Democrats are deeply divided over whether to work with Republicans to revamp the controversial consumer financial watchdog created after the 2008 financial crisis.
Some Democrats say they’re open to working with Republicans to improve the Consumer Financial Protection Bureau (CFPB). Others dismiss the idea as an ill-intentioned backdoor into destroying the agency.
“At this point, it’s impossible. They’ve tried to destroy [the CFPB] so many times, they’ve lost their credibility, really,” said Rep. Stephen Lynch (D-Mass.), a veteran on the House Financial Services Committee. “That’s their end game here.”
Progressive groups are pushing Democrats to defend the bureau, the brainchild of Sen. Elizabeth WarrenElizabeth WarrenOvernight Energy & Environment — Presented by American Clean Power — Democrats prepare to grill oil execs Manchin dampens progressive hopes for billionaires tax Merkley, Warren and Markey sound alarm over 'dirty' hydrogen provision in climate deal MORE (D-Mass.). The party’s liberal base, still fuming over the 2016 elections, does not want to see any compromise with Republicans over policies won by the left during the Obama era.
The CFPB has been in Republicans’ crosshairs for as long as it has existed. They consider the agency redundant at best and an unaccountable, overly powerful drain on the American economy at worst.
The bureau opened in July 2011 with a mandate to crack down on harmful and fraudulent financial practices that other regulators might miss or not cover. Warren, then a Harvard professor and adviser to President Obama, is credited with laying its foundation.
The CFPB is an independent agency with a sole director who can only be dismissed for major abuses of power or incompetence. It is funded through the Federal Reserve budget, not congressional appropriations, effectively insulating the bureau from political influence.
Republicans want to replace CFPB Director Richard Cordray with a bipartisan commission and subject the CFPB to congressional appropriations. That would give Congress much stronger oversight of the agency and the potential to defund it.
President Trump has promised to “dismantle” the Dodd-Frank financial reform law approved after the housing crisis, which set up the CFPB. The bureau is also under fire from the courts as in October the U.S. Court of Appeals for the District of Columbia held that the agency’s structure is unconstitutional.
Republicans on the House Financial Services Committee are eyeing April markups for Dodd-Frank legislation, meaning Democrats have just about a month to settle on a strategy to defend the CFPB.
Some Democrats think working with Republicans on some changes to the CFPB could be sound policy.
Several House Financial Services Committee Democrats say backing a coalition, for example, could protect the agency from withering under a Trump appointee.
“I’ve been warning my party for a long time that at some point you’re going to have a Republican president,” said Rep. Brad Sherman (D-Calif.). “I prefer a bipartisan commission.”
Cordray’s term ends next year, and Trump could decide not to replace him.
“For some Democrats, the choice is do we stick with the holy scripture, which is what we passed in Dodd-Frank,” said Sherman. “For others, it’s the practical question, which is, next year, do you want a Trump appointee or a board? Nothing that Trump has done makes me think that I want a Trump appointee.”
Rep. John Delaney (D-Md.) said he discussed backing a -CFPB commission last year with Republican colleagues, but only if Cordray would be part of it and the commission wouldn’t form until a majority of members were approved by the Senate.
Delaney said he’d still accept a commission under those terms but doesn’t trust that Republicans would protect the CFPB.
“I became very suspicious about the intent and the motives behind the commission structure, so that’s why I didn’t pursue those conversations,” said Delaney. “I wasn’t open-minded to a concept that would basically impair the agency during the transition.”
Any Democrat who supports making changes advocated by Republicans to the CFPB could come under fire from others in the party.
A spokesperson for Warren declined to comment for the article, but referred The Hill to an October 2016 Huffington Post column in which the senator opposed changing the bureau’s structure.
“The quickest way to undermine an agency’s effectiveness is to make it a commission — which is why I want a single director and the banking industry doesn’t,” wrote Warren.
Liberal legislators are often hesitant to oppose Warren on financial issues, and her influence over the left could be costly for Democrats looking to strike a deal.
Financial Services Committee ranking member Rep. Maxine Waters (D-Calif.) told The Hill she’s an “an avid supporter of the Consumer Financial Protection Bureau as it is.”
“We constructed it so he would not be at the mercy of a commission that would get deadlocked or an appropriations committee who would stymie his work by not appropriating the appropriate funds,” Waters said.
Karl Frisch, executive director of the progressive nonprofit Allied Progress, said maintaining the current CFPB structure is critical for fending off “Wall Street influence” in Congress.
“This idea … would hobble the agency in gridlock and render it incapable of defending consumers or holding Wall Street accountable. That cannot be allowed to happen,” said Frisch.
Financial Services Republicans are mum on their plans.
Rep. Jeb Hensarling (R-Texas), the chairman of the panel, floated keeping a single director at the CFPB in a memo to committee Republicans, but with much less power and more White House oversight.
Rep. Michael Capuano (D-Mass.) said he’s not opposed to a commission in theory but that “it’s awfully hard to be open-minded when the people who are pushing it the hardest are the ones who’ve been against the CFPB from day one.”
“It’s about the history of the people pushing it,” said Capuano. “They have been consistently against the CFPB from day one, have done everything they could to undermine it. Their actions have raised questions about their motives.”