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LEGISLATIVE PROPOSALS TO PROMOTE 

ACCOUNTABILITY AND TRANSPARENCY AT THE 

CONSUMER FINANCIAL PROTECTION BUREAU 

HEARING 

BEFORE THE

SUBCOMMITTEE ON FINANCIAL INSTITUTIONS 

AND CONSUMER CREDIT 

OF THE

COMMITTEE ON FINANCIAL SERVICES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

SECOND SESSION 

FEBRUARY 8, 2012 

Printed for the use of the Committee on Financial Services 

Serial No. 112–99 

( 

(II) 

HOUSE COMMITTEE ON FINANCIAL SERVICES 

SPENCER BACHUS, Alabama, Chairman 

JEB HENSARLING, Texas, Vice Chairman 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

RON PAUL, Texas 

DONALD A. MANZULLO, Illinois 

WALTER B. JONES, North Carolina 

JUDY BIGGERT, Illinois 

GARY G. MILLER, California 

SHELLEY MOORE CAPITO, West Virginia 

SCOTT GARRETT, New Jersey 

RANDY NEUGEBAUER, Texas 

PATRICK T. MCHENRY, North Carolina 

JOHN CAMPBELL, California 

MICHELE BACHMANN, Minnesota 

THADDEUS G. McCOTTER, Michigan 

KEVIN McCARTHY, California 

STEVAN PEARCE, New Mexico 

BILL POSEY, Florida 

MICHAEL G. FITZPATRICK, Pennsylvania 

LYNN A. WESTMORELAND, Georgia 

BLAINE LUETKEMEYER, Missouri 

BILL HUIZENGA, Michigan 

SEAN P. DUFFY, Wisconsin 

NAN A. S. HAYWORTH, New York 

JAMES B. RENACCI, Ohio 

ROBERT HURT, Virginia 

ROBERT J. DOLD, Illinois 

DAVID SCHWEIKERT, Arizona 

MICHAEL G. GRIMM, New York 

FRANCISCO ‘‘QUICO’’ CANSECO, Texas 

STEVE STIVERS, Ohio 

STEPHEN LEE FINCHER, Tennessee 

BARNEY FRANK, Massachusetts, Ranking 

Member 

MAXINE WATERS, California 

CAROLYN B. MALONEY, New York 

LUIS V. GUTIERREZ, Illinois 

NYDIA M. VELA ́ ZQUEZ, New York 

MELVIN L. WATT, North Carolina 

GARY L. ACKERMAN, New York 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

MICHAEL E. CAPUANO, Massachusetts 

RUBE ́ N HINOJOSA, Texas 

WM. LACY CLAY, Missouri 

CAROLYN MCCARTHY, New York 

JOE BACA, California 

STEPHEN F. LYNCH, Massachusetts 

BRAD MILLER, North Carolina 

DAVID SCOTT, Georgia 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

GWEN MOORE, Wisconsin 

KEITH ELLISON, Minnesota 

ED PERLMUTTER, Colorado 

JOE DONNELLY, Indiana 

ANDRE ́ CARSON, Indiana 

JAMES A. HIMES, Connecticut 

GARY C. PETERS, Michigan 

JOHN C. CARNEY, JR., Delaware 

JAMES H. CLINGER, Staff Director and Chief Counsel 

(III) 

SUBCOMMITTEE ON FINANCIAL INSTITUTIONS AND CONSUMER CREDIT

SHELLEY MOORE CAPITO, West Virginia, Chairman 

JAMES B. RENACCI, Ohio, Vice Chairman 

EDWARD R. ROYCE, California 

DONALD A. MANZULLO, Illinois 

WALTER B. JONES, North Carolina 

JEB HENSARLING, Texas 

PATRICK T. MCHENRY, North Carolina 

THADDEUS G. McCOTTER, Michigan 

KEVIN McCARTHY, California 

STEVAN PEARCE, New Mexico 

LYNN A. WESTMORELAND, Georgia 

BLAINE LUETKEMEYER, Missouri 

BILL HUIZENGA, Michigan 

SEAN P. DUFFY, Wisconsin 

FRANCISCO ‘‘QUICO’’ CANSECO, Texas 

MICHAEL G. GRIMM, New York 

STEPHEN LEE FINCHER, Tennessee 

CAROLYN B. MALONEY, New York, 

Ranking Member 

LUIS V. GUTIERREZ, Illinois 

MELVIN L. WATT, North Carolina 

GARY L. ACKERMAN, New York 

RUBE ́ N HINOJOSA, Texas 

CAROLYN MCCARTHY, New York 

JOE BACA, California 

BRAD MILLER, North Carolina 

DAVID SCOTT, Georgia 

NYDIA M. VELA ́ ZQUEZ, New York 

GREGORY W. MEEKS, New York 

STEPHEN F. LYNCH, Massachusetts 

JOHN C. CARNEY, JR., Delaware 

(V) 

C O N T E N T S 

Page 

Hearing held on: 

February 8, 2012 .............................................................................................. 1 

Appendix: 

February 8, 2012 .............................................................................................. 45 

WITNESSES 

WEDNESDAY, FEBRUARY 8, 2012 

Hunter, Michael J., Chief Operating Officer, American Bankers Association 

(ABA) ..................................................................................................................... 9 

Pincus, Andrew, Partner, Mayer Brown LLP, on behalf of the U.S. Chamber 

of Commerce ......................................................................................................... 11 

Stinebert, Chris, President and Chief Executive Officer, American Financial 

Services Association (AFSA) ................................................................................ 13 

Wilmarth, Arthur E., Jr., Professor of Law and Executive Director, Center 

for Law, Economics & Finance, George Washington University Law School . 14 

APPENDIX 

Prepared statements: 

Huizenga, Hon. Bill .......................................................................................... 46 

Hunter, Michael J. ........................................................................................... 47 

Pincus, Andrew ................................................................................................. 54 

Stinebert, Chris ................................................................................................ 64 

Wilmarth, Arthur E., Jr. .................................................................................. 70 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Capito, Hon. Shelley Moore: 

Written statement of the Consumer Bankers Association (CBA) ................. 86 

Letter to Representative Huizenga from Bill Cheney, President & CEO, 

the Credit Union National Association (CUNA) ......................................... 90 

Maloney, Hon. Carolyn: 

Written statement of Americans for Financial Reform ................................. 91 

(1) 

LEGISLATIVE PROPOSALS TO PROMOTE 

ACCOUNTABILITY AND TRANSPARENCY 

AT THE CONSUMER FINANCIAL 

PROTECTION BUREAU 

Wednesday, February 8, 2012 

U.S. HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON FINANCIAL INSTITUTIONS

AND CONSUMER CREDIT, 

COMMITTEE ON FINANCIAL SERVICES, 

Washington, D.C. 

The subcommittee met, pursuant to notice, at 10:01 a.m., in room 

2128, Rayburn House Office Building, Hon. Shelley Moore Capito 

[chairwoman of the subcommittee] presiding. 

Members present: Representatives Capito, Renacci, Royce, Hensarling, McHenry, McCotter, Pearce, Luetkemeyer, Huizenga, 

Duffy, Canseco, Grimm; Maloney, Gutierrez, Hinojosa, Baca, Miller 

of North Carolina, Scott, Velazquez, and Carney. 

Ex officio present: Representative Bachus. 

Also present: Representatives Neugebauer and Green. 

Chairwoman CAPITO. This hearing will come to order. I would 

like to thank the members of the subcommittee and our witnesses 

for joining us today. 

The title of this morning’s hearing is, ‘‘Legislative Proposals to 

Promote Accountability and Transparency at the Consumer Financial Protection Bureau,’’ which is better known to all as the CFPB. 

We will be considering three bills: one, legislation which is authored by Mr. Neugebauer; two, legislation which is authored by 

Mr. Renacci—two of these bills address the funding of the Bureau 

and responsibilities of the Bureau’s Director; and three, legislation 

introduced by Mr. Huizenga that seeks to address an oversight in 

the Dodd-Frank Act to ensure that information shared with the 

Bureau is protected by the attorney/client privilege and work product immunity. 

A little over a month ago, President Obama used his executive 

power to appoint Richard Cordray to be Director of the Consumer 

Financial Protection Bureau using a recess appointment. However, 

it is still unclear whether or not the Congress was technically in 

recess when he made that appointment. While this may seem like 

a technicality to many across the Nation, it will undoubtedly lead 

to significant, I think, litigation, further damaging the credibility 

of this Bureau. I stated nearly 6 months ago that I felt that the 

Administration had mishandled the appointment of the Bureau’s 

2 

Director from the beginning. The complexities of moving a nominee 

through the United States Senate are not new. 

For an agency that was supposed to be the crown jewel of the 

Dodd-Frank Act, waiting until the last minute to appoint a nominee and then subsequently dismissing constitutionally mandated 

procedures for appointment, I think creates an uncertainty over the 

Bureau and its actions until it is resolved. The legislative proposals 

before us today are an important step in improving the accountability for this new agency. The first measure, H.R. 1355, sponsored by Mr. Neugebauer, will remove the Bureau from the Federal 

Reserve and place it within the Department of the Treasury, where 

the Bureau will subsequently be subject to regular authorization, 

budget, and appropriations processes. 

The Bureau’s stated goal is to regulate financial products. And 

it is prudent for Members of Congress to have some say over the 

budget of an agency that could decide which financial products are 

appropriate for their constituents. 

The second measure, H.R. 2081, as sponsored by Mr. Renacci, 

moves the Bureau Director off of the FDIC Board and fills the vacancy with the Chairman of the Federal Reserve. The primary goal 

of the FDIC is the safety and soundness of the institutions that 

benefit from the Deposit Insurance Fund. And it is appropriate to 

have all of the prudent regulators represented on the FDIC Board. 

Finally, I would like to thank Mr. Huizenga for the third bill we 

will consider today, H.R. 3871. We have worked with Mr. Huizenga 

to address an issue of an oversight of the Dodd-Frank Act to ensure 

information that is shared with the Bureau is treated as privileged 

information and cannot be shared with third parties. 

