Monday, June 25, 2018
Business

PolitiFact: Fiorina exaggerates on consumer protection bureau's lack of oversight

The statement

The Consumer Financial Protection Bureau has "no congressional oversight."

Carly Fiorina, Nov. 10 in a presidential debate

The ruling

The bureau's mission is to "protect consumers by carrying out federal consumer financial laws." This includes enforcing consumer financial protection laws, following up on consumer complaints, promoting financial education, conducting research on consumer behavior, and monitoring financial markets for risks.

New agencies that seek to police well-established industries are often controversial, and the bureau is no different. Its champion was Elizabeth Warren, who was considered the likely first head of the bureau until her appointment was effectively blocked by Republicans in Congress. Obama's second choice, Richard Cordray, was also kept from taking office until Obama sidestepped GOP lawmakers by making a controversial recess appointment. Cordray was ultimately confirmed with some bipartisan support in 2013.

Fiorina has a point that by Washington standards, the bureau is unusually unfettered by oversight, congressional and otherwise — something specifically designed to limit any influence by the financial sector it oversees.

Perhaps the clearest example of this long leash is that, unlike most federal agencies, the bureau does not rely on appropriations for its funding. Instead, the bureau's operating budget comes from the Federal Reserve, currently capped at 12 percent of the Fed's total operating expenses. This works out to about $600 million a year today.

Those who are skeptical of the bureau say that seriously hampers Congress' oversight ability.

"Oversight without any budget leverage has turned out to be completely hollow," said Todd J. Zywicki, executive director of the George Mason Law and Economics Center at George Mason University and a frequent commentator on the issue.

Brenden D. Soucy, a Miami-based lawyer, wrote an article critical of the bureau's degree of congressional oversight in the Florida State University Law Review in 2013. He called the bureau "the most independent agency in United States history."

"The CFPB's extreme independence is touted as one of its greatest virtues, but history has shown that while independence from political pressure can be a virtue, near total isolation is not," Soucy wrote.

So it's clear that Congress lacks an important lever for allowing lawmakers to oversee and guide the agency. But does that equal "no congressional oversight"?

Not really. Here are a number of ways in which Congress can oversee the bureau:

• Congress can use legislation to change (or even abolish) the bureau. Indeed, there's currently legislation in both chambers to enshrine a variety of transparency standards.

• The Senate must confirm the head of the bureau.

• The board's director must testify at least twice a year before the Senate Banking, Housing, and Urban Affairs Committee; the House Financial Services Committee; and the House Energy and Commerce Committee. The bureau must also submit semi-annual budget justifications.

• The bureau is subject to an annual financial audit by the Government Accountability Office, a congressional agency.

Combined with other checks and balances by other parts of the executive branch and the judicial branch, this is a list of oversight mechanisms "that will measure up against any regulatory agency in Washington," Warren wrote in an October 2015 op-ed.

Other experts don't go this far — but they add that Fiorina's characterization is an exaggeration.

'The CFPB has a lot longer leash that almost any other federal agency," said Donald F. Kettl, a professor at the University of Maryland School of Public Policy and a senior fellow at the Brookings Institution. But, he added, "Congress did it on purpose. Congress can change it."

The statement is partially accurate but leaves out important details. We rate it Half True.

Edited for print. Read the full version at PolitiFact.com.

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