau to the floor for a vote. I have met Mr. Cordray, and my decision to oppose his confirmation by the Senate has nothing to do with his qualifications. Rather, I feel it is my duty to oppose his confirmation as part of my opposition to the creation of CFPB itself.

In the wake of the financial crisis, Congress passed the Dodd-Frank financial industry reform which has done very little to address the core reasons the financial collapse occurred.  However, using the guise of “consumer protection”, Dodd-Frank did create an unaccountable new government bureaucracy that will invariably intrude into the lives of nearly every American with a checking account or a credit card.   

The financial crisis was not caused by a lack of consumer protection watchdogs.  The federal government has dozens of agencies and thousands of employees, not to mention 535 members of Congress, who supposedly perform oversight functions intended to promote competition and protect consumers.  Yet, most of the questionable loans that were granted while the housing bubble was inflating were supported, required, or even created by the government itself.

The crisis was the predictable result of dangerously easy credit facilitated by the Federal Reserve and years of government policy promoting home-ownership-for-all at any cost.

The CFPB will change absolutely none of that. Instead, it is in the process of assuming power over all sorts of consumer financial products, including checking accounts, credit cards, and student loans. New system-wide regulations will actually have the effect of disproportionately harming small community banks and their customers through higher costs.

Even more worrisome, the new agency is designed to have the authority to affect practically everyone while having accountability to practically no one, and this authority is vested in a single acting director.

The CFPB has access to annual funding of roughly half a billion dollars that is provided by the Federal Reserve, rather than Congress. According to the Congressional Research Service, “These funds are not reviewable by either the House or Senate Committees on Appropriations,” making the CFPB entirely outside the realm of traditional appropriations controls.  

Moreover, given that it is funded entirely by the Federal Reserve, serious questions could be raised about the out-of-control, unaccountable central bank that primarily serves powerful banking interests having undue influence.

The CFPB pretends to be accountable to itself. The law claims that the Financial Stability Oversight Council may veto actions which threaten the “safety and soundness of the United States banking system or the stability of the financial system of the United States.” But the FSOC is a board consisting of representatives from agencies that never saw the 2008 crisis coming, such as the Treasury secretary and the Federal Housing Finance Agency. Such a veto requires a supermajority of seven or more votes out of ten, and conveniently includes the vote of the CFPB director.

Perhaps most troubling, the Dodd-Frank financial law protects the bureau from many actions that could be taken by the courts:

“ . . . the deference that a court affords to the [CFPB] with respect to a determination by the [CFPB] regarding the meaning or interpretation of any provision of a Federal consumer financial law shall be applied as if the Bureau were the only agency authorized to apply, enforce, interpret, or administer the provisions of such Federal consumer financial law (Dodd-Frank, Section 1022(b)(4)(B)).” (Emphasis added.)

Confirming any director for this bureau would be tantamount to agreeing that we need a uniquely powerful super-agency that is not even designed to prevent a repeat of the financial crisis. Until the CFPB is reformed, I will not support it in any way.