It is our intent to move this legislation quickly, especially given 

Mr. Cordray’s recent statement that, ‘‘Congress may want to look 

at a legislative fix.’’ We hope our colleagues across the aisle will 

work—and we have already been talking about this—with us on 

moving this forward without delay. I would like to thank the three 

sponsors of the bills before the subcommittee today for their leadership, and I look forward to hearing the testimony of the witnesses. 

At this time, I would like to yield to my good friend and colleague, Ranking Member Maloney, for the purpose of giving an 

opening statement. 

Mrs. MALONEY. I want to thank the gentlelady for yielding and 

I welcome the panel of witnesses. There are three bills before us 

today, which according to the title of this hearing will ‘‘promote accountability and transparency.’’ However, two of these proposed 

bills are seriously misguided and meant to distract from the 

CFPB’s important work to protect the American consumer. But I 

would argue that for the most part, they do nothing to further that 

goal of transparency because the CFPB is already the most accountable agency in our government. The first bill will ensure that 

privileged documents used in CFPB exams maintain that privileged status. 

I support the goal of this bill, but I want to make sure that we 

are amending the right part of the law. In the Senate, Senator 

Shelby has a bill that does the same thing, but it amends the FDI. 

I believe this is a better way to provide for this protection as that 

is where the OCC, the FDIC and the Federal Reserve have this 

3 

protection. The bill before us amends Dodd-Frank. I do not support 

the other two. The second bill takes the CFP Director off the FDIC 

Board and replaces him with the Federal Reserve (Fed) Chairman. 

The purpose of giving a seat to the CFPB Director was to enable 

him to interact with the prudential regulators who conduct exams 

of financial institutions. And this would eliminate the ability of 

consumer and prudential bank regulators to work together for consumers and safety and soundness. 

Finally, we have the most blatant attempt to dismantle the Bureau, which would move it out of the Fed and put it under the 

Treasury Department, where it would be subject to the political 

and uncertain appropriations process. I oppose this bill and this 

change to the law. To subject a regulatory agency, and the CFPB 

in particular, to appropriations in this Republican-led Chamber is 

to put it on a chopping block. I remind you that all of my colleagues on the Republican side voted against this bill and this 

would leave the American people without an effective watchdog 

and put this country back on the path that led to the financial crisis. This bill also eliminates the Consumer Financial Civil Penalty 

Fund, which holds the proceeds from enforcement actions and directs those funds back to victims. 

Many of my colleagues talked about how we needed to help the 

victims from Madoff and other scandals, but this would eliminate 

that. And if the victims can’t be identified, this would go to financial literacy and consumer education, a stated goal of this committee. But I would note that the CFPB already has unprecedented 

accountability, and since opening its doors, the CFPB has issued its 

semi-annual report justifying its budget. It has testified before Congress 14 different times. It has provided its financial operating 

plans to the Office of Management and Budget. It has a budget 

cap, and the Bureau is subject to potential vetoes on rulemakings 

by the Financial Stability Oversight Council. And it has already 

been audited by the Comptroller General. This is all in accordance 

with the rules as set forth in Dodd-Frank. 

I fail to understand why my colleagues want to try to dismantle 

the power of the CFPB. I would like to place in the record some 

of their accomplishments, a whole list of them, such as opening up 

an office to help veterans, opening up an office to help students, 

coming out with a one-pager for mortgages that people understand, 

coming out with information so that students understand the dangers of financial products and how they can go into debt. I have a 

list here of many, many different things that they have done that 

help our economy, help our consumers, and help our country. So, 

I would ask unanimous consent to place it in the record. 

Chairwoman CAPITO. Without objection, it is so ordered. 

Mrs. MALONEY. I yield back. 

Chairwoman CAPITO. I would like to recognize the chairman of 

the full committee, Mr. Bachus, for 2 minutes for an opening statement. 

Chairman BACHUS. Thank you, Madam Chairwoman, for holding 

this hearing on three bills that our committee continues to advance. We think they are reforms that will bring much needed 

oversight, accountability, and transparency to the Consumer Financial Protection Bureau. 

4 

I think all of us agree on the need to protect consumers. But I 

think in honesty, we have to go beyond that and say that at times, 

it was not a priority for the Federal regulators. At times, they focused on safety and soundness and they should have done that, but 

I think consumer protection was sacrificed, probably particularly as 

it dealt with non-banking companies. 

There has also been criticism—Professor Wilmarth, you discuss 

this in your written testimony—that they sometimes focused on 

profitability of the banks as opposed to consumer protection. I associate myself with your remarks, Professor, saying that you can 

have both and it has to work for both parties. And if it doesn’t 

work for the consumer, ultimately it won’t work for the financial 

institution. I think that there are other witnesses at the table who 

would agree. What these bills do—actually the bill that forms the 

commission is exactly what we passed out of the House; an overwhelming vote was for a bipartisan commission. 

And I will say that, because we resisted the formation of this 

board as a group—that I am sure that our colleagues express some 

skepticism now. But I will tell you that I actually, in 2005 proposed 

a subprime lending bill and we encountered resistance from the 

regulators and the institutions, and I think there was a push back. 

I want to close by commending Mr. Huizenga and Mr. Renacci and 

Mr. Neugebauer for their strong work on these bills, and hopefully 

we can come to some consensus. I think we have an agency where 

maybe the recess appointment is questionable, and we could have 

lawsuits for years about that. That is not going to benefit anyone. 

But I will acknowledge that we didn’t always put consumer protection—we didn’t elevate it to the level we should have. Thank you. 

Chairwoman CAPITO. Thank you, Mr. Chairman. 

I would like to recognize Mr. Hinojosa for 1 minute for the purpose of an opening statement. 

Mr. HINOJOSA. Thank you. 

Chairwoman Capito and Ranking Member Maloney, I thank you 

both for holding today’s hearing on examining the accountability of 

the new Consumer Financial Protection Bureau. 

I believe we should continually strive to ensure the strength, the 

independence, and the accountability of the Bureau, and holding 

hearings such as this contributes to that effort. 

After the financial collapse in 2008, it became apparent that consumers were left holding the bag, and that the agencies charged 

with their protection were too fragmented to be effective. 

The Consumer Financial Protection Bureau was created in response to this fragmentation, to hold the protection of American 

consumers as its sole priority. The American public needs to be informed of the House Majority’s attempt to cut the funding of the 

CFPB, which can help prevent another financial crisis like the one 

that started at the end of 2007. 

It is our duty to make certain the Bureau follows through on its 

mission. However, subjecting the Bureau’s budget to the appropriations process in order to reduce its funding, and stripping the Director of his membership on the FDIC Board of Directors, is counterproductive to the mission of the Bureau and will weaken its 

ability to guard consumers against fraud and predatory practices. 

5 

I look forward to hearing today’s testimony and our distinguished 

panelists’ response to our concerns. 

I yield back the remainder of my time. 

Chairwoman CAPITO. Thank you 

I recognize Mr. Renacci for 1 minute for the purpose of an opening statement. 

Mr. RENACCI. Thank you, Madam Chairwoman. 

I would like to begin by emphasizing that I am fully committed 

to consumer protection. I recognize that consumers are the driving 

force behind our economy, and I believe consumers depend on a 

sound financial system. 

Main Street consumers are the ones most impacted by the reckless decisions made on Wall Street. As the financial system crumbled around them, consumers were the ones who lost their jobs, 

lost their homes, and were unable to access credit. 

It is for this reason that we must enact sound policies of protecting the entire financial system and put an end to special interest carve-outs that favor one segment of the economy over the 

other. 

Therefore, I offered H.R. 2081, a bill to ensure the safety and 

soundness of our financial system. 

During the creation of the CFPB, the proponents argued for an 

agency whose sole purpose was consumer protection. By placing the 

CFPB Director on the FDIC Board, whose mandate is safety and 

soundness, the bill drafters created a conflict of interest when the 

CFPB Director was making decisions during the FDIC Board meeting as to which mandate should he follow. 

The best thing we can do for consumers is to ensure a transparent banking system that protects their savings, provides access 

to credit, and creates safe and innovative products. 

One of the best things we can do for the CFPB Director is to 

allow him to do his job with no perceived conflict of interest. 

I look forward to hearing your comments on all three proposals. 

Again, thank you for your testimony. 

Chairwoman CAPITO. Thank you. 

Mr. Scott is recognized for 3 minutes for the purpose of making 

an opening statement. 

Mr. SCOTT. Thank you very much, Madam Chairwoman. 

The American people basically have spoken and have declared 

that we really need consumer protection in this country and unfortunately, these three measures before us are, to me, a declaration 

of war on the CFPB, the Consumer Protection Bureau. They clearly 

want to move it out of the Federal Reserve, they want to put it into 

Treasury. They want to revoke the automatic and unrenewable annual funding of the agency. They want to repeal the establishment 

of the consumer financial protection fund and the consumer financial civil penalty fund. They totally weaken the educational effort 

in this bill. They reduce the resources that are available to consumers. They remove some of the oversight of the CFPB and its 

reach for accountability and its reach for transparency. They omit 

fairness and openness and totally weaken the entire thrust of this 

bill, which is to provide unfettered protection for consumers. 

We must remember how we got into this situation in the first 

place. It was because of abusive kinds of actions. Now, I don’t mind 

6 

us moving on and trying to correct some things and certainly, to 

enable the financial services industry to better to do its job, but we 

cannot re-alter and re-shape this agency so that it cannot do its 

job. 

This agency must be allowed to breathe. These measures simply 

put this agency into a form of a straitjacket so that they cannot do 

it. 

And I understand my friends on the other side have never approved of this agency, they don’t want this agency, they have been 

trying to kill this agency ever since it has been here. 

But let us be real, our American people deserve protection. 

There is nothing more complex than some of these financial instruments, and this is especially true in very tough economic times. 

We have all kinds of financial products and services and to be honest, we have some unscrupulous actors in this field. Not all, but 

some. I would hope that we can look at this. I would be interested 

in—not only during my questions—to find your opinions about this 

and some of my comments, but I believe firmly that they are true. 

I am one who is willing to work with the financial services industry to make sure that they can do their job. But I am also one who 

wants to make sure that this agency lives and breathes and is able 

to do its essential job of protecting the American people from financial abuses. 

I yield back, Madam Chairwoman. 

Chairwoman CAPITO. Thank you. 

I would like to recognize Mr. Royce for 1 minute for the purpose 

of an opening statement. 

Mr. ROYCE. Thank you. 

The Administration just went to great lengths to usurp regular 

order and recess-appoint the head of the CFPB, and what was the 

Senate asking for in return that elicited such a step that many 

argue violates the Constitution itself? They were looking to subject 

the CFPB’s budget to the normal appropriations process and to 

move the agency from a Director to a board, and these are the 

steps, frankly, that were originally envisioned by Mrs. Warren and 

Secretary Geithner. 

The real worry we have in terms of the way that this has been 

done is it is going to undermine safety and soundness. It is going 

to take away the inputs of the prudential regulator. 

So these reforms would reduce the potential abuses that may 

come from this agency, which unlike any other regulator now has 

an independent budget, has broad regulator authority over a number of different types of institutions, and is run by a single individual. I am encouraged by the bills being discussed today which 

get at what Senate Republicans were trying to achieve in the first 

place, which was to provide added transparency to the CFPB and 

ensure safety and soundness regulation remains the chief function 

of our regulatory structure. I would argue that lack of proper safety 

and soundness regulation, the lack of efficient prudential regulation, is also what helped bring on the original crisis, so it needs to 

be addressed, and we can’t walk down this road again with bifurcated regulation as we did with Fannie Mae and Freddie Mac without the prudential regulator having the necessary authority to protect safety and soundness. 

7 

Thank you, I yield back. 

Chairwoman CAPITO. Thank you. I will recognize Mr. Green. 

Mr. GREEN. Thank you, Madam Chairwoman, and I thank you 

for allowing me to become a part of the committee. I would also 

like to thank the witnesses for appearing today. 

I would like to associate myself with the comments made by the 

ranking member, and I would like to say to the persons listening, 

whereever they happen to be, whomever they happen to be, I believe the President did the right thing. 

More than 40 Senators indicated that they would approve no one 

until certain things were done that can be done legislatively, but 

there was an understanding that without leadership, the organization could not function. There had to be leadership for the organization to function. 

Leadership is key to any organization’s being efficacious. The 

President did the right thing. He made the appointment. And for 

those who think that the wrong thing was done, the courts are 

available to sort these things out. 

Funding is important to the existence of any organization. If you 

assault leadership and you can circumvent funding, you can thwart 

the efforts of the organization. 

These measures assault leadership and funding. This agency is 

designed to help people, people on Main Street, but also people on 

a third street. We talk about Wall Street and Main Street, but 

there is a street called ‘‘Home Street’’ where people have their 

houses that are being foreclosed on. They understand the need for 

the Consumer Financial Protection Bureau because they understand what they have gone through, and even if their homes are 

not directly impacted, they are indirectly impacted by other homes 

on their blocks that have been foreclosed upon. Leadership and 

funding are key. 

I thank you for the time, I yield back. 

Chairwoman CAPITO. Thank you. 

Mr. Huizenga, for 1 minute, for an opening statement. 

Mr. HUIZENGA. Thank you, Madam Chairwoman, and Ranking 

Member Maloney. I appreciate this important hearing and the legislative proposals that will create some piece of mind, I think, for 

our financial institutions. 

CFPB as created under Dodd-Frank has been identified to fail 

the safeguards from proprietary information given to the Bureau 

by financial institutions. 

Let me be clear. We all agree that we need to have stringent consumer protections, but these reforms are much-needed commonsense measures, I believe. Specifically, my bill, H.R. 3871, the Proprietary Information and Protection Act, immediately closes a loophole created under the CFPB creation. 

Unlike current statutes regarding other Federal agencies assessing relevant information, Dodd-Frank failed to provide such protections. The simple truth is that the CFPB could largely legally share 

privileged information with third parties at this point. Absent specific congressional legislation, the courts have permitted this practice in the case of other Federal agencies. 

Richard Cordray, Director of the CFPB, appointed by President 

Obama, recently testified that this was an ‘‘oversight.’’ And, that he 

8 

supports a legislative solution to ensure privileged information is 

not leaked to third parties through the CFPB. My bill is that real 

legislative solution, a common-sense fix that would put an end to 

needless uncertainty and legal costs to both the CFPB and to financial institutions. 

I appreciate the opportunity to be here today. 

Chairwoman CAPITO. Thank you. 

Mr. Canseco, for 1 minute? 

Mr. CANSECO. Thank you, Madam Chairwoman. 

Last March, Elizabeth Warren told this committee, with a 

straight face I should add, that the CFPB was the most accountable agency in government. And needless to say, there has been 

some disagreement over that assertion. In the past year, this committee has led several efforts to bring transparency and accountability to the Consumer Financial Protection Bureau. And each 

time, these efforts have been rebuffed, either by a crusading President, or by a Democratic caucus that for a five-member commission 

before they were against it. 

And so, what we have now is a rogue agency, headed by a rogue 

Director who operates with almost no accountability, and whose 

mandates will be subject to the whims of whomever happens to be 

sitting in the czar’s throne—excuse me, the Director’s chair. 

This is an unacceptable way for a Federal agency to run, and I 

look forward to considering more measures that would shine a little 

more light on the CFPB. 

Thank you. 

Chairwoman CAPITO. Thank you. 

Mr. Grimm is recognized for 1 minute for the purpose of an opening statement. 

Mr. GRIMM. Thank you, Madam Chairwoman. 

I appreciate you holding this hearing to examine proposals to improve accountability and oversight of the CFPB. The CFPB, created 

under Dodd-Frank, I think is a classic example of an ever-expanding Federal bureaucracy. It is given a funding stream directly from 

the budget of the Federal Reserve, which removes from Congress 

one of its most basic and fundamental powers, the ability to appropriate funds to a Federal agency as it sees fit; and by extension, 

the ability for the Congress to hold that agency accountable for its 

performance, or for the lack thereof. 

Therefore, I welcome the proposal of Chairman Neugebauer to 

place the CFPB under the Department of the Treasury and restore 

Congress’ rightful role in determining the funding of this agency 

and its direction going forward. 

I look forward to hearing from the witnesses their thoughts on 

the bills today before us, and I yield back the balance of my time. 

Thank you. 

Chairwoman CAPITO. Thank you. 

Mr. Neugebauer, for 1 minute, for an opening statement. 

Mr. NEUGEBAUER. Thank you very much. 

This hearing is not about consumer protection; it is about accountability, accountability that the American people desire. Our 

country was founded on the principles of checks and balances. And, 

we now have an agency that has basically unlimited powers, which 

is being run by a person who has not been constitutionally ratified 

9 

to hold that position. And people are expecting us to do something 

about that. 

For example, this new agency just put out its very first rule and 

it turns out that it is going to take 7.7 million manhours to comply 

with this new regulation. I would remind you that it took just over 

7 million manhours to build the Empire State Building. So the accountability and responsibility is an important part of our government. As my good friend, Mr. Scott, said, ‘‘automatic funding.’’ 

The American people are tired of automatic funding. In fact, that 

is kind of how we got into these record deficits is automatic funding. And so, moving this agency to the budget, going through the 

normal appropriations process is the right thing to do. And I encourage my other colleagues to support H.R. 1355. 

Chairwoman CAPITO. Thank you. 

Our final opening statement is Mr. Duffy for 1 minute. 

Mr. DUFFY. Thank you, Madam Chairwoman. 

To echo what has been said before, we all agree that we want 

to have sound consumer protections in place. We want our family 

members, our friends, and our constituents to be dealt with fairly 

when they deal with a financial institution in a transparent way. 

But we hear heightened rhetoric in this room. We hear comments 

like, we want to put the CFPB in a straitjacket. We hear comments 

like, we are going to de-fang the CFPB. And I guess I would like 

the panel to talk about, when agencies like the SEC, the CFTC, the 

FTC, the FCC, and the EEOC all are agencies that are funded by 

Congress, how that has put them in a straitjacket that doesn’t 

allow them to effectively do their jobs? 

We also hear a concern about this agency being run by a commission, and then therefore, how the Federal Reserve is ineffective because it has a board, or the FDIC is ineffective because it has a 

five-member board. Or the SEC, or the CFTC, NACU—all of these 

agencies run by a board. 

I would like to hear the panel talk about how they are so ineffective because they have a board or a panel which runs the agency. 

Or, those panels that receive their money through the appropriations process, how they, too, are ineffective. 

I would like to hear the panel talk about that throughout the 

hearing. 

I yield back. 

Chairwoman CAPITO. Thank you. Thank you, Mr. Duffy. 

That concludes our opening statements, and I would now like to 

introduce our panel of witnesses for the purpose of giving a 5- 

minute opening statement. I will introduce you individually before 

you speak. 

First, Mr. Michael G. Hunter, chief operating officer of the American Bankers Association. And I would like to remind the witnesses 

that if you can pull the microphones close to you, it is easier for 

us to hear you in this room. 

Thank you. Welcome, Mr. Hunter. 

STATEMENT OF MICHAEL J. HUNTER, CHIEF OPERATING 

OFFICER, AMERICAN BANKERS ASSOCIATION (ABA) 

Mr. HUNTER. Thank you. Chairwoman Capito, Ranking Member 

Maloney, and members of the subcommittee, my name is Michael 

10 

Hunter. I am the chief operating officer of the American Bankers 

Association. I come before this subcommittee not only as a representative of the banking industry, but also as someone with experience in government at both the State and Federal levels. I served 

in both the Oklahoma House as Oklahoma’s secretary of state, and 

was chief of staff to Congressman J.C. Watts, a former member of 

the House Financial Services Committee. 

I appreciate the opportunity to present the ABA’s views on several pieces of legislation that would improve the accountability of 

the Bureau of Consumer Financial Protection. Let me first begin by 

emphasizing that the banking industry fully supports effective consumer protection. Americans are best served by a financially sound 

banking industry that safeguards customer deposits, lends those 

deposits responsibly, and processes payments efficiently. 

No bank can be successful without treating customers fairly. It 

is no surprise, therefore, that two-thirds of banks in this country 

have been in business for more than 50 years, and one-third for 

more than a century. The Consumer Financial Protection Bureau 

will play a pivotal role in setting new rules that will affect access 

and availability of consumer financial products. 

We appreciate the work of Congressmen Renacci and Neugebauer to put forward options to address concerns about the role of 

the Bureau and its exercise of power; and to Congressman 

Huizenga for his work in the area of privileged information. We 

strongly support an effective mechanism of checks and balances for 

the Bureau and we applaud congressional efforts to achieve this 

goal. 

Let me comment briefly on each of the three bills. First, H.R. 

2081 would replace the Bureau Director with the Chairman of the 

Federal Reserve as one of the five members of the FDIC Board. 

Maintaining a safe and sound banking system is at the heart of 

protecting the FDIC insurance fund. Therefore, regulators with 

safety and soundness responsibilities are important for directing 

the FDIC, which is the rationale for including the Fed. 

What is missing on the FDIC’s Board is representation from the 

banking industry. Banks bear the full cost of the FDIC without any 

taxpayer assistance. Yet, banks have no voice in the priorities, policies, and staffing of the agency. We would be happy to work with 

the subcommittee on how this might be accomplished. 

The second bill, H.R. 1355, would move the Bureau under Treasury, and subject it to the appropriations process. At the heart of 

this bill is the need to ensure accountability for Bureau decisions 

and ensure that the funds used are done so effectively. 

On the question of accountability, there are many ways to 

achieve this. The ABA has long advocated the use of a commission 

or a board structure to accomplish this, as currently there is too 

much power vested in one person to fundamentally alter the financial choices available to consumers. Such a structural change would 

provide an effective check and balance. 

ABA supports H.R. 1121, introduced by Chairman Bachus, which 

created a five-member board for the Bureau. This bill passed the 

subcommittee, the full committee, and later the full House as part 

of H.R. 1315. 

11 

The last bill, H.R. 3871, is intended to clarify for the Bureau the 

protection of confidential information. Banks currently have legal 

protection that allows them to be comfortable in voluntarily turning over privileged documents upon the request of banking agencies. While the Bureau has expressed its willingness to address this 

issue through regulation, the ABA believes it is appropriate to add 

certainty by enacting the same express rules regarding privilege of 

information for the Bureau as those already established for the 

other Federal banking supervisors. 

In testimony before the House and the Senate, we note that 

Richard Cordray has indicated his support for such action. We appreciate Representative Huizenga’s work on this important issue. 

We would suggest a technical modification to the bill to address the 

privilege issue with respect to the sharing of information with 

other Federal agencies. The bill currently only addresses one of the 

two statutory provisions that would put the Bureau on equal footing with the other banking agencies. 

We look forward to working with Congressman Huizenga and the 

subcommittee on this very important issue. Thank you for the opportunity to testify. I would be happy to answer any questions. 

[The prepared statement of Mr. Hunter can be found on page 47 

of the appendix.] 

Chairwoman CAPITO. Thank you. 

Our second witness is Mr. Andrew Pincus, partner, Mayer Brown 

LLP, on behalf of the United States Chamber of Commerce. 

Welcome. 

STATEMENT OF ANDREW PINCUS, PARTNER, MAYER BROWN 

LLP, ON BEHALF OF THE U.S. CHAMBER OF COMMERCE 

Mr. PINCUS. Thank you. 

Chairwoman Capito, Ranking Member Maloney, and members of 

the subcommittee, thank you for the opportunity to testify today on 

behalf of the U.S. Chamber of Commerce and the hundreds of businesses that the Chamber represents. 

The Chamber, too, strongly supports consumer protection. At the 

same time, we have to recognize that consumer protection regulation must be efficient and focused. Unjustified regulatory burdens 

harm all Americans by diverting the resources that are essential 

to fueling economic growth, and perhaps even more importantly in 

this context, by preventing small businesses from obtaining the 

credit they need to expand and create the new jobs that our economy so desperately needs. 

The bills that are the subject of this hearing address significant 

problems confronting the CFPB. Although they certainly don’t address all of the Chamber’s concerns about the Bureau, they will resolve several important issues. And I would like to talk first about 

the attorney-client privilege issue. 

As Mr. Hunter has said, the critical issue here is that statutory 

protection that exists in the bank examination process, with respect to interactions with the prudential Federal regulators in 

terms of the protection of the attorney-client privilege, were not extended to the examination processes that the Bureau administers, 

both with respect to federally-regulated banks, and with respect to 

12 

the many other non-bank institutions as to which the Bureau can 

exercise examination authority. 

The Bureau has addressed this issue as best it can in a July 4th 

guidance bulletin that was issued, saying that its analysis was that 

the submission of information to it in the examination process does 

constitute the waiver of any attorney-client or associate privilege 

But of course, as useful as that guidance document is, it does not 

provide the certainty that a statute does. The situation that Congress confronts here is very similar to the one it confronted in 2006 

with respect to the banking regulators. There, the OCC in 1991 

had issued an opinion letter very similar to the one that the Bureau has issued here saying, ‘‘We believe that there is protection 

against a waiver.’’ 

But Congress in 2006 recognized that providing statutory certainty was critical, and therefore enacted the provision, Section 

1828(x), that provides that certainty. And I think what is critical 

is extending that statutory protection to the examination interactions that the Bureau is having with the entities that it is examining. 

I think, just being a lawyer for a minute, the reason for this is 

that any general counsel, although comforted by the Bureau’s opinion, is going to be a little nervous about interactions that involve 

important, critical, privileged documents. And it would just be cautious for the company to say to the examiners, ‘‘Gee, we would really—can we do this another way?’’ 

And that obviously is going to burden the examination process. 

It is going to take longer and eliminate the flow of information 

back and forth that I think everyone agrees is what makes the examination process work. So providing the statutory certainty is not 

only good for businesses; it is going to be good to make the examination process work effectively. 

Let me turn next to H.R. 1355, which would subject the Bureau’s 

expenditures to the congressional appropriations process. I think it 

is a fundamental principle of American government that those who 

exercise power have to be accountable to the people through their 

elected representatives. 

And for that reason, every government agency that Congress has 

created has historically been subjected to various robust checks and 

balances to ensure their accountability to the people and to provide 

oversight of their fidelity to the law. 

Here, I think it is undisputed that the Bureau Director lacks all 

of these accountability mechanisms. He has sole decision-making 

authority about rulemaking, enforcement, hiring, and every other 

matter. He has policy independence to the President, and can only 

be removed from office for ‘‘inefficiency, neglect of duty or malfeasance,’’ and has the ability to spend more than half a billion dollars 

without getting approval of anyone, Congress or the President. 

And there is no regulatory agency that has this same combination of features as the Bureau that oversees the private sector, and 

certainly none that has the extraordinarily broad oversight, not 

just of the financial services sector, but of large, other segments of 

the economy that this agency has. 

And it is important to note that one of the important constraints 

in the statute, advice and consent, was eliminated by the recess apVerDate Nov 24 2008 18:36 Aug 21, 2012 Jkt 075071 PO 00000 Frm 00018 Fmt 6633 Sfmt 6633 K:\DOCS\75071.TXT TERRIE
13 

pointment. H.R. 1355 begins to address this by addressing the appropriations process. And that is critical because, as I note in my 

testimony, the Appropriations Committee noted in its report that 

it received no information from the Bureau about how it plans to 

spend hundreds of millions of dollars in the next fiscal year. Thank 

you, and I would be happy to answer any questions. 

[The prepared statement of Mr. Pincus can be found on page 54 

of the appendix.] 

Chairwoman CAPITO. Thank you, Mr. Pincus. 

Our next witness is Mr. Chris Stinebert, president and chief executive officer, American Financial Services Association. 

Welcome. 

STATEMENT OF CHRIS STINEBERT, PRESIDENT AND CHIEF 

EXECUTIVE OFFICER, AMERICAN FINANCIAL SERVICES ASSOCIATION (AFSA) 

Mr. STINEBERT. Good morning, and my appreciation as well to 

the chairwoman and the ranking member for holding these important hearings on these important proposals. Like my colleagues, 

AFSA is certainly committed to consumer protection. AFSA’s members include consumer finance companies, auto finance companies, 

mortgage lenders, and credit card issuers. 

Before the passage of the Dodd-Frank Act, most AFSA members 

had been regulated, licensed, examined, and supervised by the 

State banking agencies. They are funded by putting their own capital at risk, not dependent on federally-insured deposits. 

Importantly, this testimony should not be taken as kind of a negative comment about the professionalism of the civil servants at 

the CFPB, many of whom have been veterans of many administrative agencies. 

Unlike traditional agencies governed by a bipartisan commission, 

the CFPB is directed by a single regulator. Unlike the traditional 

independent agency model, the CFPB is guaranteed a percentage 

of the Federal Reserve Board’s budget. Therefore, there is no congressional oversight through the normal budgetary process. 

We are grateful to the chairwoman for her co-sponsorship of H.R. 

1121, the Responsible Consumer Financial Protection Regulations 

Act, which replaces the single Director of the CFPB with a fivemember commission, a structure similar to the FTC. 

The original plans to create a consumer agency—as has been 

pointed out numerous times, including the Administration’s proposal and the Wall Street Reform Consumer Protection Act of 

2009—all structured the agency as a commission. 

AFSA also supports H.R. 1335, introduced by the Oversight and 

Investigations Subcommittee, which would move the CFPB into the 

Treasury Department in a structure similar to that of the Office of 

the Comptroller of the Currency. Doing so would provide congressional oversight and budgetary accountability. 

AFSA members are also concerned about the treatment of confidential information collected during the examination process. 

There are certainly precedents for maintaining this confidentiality 

in the long-standing practice by the Federal banking agencies and 

claiming privilege with regard to bank examination records. We are 

pleased that the recent CFPB bulletin states that institutions proVerDate Nov 24 2008 18:36 Aug 21, 2012 Jkt 075071 PO 00000 Frm 00019 Fmt 6633 Sfmt 6633 K:\DOCS\75071.TXT TERRIE
14 

viding privileged information in response to a supervisory request 

will not waive any privilege; however, it is unclear whether the 

CFPB is a Federal banking agency under the Federal Deposit Insurance Act, which governs the treatment and waiver of privilege 

for depository institutions. 

In a recent CFPB bulletin, the Bureau asserts that it has the authority to demand privileged documents from supervised institutions without the privilege being waived, despite the fact that the 

CFPB is not a Federal banking agency. It is also doubtful whether 

this body of law extends to the non-depository companies that 

AFSA currently represents. 

We are encouraged that Director Cordray has indicated a desire 

to work with Congress to include CFPB among covered agencies for 

the purpose of maintaining privilege We are also pleased to offer 

enthusiastic support of H.R. 3871. This Act would clarify the law 

to say that the submission of confidential information to the CFPB 

in the course of its supervisory process does not waive any privilege 

to any regulated entity. 

The House of Representatives passed H.R. 10, the Regulations 

From the Executive in Need of Scrutiny Act of 2011, co-sponsored 

by the chairman. This bill prevents Federal agencies from implementing major regulatory initiatives without congressional approval, and ensures that new, major rules that impose annual economic costs in excess of $100 million cannot take effect unless Congress passes a joint resolution approving this regulation. 

And finally, most regulatory agencies promulgate rules under the 

Administrative Procedure Act (APA). Unfortunately, the APA provides little for protection when agencies exceed their congressional 

mandates. But there is a model that does just that. Perhaps, it 

would be helpful for the Congress to look at the FTC with the Magnus and Moss Warranty Act, which imposes procedural safeguards 

on FTC rulemaking. 

Madam Chairwoman, I yield back the rest of my time. Thank 

you. 

[The prepared statement of Mr. Stinebert can be found on page 

64 of the appendix.] 

Chairwoman CAPITO. Thank you. For our final witness, I want 

to welcome back to the committee Mr. Arthur E. Wilmarth, who is 

a professor of law at the George Washington University. 

Welcome. 

STATEMENT OF ARTHUR E. WILMARTH, JR., PROFESSOR OF 

LAW AND EXECUTIVE DIRECTOR, CENTER FOR LAW, ECONOMICS & FINANCE, GEORGE WASHINGTON UNIVERSITY 

LAW SCHOOL 

Mr. WILMARTH. Chairwoman Capito, Ranking Member Maloney, 

and members of the subcommittee, thank you very much for inviting me to participate in this important hearing. For the reasons set 

forth in my written testimony, I strongly oppose enactment of H.R. 

1355 and H.R. 2081. I do not oppose enactment of H.R. 3871. 

Congress created the CFPB because a previous dispersion of consumer protection responsibilities among several bank regulators 

produced a systematic failure of the consumer protection function 

during the credit bubble leading up to the financial crisis. 

15 

Title X of Dodd-Frank authorizes the CFPB to issue regulations, 

perform investigations, create public education programs, and prosecute enforcement proceedings in order to protect consumers 

against unfair, deceptive, abusive, and discriminatory financial 

practices. 

Title X promotes the CFPB’s independence from both political 

and industry influence by granting the CFPB autonomy in its policymaking, rulemaking, and enforcement functions, and by giving 

the CFPB an assured source of funding from the Fed. 

H.R. 1355 would severely weaken the CFPB in several ways. Section 2(1) would repeal the CFPB’s status as an independent Bureau, and move the CFPB from the Fed to the Treasury. Thus, it 

would transfer the CFPB from an independent agency that is relatively insulated from political influence, to an Executive Branch 

agency that is highly susceptible to political intervention. 

Section 2(2) would remove critical statutory protections that enable the CFPB to function as an autonomous bureau when setting 

policy. However, H.R. 1355 would not make any similar changes to 

the Office of the Comptroller of the Currency, which is an autonomous bureau within Treasury. 

Federal statutes prohibit Treasury from preventing or delaying 

the issuance of any OCC regulation. And they also bar Treasury 

from intervening in any matter, including any enforcement matter 

pending before the OCC. If H.R. 1355 deems it essential to remove 

the CFPB’s autonomy and to subject the CFPB to Treasury’s unlimited oversight, why doesn’t H.R. 1355 contain similar provisions 

removing OCC’s policy-making independence as well? Can this apparent anomaly be explained by the fact that the OCC is widely 

viewed as the most committed and vehement regulatory champion 

for the interests of major banks? Indeed, those same banks have 

devoted enormous lobbying resources to oppose the CFPB’s creation 

and to seek to undermine it since it has been created. 

Section 2(3) would seriously impair the CFPB’s ability to attract 

qualified employees by requiring the CFPB to pay its employees in 

accordance with the general schedule for civil service employees. 

The CFPB would then become the only Federal financial regulator 

that is not exempted from civil service restrictions on pay. And the 

agency would find it extremely difficult, if not impossible, to attract 

the best, most experienced, and most talented employees. 

Section 3 of H.R. 1355 would remove the CFPB’s assured source 

of funding from the Fed and make the CFPB’s entire budget subject to congressional appropriations. Except for the CFTC and the 

SEC, no Federal financial regulator is subject to congressional appropriations. Congress has undermined the effectiveness of the 

CFTC and the SEC for more than 2 decades by frequently failing 

to provide those agencies with adequate funds. 

At congressional oversight hearings in December, CFTC Chairman Gary Gensler and SEC Chairman Mary Schapiro expressed 

great doubts about their agencies’ ability to adopt and enforce the 

new Dodd-Frank provisions unless Congress gives them major increases in their budgets. Republicans and banks took a very different position when they pushed for legislation to create the Federal Housing Finance Agency because they wanted a new and more 

16 

powerful and independent regulator for Fannie Mae and Freddie 

Mac. 

Republicans and banks insisted that FHFA must have independent, secure funding that was not subject to congressional appropriations. They pointed out that Fannie and Freddie had often 

used their political clout to persuade Congress to cut the budget of 

FHFA’s predecessor, thereby undermining that predecessor’s enforcement efforts. When Congress created the CFPB, as a Senate 

committee report explains, Congress drew directly on FHFA’s secure funding model. 

Briefly turning to H.R. 2081, there are two big problems. One is 

that removing the CFPB Director from the FDIC’s Board will deprive the banking industry and consumers of the beneficial interaction between the consumer regulator and the safety and soundness regulators. I thought that is what the CFPB’s opponents 

wanted. I thought they wanted interaction between the safety and 

soundness function and the consumer protection function. 

The other major problem is it is a very bad idea to put the Fed 

Chairman on the FDIC’s Board. The Fed already has tremendous 

influence in deciding whether to grant bailouts and other support 

and forbearances to major institutions. 

When the systemic risk exception comes into question, when regulators decide whether to bail out uninsured creditors of a too-bigto-fail bank, the Fed already gets a vote on that. They make their 

recommendation. It then goes to the FDIC. 

Putting the Fed Chairman on the Board of the FDIC would give 

the Fed two bites at the apple. As my written testimony indicates, 

during the financial crisis, it was the Fed and the Treasury that 

were constantly pushing for more aggressive bailouts. And it was 

the FDIC that was constantly saying, ‘‘We don’t think this is necessary. We don’t think it is a good idea.’’ We shouldn’t undermine 

the FDIC’s independence by putting the Fed Chairman on the 

FDIC’s Board, as H.R. 2081 would do. 

Thank you very much, again. 

[The prepared statement of Professor Wilmarth can be found on 

page 70 of the appendix.] 

Chairwoman CAPITO. Thank you. 

Thank you all, and I would like to recognize myself for 5 minutes 

for questioning. I would like to go to the funding issue because in 

2012, the CFPB could access 11 percent, or over $500 million. In 

2013, it goes up to $597 million. 

When we have tried to investigate how much is actually drawn 

down and where this money is being spent, what we have found 

is that they actually drew down in 2011, $161.8 million. But I don’t 

know if Members of Congress and the general public are aware 

that after they draw the money down, if the money is not spent, 

it goes into a fund that can then be invested. So the money never 

goes back to the Treasury or to the Federal Reserve, where it could 

be used for paying down the debt and other issues. 

To me, this sort of evokes—I don’t want to use the term, but I 

will say it anyway—a ‘‘slush-fund’’ sort of situation, and a lack of 

accountability on that. Could you all speak to the way the mechanism is and how we could get more transparency and accountability—when, really, the Bureau doesn’t have to speak to Congress 

17 

or ask Congress in any way to justify the expenditures that they 

have over the course of a year? 

Mr. Pincus, I will start with you, because you talked about this. 

Mr. PINCUS. Thank you, Madam Chairwoman. 

I guess a couple of points—I think what is troubling is that there 

is this lack of accountability, as I say, in all directions. Once the 

Bureau Director is appointed, he is not accountable to Congress because the appropriations process has been avoided. And he is not 

accountable even to the President because the President can only 

remove him if there is this very tough standard. So just in terms 

of our constitutional structure and accountability to the people, it 

is very troubling. 

I think the way the process works is just as you have described. 

The money is drawn down, it goes into a fund, and there is very 

little transparency. 

And even on a forward-looking basis, as I laid out in my testimony, and as I am sure you are familiar with from reading the documents, the Appropriations Committee was very concerned that a 

plan to draw down over $300 million was supported by about 15 

pages, most of which were white space and certainly nothing close 

to the budget justifications that agencies ordinarily have to give to 

justify their appropriations. So, I think that it is very troubling. 

And I guess one short-term solution—obviously we believe that 

this kind of statutory accountability is essential and I know Mr. 

Wilmarth talked about political influences. 

But that is just a—sort of a derogatory—about talking about the 

people’s influence. It is—this money that comes from the Fed is not 

a gift. If it wasn’t spent, any surplus that the Fed generates goes 

into the Treasury and is used, as you say, to pay down the debt. 

So this money is really, in terms of its economic effect on the government’s finances, indistinguishable from money that is appropriated and paid out. 

If it wasn’t paid out, the government would have it and could use 

it to reduce the debt. So I think that is critical. And I think the 

other thing that is critical is perhaps a threshold step as the statute provides for some reports by the Bureau to OMB. It doesn’t say 

that those reports have to be provided to the Congress, but one 

short-term way to get at least some transparency might be to ask 

the Bureau to provide those statutory reports to the committee as 

well. 

Chairwoman CAPITO. Does anybody else have a comment on 

that? 

We will go to Mr. Stinebert, and then to Mr. Wilmarth. 

Mr. STINEBERT. To comment a little bit on what is being said 

here, I have never really understood why putting it under appropriations is going to, for example, gut or hurt the Bureau or hurt 

consumers in the long run. I see no evidence of that. 

In the cases where it has been done before, it can actually bring 

efficiency and effectiveness to the program, knowing that there is 

some oversight. We have never done a great job of throwing money 

at a problem and having an unlimited budget and that resulting 

in only good things. I think the accountability to Congress would 

help the Bureau in the long run. 

Chairwoman CAPITO. Thank you. 

18 

Mr. Wilmarth? I have 30 seconds left. 

Mr. WILMARTH. Yes, certainly. 

The OCC and the FHFA operate in exactly the same way. They 

don’t return money to the Treasury, and the FDIC keeps its money 

as well. Now, some of that goes into the FDIC’s Deposit Insurance 

Fund, but there is no return of the money to the Treasury. 

So as I said, there are only two financial regulators who are not 

given an independent, secure funding source: the SEC; and the 

CFTC. And as I said in my written testimony, I don’t think anyone 

can seriously contest that those agencies have been greatly weakened and seriously underfunded for a very long time. 

I will give a third example. The Consumer Product Safety Commission is widely viewed as a very ineffective and weak agency because it wasn’t given the budget that it needed. 

So I have given you three examples of agencies that have been 

undermined by a lack of secure funding. And in each case, there 

was very strong industry push back against the agency. I point out 

in my testimony that the financial sector has been the biggest contributor to political campaigns—congressional campaigns since 

1990, the biggest lobbyists since 1990— 

Chairwoman CAPITO. My time has expired. 

Mr. WILMARTH. —but anyone who thinks that they are not effective, I— 

Chairwoman CAPITO. Ranking Member Maloney for 5 minutes? 

Mrs. MALONEY. Thank you. 

This bill by my good friend, Mr. Neugebauer, would really subject the CFPB to a double standard. No other banking agency is 

subject to the appropriations process, not the OCC, the FDIC, or 

the Federal Reserve, for purposes of independence and not being 

compromised by political pressure. 

As Mr. Wilmarth pointed out, the SEC and the CFTC, although 

they have many more responsibilities, have been seriously underfunded. And we have to recognize the reality that the Republican 

Majority voted against Dodd-Frank and financial reform. They 

voted against the CFPB. And they probably wouldn’t fund it, as 

they haven’t appropriately funded the SEC and the CFTC. 

And as my good friend, Mr. Green, pointed out about the confirmation process, I have never seen such an abuse of the confirmation process, where they literally said they would not confirm a Director unless you made changes to the law. So they were trying to 

get through the confirmation process what they couldn’t achieve in 

the passage of the law, and literally signed letters to that effect. 

Now, many of my colleagues and panelists have said that the 

CFPB is not subject to enough oversight. I would argue that it has 

extensive accountability standards that were put in place in the reform bill and I am going to list them for you. 

They have more accountability standards than any other agency. 

The President can remove the Director for cause. The Director 

must appear before Congress biannually and report on, among 

other things, its budget and list of significant rules. Not only do we 

have this requirement, but we can call them any time we want. 

They have been before Congress 14 times. 

The GAO is required to audit the financial services, including the 

CFPB. It is the banking regulator. It is the only banking regulator 

19 

that has a funding cap. The final rules of the CFPB are subject to 

financial judicial review. 

The CFPB is subject to the Regulatory Flexibility Act, the Paperwork Reduction Act; the Inspector General of the Federal Reserve 

monitors the CFPB. And the CFPB budget is statutorily capped. 

The Financial Stability Oversight Council can review and overturn 

any CFPB regulation. I don’t know of any other regulator that has 

that ability of an oversight board to reverse their decisions. 

The CFPB is required to consider the impact of proposed rules 

on banks and credit unions with $10 billion or less in assets as well 

as the impact on consumers in rural areas during the rulemaking 

and issue reports on what they have done in these areas. 

The CFPB rules are subject to the Small Business Regulatory 

Enforcement Flexibilities Act, Small Business Panel Review process. The CFPB must review potential rules with affected small 

businesses prior to the publication of such proposed rules. 

I would say that everyone here has said that consumer protection, everyone is for it, but it often was a secondary thought or a 

third thought or wasn’t thought about at all. 

So to have one agency working with the safety and soundness 

regulators, which is important that they be on the FDIC is something that is helpful. 

I would like to ask Mr. Hunter—of the items that the CFPB has 

done, have you reacted to them—such as your members—the efforts to streamline the mortgage-disclosure documents; has that 

been a positive for your industry? What about the shopping sheet 

to compare credit card rates? 

What about the information sheets to know before you owe for 

students who are in school and often get into debt over their 

heads? What has been the reaction of your members to these, I 

would say, improvements really for the financial institutions; for 

our economy as a whole; and certainly for consumers? Have these 

been actions that your members and consumers and bankers see as 

a positive step forward? 

Mr. HUNTER. We are working, Congresswoman, in a very interactive constructive fashion with the CFPB on almost a daily basis. 

We recognize the authority that Congress has chosen to repose 

in the CFPB. Our concern long term is that there is too much 

power and authority reposed in one person and that there ought to 

be more checks and balances with respect to that person’s decisionmaking. 

If you are going to repose that much authority and power in an 

entity, it makes more sense to have a commission. I think that is 

a political science proposition that has stood the test of time. 

Mrs. MALONEY. My time has expired. But I would say the CFPB 

is already one of the most accountable Federal agencies with the 

list that I gave you, the oversight that is there and I think they 

have worked hard, Mr. Stinebert, would you say to reach out to— 

Chairwoman CAPITO. The gentlelady’s time has expired. 

Mrs. MALONEY. —stakeholders for their influence? 

Mr. STINEBERT. Actually, we have been very encouraged by the 

CFPB and how they have reached out to impacted industries in a 

cooperative way. 

20 

In some instances, we have had some field hearings and others 

which, I think all of us have received about a 24-hour notice of 

some hearings that were somewhat disconcerting, but I think we 

have been encouraged by what the Director has said, and we are 

hopeful that will continue. 

But going along with my colleagues— 

Chairwoman CAPITO. The gentlewoman’s time has expired, so I 

am going— 

Mrs. MALONEY. Thank you. 

Chairwoman CAPITO. —to try to keep it moving here. 

Mr. Renacci, for 5 minutes? 

Mr. RENACCI. Thank you, Madam Chairwoman. 

I want to kind of zero in on H.R. 2081, and it is interesting because as I have listened to my colleagues and also the testimony— 

this bill basically replaces the CFPB Director with the Chairman 

of the Fed on the FDIC Board. And that is important, in my opinion, for 3 reasons: expertise; potential conflict of mandate; and a 

potential conflict of interest. 

So, it is very simple. It doesn’t weaken the CFPB board or Director and it potentially strengthens the FDIC Board. 

With that in mind, Mr. Hunter, does the inclusion of the CFPB 

on the FDIC Board jeopardize in any way, in your opinion, the 

FDIC’s focus on safety and soundness? 

Mr. HUNTER. As our testimony indicates, Congressman, that is 

the principal responsibility of the FDIC Board. We think the Fed 

is better positioned to serve on that commission based on its responsibilities. 

There is certainly something to be gained by forcing the Director 

of the CFPB to have frequent dialogue with the prudential regulators. It is our preference that a banker serve on the FDIC Board, 

but there is certainly more to be gained by someone whose focus 

is safety and soundness. 

Mr. RENACCI. So you would agree that the mandate for the CFPB 

is consumer protection, and the mandate for the FDIC Board is 

safety and soundness of the banking system—two separate mandates? 

Mr. HUNTER. We think that the two better approaches would the 

Fed or a banker. 

Mr. RENACCI. All right. 

Mr. Wilmarth, you indicated at one point that—and it is interesting because if there was a perceived or even actual conflict of 

interest—wouldn’t you agree that it would be better not to have 

that? 

Mr. WILMARTH. I actually don’t think there is a conflict of interest. And I agree with a comment that Chairman Bachus made; that 

viewed in the long term, and from the broadest perspective, consumer protection and safety and soundness are inseparable and 

completely consistent. 

So actually, I didn’t agree with this notion that somehow there 

was this terrible conflict of interest, but for the— 

Mr. RENACCI. But if there was conflict of interest—if there was, 

you would agree, even if it is perceived, that it would be better not 

to have the same— 

21 

Mr. WILMARTH. My view is that any perceived conflict is so minor 

as to be greatly overwhelmed by the other problem I pointed out, 

which is that putting the Fed Chairman on the FDIC’s Board is 

going to undermine the independence of the FDIC, and I can give 

three very specific examples of how that could have really aggravated the financial crisis—if you would allow me. 

First, was that in the period leading up to the crisis, the FDIC 

was the only agency fighting for tough capital requirements, including leverage requirements. And if you want to know the one 

thing that differentiates— 

Mr. RENACCI. I am going to run out of time. I don’t mean to cut 

you off, but I am looking at the time running away from me. 

You also talked about not having the ability to communicate. 

Wouldn’t you believe on the FSOC Board, there is opportunity for 

the Director of the CFPB to get his influence with the other members? 

Mr. WILMARTH. There is some communication there, but I think 

the FDIC deals much more with the type of institutions that the 

CFPB is dealing with on a daily basis and therefore there would 

be much more beneficial interactions on the FDIC Board as compared to FSOC, which deals with the financial giants of the world. 

Mr. RENACCI. Okay. 

Mr. Hunter, I am going to move back to you because I know you 

talked about expertise and you mentioned that several members 

are already there because of their expertise. 

Do you believe there is the requirement today that the Director 

of the CFPB have any experience as a safety and soundness regulator or even a requirement that a potential Director have any 

banking experience at all? 

Mr. HUNTER. I don’t think that requirement is in the Act, Congressman. 

Mr. RENACCI. All right. 

So with that, you could have someone serving on the FDIC Board 

without the experience that the Chairman of the Fed would have 

by being on that same board? 

Mr. HUNTER. That is a hypothetical probability, sir. 

Mr. RENACCI. Yes. 

The Federal Reserve as a prudential regulator is keenly aware 

of how regulatory policy can impact the likelihood and cost of bank 

failures. Would the Fed, rather than the Director of the CFPB, be 

able to contribute more meaningfully to the FDIC’s mission? 

Wouldn’t the Chairman of the Fed? 

Mr. HUNTER. As a general proposition, yes. 

Mr. RENACCI. Yes. 

Do you feel—I know I you mentioned this earlier—but do you 

feel there is a conflict of interest, even a perceived conflict of interest at this point in time? 

Mr. HUNTER. I guess if you start with— 

Mr. RENACCI. Because of the mandate? I know I am running out 

of time—because of the mandate? 

Mr. HUNTER. Quickly, if you start with the statutory responsibilities that have been placed with the Director, there aren’t safety 

and soundness responsibilities. So it is certainly, as I say—it is cerVerDate Nov 24 2008 18:36 Aug 21, 2012 Jkt 075071 PO 00000 Frm 00027 Fmt 6633 Sfmt 6633 K:\DOCS\75071.TXT TERRIE
22 

tainly a situation where he could be in conflict with what his legal 

responsibilities are as Director. 

Mr. RENACCI. Okay, thank you. 

Chairwoman CAPITO. Thank you. 

I recognize Mr. Hinojosa for questions. 

Mr. HINOJOSA. Thank you. 

My first question is addressed to Professor Wilmarth. 

Some of my colleagues have argued that the Consumer Financial 

Protection Bureau lacks accountability. However, in creating this 

Bureau, this body inserted several measures to ensure its accountability while also maintaining it as an independent regulator. 

In fact, the Consumer Federation of America contends that the 

CFPB is the subject of more oversight than any banking regulator. 

Some would like to see the Bureau’s budget brought under the appropriations process, as I mentioned in my opening remarks, supposedly to increase accountability, even though no other banking 

regulator has a budget which is subject to appropriations. 

I would like to ask you, what are the advantages for the banking 

regulatory system to have regulators such as the FDIC, the OCC, 

the OTS, and now, the CFPB, to have budgets outside the appropriations process? 

Mr. WILMARTH. Yes, thank you. 

I would make two comments. One is that I believe the President’s power to remove the CFPB’s Director is actually broader 

than has been indicated because in the Supreme Court case of 

Bowsher v. Synar in 1986, where the statutory language concerning 

an administrative official’s removal was very similar, the Supreme 

Court viewed that as a very broad removal power. Inefficiency or 

maladministration provides the President with broad discretion to 

remove the CFPB’s Director. 

Moving to the appropriations issue, as you say, no other Federal 

bank regulator is subject to appropriations and we know that the 

three regulators I have mentioned have been greatly weakened by 

industry influence because they do not have secure funding. 

We also know that OFHEO before it was replaced by the FHFA 

was greatly weakened by the influence wielded by Fannie and 

Freddie. I pointed out that no one can contest that the financial 

sector has had unbelievable political influence and power over the 

last 20 years and more. 

The statutory drafters for all the other bank regulators realized 

that because these regulators have such a critical public interest 

and because in fact they are trying to properly restrain very powerful regulated institutions for the public interest, there will inevitably be push back through the political system. And if you don’t 

give some meaningful insulation and independence to the regulator, they are not going to be as successful in doing their job. 

Mr. HINOJOSA. I remember in the second term of the Bush Administration, when Henry Paulson, the Secretary of the Treasury, 

came to talk to us and asked for $800 billion within a week to be 

able to save the financial system. 

And one of the things that came out at that hearing was the fact 

that we had wanted a smaller government, less involvement by the 

Federal Government. And so, the end result was that we didn’t 

have the people to enforce the regulations and we got into the mess 

23 

that we did. This seems to be the wrong route to take to improve 

consumer financial protection. 

I would like to ask my second question to Mr. Michael Hunter. 

In my district in deep south Texas, we have sought to protect consumers from predatory payday lending while partnering with community banks and credit unions, and also we have worked to increase the financial literacy and capability of our residents. The 

Consumer Financial Protection Bureau recently held a field hearing to examine pay day lending and CFPB is moving forward with 

its supervision and examination of non-bank financial companies. 

How do community banks view the efforts of the CFPB to examine these non-bank competitors and level the playing field? And the 

last part of the question, does the ABA anticipate a budget cut will 

affect the ability of this Bureau to monitor these non-bank companies such as payday lending companies and others? 

Mr. HUNTER. The membership of the American Banker’s Association looks forward to Mr. Stinebert’s members joining the club of 

the most highly regulated industry in this country. And we applaud 

the efforts of the CFPB in beginning to impose its jurisdiction on 

non-banks. With regard to the implications of a budget cut, as a 

general proposition—and I used to teach political science—I think 

the democratic process works. 

I think the appropriations process works and the idea that we 

ought to have these independent agencies to protect Congress from 

themselves is just a proposition that I have never been in favor of. 

Mr. HINOJOSA. You can understand— 

Mr. HUNTER. Excuse me, I am— 

Mr. HINOJOSA. —you can understand why I am concerned about 

budget cuts to weaken this Bureau. Because we saw it in 2007. We 

saw it in 2008, that we didn’t have the regulators to enforce the 

regulations. So, I think my time has expired and with that, I yield 

back. 

Chairwoman CAPITO. Thank you. 

Mr. Hensarling is recognized for 5 minutes for questions. 

Mr. HENSARLING. Thank you, Madam Chairwoman. And I certainly thank you for holding this hearing. 

I think one of the lessons that we know from Dodd-Frank is that 

when you essentially give unfettered, unprecedented discretionary 

powers to unelected bureaucrats, they have a tendency to use it. 

That in some respects is the subject of this hearing, and a hearing 

later this afternoon in the Capital Markets Subcommittee as well. 

I guess the first question I would want to pose is, frankly, the 

controversy surrounding the appointment of the Director of the 

CFPB. I know back in 2005, then-Senator Barack Obama said that 

recess appointments were ‘‘the wrong thing to do.’’ He also went on 

to say that a recess appointment ‘‘is somebody who couldn’t get 

through a nomination in the Senate.’’ And I think that means that 

we will have less credibility. 

And so the question that I really want to ask, as I am concerned 

about the regulatory uncertainty that we already have in this particular process, we have some questioning the constitutionality of 

Mr. Cordray’s appointment and Dodd-Frank is explicit that the 

CFPB Director must be ‘‘confirmed by the Senate.’’ Many legal 

24 

scholars say a recess appointment is not a Senate confirmation and 

there are further clouds on whether or not Congress was in recess. 

As I might also note, for the record, the latest extension of the 

U.I. in payroll was done during a pro forma session. So the first 

question I am—I guess I will pose it to you, Mr. Hunter, have the 

members in your organization concluded unequivocally that this is 

a constitutionally valid appointment? Or is there some controversy? 

And if there is controversy, is that uncertainty hindering your 

membership? 

Mr. HUNTER. Congressman, the president and CEO of the ABA, 

Frank Keating, expressed concern after the appointment occurred. 

It is certainly a subject of debate. Until a court of original jurisdiction tells us that Mr. Cordray isn’t the legal authority for the 

CFPB, our responsibility is to recognize it and work in as constructive and cooperative a way as we can. 

Mr. HENSARLING. Next question—I have seen a recent interview 

with Mr. Cordray. He was quoted in the Associated Press as saying, ‘‘Frankly, there is a lot of fraud that is committed in the marketplace that is not, on its face, necessarily technically illegal.’’ 

My question is: If we have a Director of CFPB who may or may 

not be constitutionally appointed who now says that his agency essentially has the ability to regulate activities that are not necessarily technically illegal, how does this impact your members, 

particularly product development, that they may have their profitability, their survivability? 

Mr. Stinebert, I will start with you. Is that a chilling comment 

to you? 

Mr. STINEBERT. It was a very interesting statement. As far as I 

know, fraud is technically illegal and I don’t know of any wiggle 

room there. It is either fraud or it is not fraud. Certainly, we have 

laws on the books now which protect against fraud. So it does 

cause some concern when we read that statement. 

I think that since that time, he has corrected that statement to 

a better understanding. But going along with what our colleagues 

here have stated—and I did not know we were not members of the 

club to begin with—but if being State-regulated is entirely different 

than being federally-regulated, it still is being regulated. 

Mr. HENSARLING. I will let you gentleman work out that disagreement in your own time. In the remaining seconds I have, one 

of the reasons I am a strong supporter of Mr. Neugebauer’s bill to 

bring in greater accountability and transparency is the unfettered 

powers that this agency has been given. I am hearing from a lot 

of community financial institutions in the fifth district of Texas 

that I represent, particularly about their unfettered powers to essentially ban debit cards, overdraft protection, reward checking, 

and identity-theft products. 

My community bankers are telling me they are at a low-time 

profitability due to monetary policy, due to the interchange regulations. And so my question is—without that oversight, could the 

CFPB’s ability to essentially ban these products impact profitability and the safety and soundness of community financial institutions? Mr. Hunter? 

Mr. HUNTER. The concern that we have generally speaking, Congressman, is that in our membership, there is a very troubling 

25 

ratio that is developing out there and I will be quick. And that 

ratio that is developing that we are seeing in our banks is a oneto-one relationship between bank employees who are there to serve 

customers and bank employees whose responsibility is compliance. 

I don’t think that is good for banks and I certainly don’t think 

it is good for customers. And at the end of the day, we are hopeful 

that this can work, this being the CFPB. Again we think it is important that if you are going to have an independent agency with 

this kind of power and authority, the better approach is to have a 

commission and have some oversight. They should have, as opposed 

to reporting responsibility, accountability to Congress with regard 

to expenditures. 

Chairwoman CAPITO. The gentleman’s time has expired. 

Mr. Gutierrez, for 5 minutes. 

Mr. GUTIERREZ. Thank you. 

Welcome to you all. 

I just wanted to follow up very quickly because as best as I can 

recall, and I didn’t know we were going to go into this part of the 

conversation, Goldman-Sachs and others reorganized themselves 

and some bank holding companies so that they would have access 

to the discount window, not for $1 billion, not for $10 billion, but 

for hundreds of billions of dollars in order to acquire liquidity. 

And now, people complain. We can’t have it. You can’t go to the 

government when you get in trouble, have the government bail you 

out, then continue to reorganize yourself under government rules 

so that you have more access to the government and their money, 

and then expect the American taxpayer and the people to say, ‘‘We 

are going to let you do whatever you want.’’ 

So, I think we should have a little more balance in terms of our 

conversation that we are having in terms of the most regulated. 

You are also one of the greatest beneficiaries of the American taxpayers supporting who you are today, or you would have simply 

have died and gone away just like the dinosaurs had it not been 

for the intervention of this Congress and specifically Members on 

this side of the aisle who many times have said, ‘‘Okay we are 

going to do it, but we are going to watch carefully.’’ So let us remember where we are at because there was a crisis; it was 2002. 

I know that everything has changed and it is kind of tough because everybody on Wall Street is complaining that it was ‘‘only 

$75,000; only $75,000, I am quitting.’’ That is the bonus, and people are complaining? Tell that to the rest of America, that it is only 

$75,000. 

Having said that, I want to make sure that what we are talking 

about today is the Consumer Financial Protection Bureau. And it 

is just mind-boggling. The Bureau has been fully operational for 34 

days, yet we have brought them here to speak 14 times. I think it 

is interesting that my colleagues on the other side of the aisle and 

representatives of the financial industry continue to shout about 

how the CFPB has insufficient oversight. 

Fourteen times in 34 days—do the math—they have been 

brought before the Congress. That seems to me to be pretty diligent 

oversight on our part. The bills before us today are really nothing 

new. Another attempt by the Majority to weaken the Bureau so it 

26 

doesn’t look over the shoulder of their friends in the banking industry. I get it. 

If you are a payday lender, guess what? If you are a payday lender, you are back there saying, ‘‘Thank you.’’ If you are somebody 

out there giving people loans that you shouldn’t be, you are clapping. If you are out there exploiting consumers, you are clapping. 

Those are the only people who are really clapping. Let us get that 

absolutely clear. Those that don’t, want to follow rules. 

People want less scrutiny of big money companies that do business with the average American consumer. One of the bills before 

us today brings the CFPB under the authority of the Treasury Department and makes its funding subject to congressional appropriations. 

Let us not split hairs here. This isn’t about making sure that 

Congress can watch the CFPB even closer than it already does— 

14 hearings in 34 days. This is about making sure that the financial industry lobbyists have access to people who make the appropriations decisions, i.e., Members of Congress. 

Instead of strengthening the Bureau or making it more accountable to Congress, the bill would undermine the Bureau’s independence and make it more vulnerable to pressure from powerful lobbyists. We have seen that. 

Pick up the newspapers. Open them up and you see what the 

lobbyists here in Washington, D.C., do. Abramoff is kind of walking 

around telling everybody, ‘‘I really didn’t mean it.’’ Oh no, he is repentant. It is Washington, D.C. So I would like an independent authority, the way we have done it. 

And lastly, let me just say that George Bush was President for 

8 years. And you know what? He used the system more times than 

President Barack Obama has ever done in terms of appointing recess appointments. 

And you know what? Lastly, I think we should make sure that 

we all understand that the Minority Leader in the Senate, the gentleman from Kentucky, has stated that his goal is to make Barack 

Obama a one-term President, and that he is going to do everything 

to make sure that he fails and that he is defeated. That is not an 

exaggeration. That is exactly what he said. 

So you know what? They are playing politics over there. They 

won’t even give Mr. Cordray or anybody the time to have up or 

down votes. They are obstructionist, and the American people have 

had enough of it. I am happy the President appointed him, and I 

hope he gets to his work and you can have a hearing every week, 

because I know he doesn’t care. Thank you. 

Chairwoman CAPITO. I thank the gentleman. 

I will have to say I am not certain—I would like to see the 14— 

we certainly haven’t had 14 meetings in 34 days in this committee. 

And— 

Mr. GUTIERREZ. —in this committee; in Congress. 

Chairwoman CAPITO. In Congress—14 meetings in 34 days. 

Ms. VELAZQUEZ. Fourteen hearings. 

Chairwoman CAPITO. Fourteen hearings. 

Mr. GUTIERREZ. Fourteen hearings. 

Chairwoman CAPITO. You said in ‘‘34 days?’’ 

27 

Mr. GUTIERREZ. Fourteen. They have been in existence for 34 

days. 

Chairwoman CAPITO. Right. 

Mr. GUTIERREZ. Fourteen hearings in the last year. 

Chairwoman CAPITO. Next, we have— 

Mr. GUTIERREZ. Those are all facts. I can bring them down. 

Chairwoman CAPITO. You said, ‘‘14 hearings in 34 days.’’ 

So you are correcting yourself? I am just clarifying. 

No? Just clarifying. 

Mr. GUTIERREZ. Well, I— 

Chairwoman CAPITO. For the record. I am sure you want to be 

accurate. 

Mr. GUTIERREZ. I absolutely do. 

Ms. VELAZQUEZ. He is accurate. 

Chairwoman CAPITO. You said 14 hearings in 1 year? 

Ms. VELAZQUEZ. 34 days in existence. 

Mr. GUTIERREZ. It has been 34 days in— 

Ms. VELAZQUEZ. Go to the record and check. 

Mr. GUTIERREZ. 14 hearings in the last— 

Chairwoman CAPITO. Right. Not in the last 34 days. 

All right. 

Mr. GUTIERREZ. We all agree there have been 14 hearings in the 

last year? 

Chairwoman CAPITO. —question about that—for a year. 

Mr. GUTIERREZ. You will catch up quickly. I am sure we will 

have more hearings on this. 

Chairwoman CAPITO. Half a billion dollars—I think we should. 

Your time has expired. 

Mr. Huizenga, for 5 minutes. 

Mr. HUIZENGA. Thank you, Madam Chairwoman. 

And frankly, I hope there are another 14 hearings because this 

is one of the most expansive steps that government has taken. And 

I am sorry my colleague is leaving. 

It just seems to me—I am not quite sure that I understand 

whether the CFPB is a five-member board versus a single individual, how exactly that is going to ensure the President’s reelection or non-reelection. So I think that we are seeing obviously some 

heated rhetoric. 

And I have seen some positive elements on my bill specifically, 

H.R. 3871. We have had everybody—the Credit Union National Association, the Consumer Bankers Association—just recently both 

put letters in; appreciate your support—the resounding endorsement of Professor Wilmarth. I think that one sentence, ‘‘I don’t oppose’’—I will take that as well. 

And I know that there has been some concern. I think somebody 

earlier had expressed that all three bills really chip away at the 

CFPB. And I just want to make sure that my colleagues aren’t 

more concerned about keeping out any amendment to Dodd-Frank 

versus trying to make sure that we make it workable and do the 

right thing, which is exactly what H.R. 3871 is trying to do. 

And frankly, I am happy to entertain the notion of a belt-andsuspenders approach to amending both the CFPB Act and the FDI 

Act. But it seems to me that, as I think—I can’t remember; I am 

sorry. It was Mr. Stinebert, I think, who noted on page four of your 

28 

testimony—I had it up here at one point, but maybe you can comment a little bit on that, sort of the background of why we do need 

to not just do this with FDI and the deposit insurance side of 

things, but why we need to amend the CFPB and why maybe we 

shouldn’t be so deathly afraid of changing a sentence or a jot or tittle in this. 

It is not holy writ that has come down from the heavens. This 

is the work of very fallible men and women who come in here trying to do the right thing, but let us try to make sure that it is 

workable. So, if you care to comment? 

Mr. STINEBERT. I think that the oversight that Congress has 

shown about CFPB, I think also highlights the problems that some 

of the industry has with it, and certainly we do. We have never had 

a bill that is quite as large, where the scope is basically unlimited, 

as we do with this piece of legislation. 

They can act right now within the confines, as the ranking member has pointed out, initially in a very finite way, which might be 

a good direction. But that doesn’t necessarily mean that the Act 

itself as drafted, as written, is basically carte blanche to do anything in this area that might impact consumers in any way for 

their financial services. 

So when we look at the Act, we look at trying to put a little bit 

of belts and suspenders around it, a little bit somewhat of insurance. When we asked our members at a recent meeting if they 

could rank the biggest concerns they had, it is always the uncertainty. And the uncertainty is because not of what CFPB has done, 

but what it could do. 

All of these Acts and the provisions we are talking about today 

really are a way to bring some oversight, to bring some accountability, so not because of what they have done, but what is so wide 

open in the future. 

Mr. HUIZENGA. Sorry. Thank you. And just so we are clear, my 

bill, H.R. 3871, you view as one of those elements to provide clarity? 

Mr. STINEBERT. Absolutely. Yes. It is an essential element. 

Mr. HUIZENGA. All right. 

Professor Wilmarth? 

Mr. WILMARTH. I just wanted to point out that I think that Mr. 

Stinebert was probably referring to the so-called UDAAP authority. 

But I have described it at some length, and I can describe it if the 

committee wishes. 

There are very tight limitations and very specific findings that 

have to be made before the Bureau can issue a UDAAP rule. And 

also, a very detailed cost-benefit analysis. They have to consult 

with Federal prudential regulators. FSOC has a potential veto. So 

I don’t this authority is nearly as wide open as that statement 

might suggest. Thank you. 

Mr. HUIZENGA. But you certainly don’t see a problem with us 

providing that clarity? 

Mr. WILMARTH. Oh, no. I think the idea about protecting the 

privileged materials so that the privilege is maintained when institutions share them with their regulator, that to me seems perfectly 

sensible. 

29 

Mr. HUIZENGA. I appreciate that. And I think that, to my colleagues on both sides of the aisle, I know we are having much 

broader conversations about whether the CFPB should or shouldn’t 

exist, whether Dodd-Frank was good or bad, all those other things. 

But the simple fact is there is a hole, in my opinion and in the 

opinion of virtually everybody who deals with this, that has to be 

fixed. 

Let us go do it. Let us go prove to the American people that we 

can set aside bickering and go get something done that is going to 

protect the consumer and protect those who are serving the consumer. So, I appreciate that. 

And the last little quick reminder—we are seeing a lot of heated 

rhetoric. And I just want to remind everybody that we are in the 

same boat. Banking lenders, non-banking lenders, you name it. 

There is a lot of stuff that is getting thrown out there. 

I just caution everybody to make sure that you realize we are 

trying to all be on the same team here to make sure that we are 

protecting consumers, and also protecting businesspeople, men and 

women who are in this industry who are providing that service. So 

thank you very much, Madam Chairwoman. 

Chairwoman CAPITO. Thank you. 

Mr. Hinojosa, for 5 minutes. 

Mr. HINOJOSA. I have already spoken. 

Chairwoman CAPITO. Excuse me. Mr. Scott. 

Mr. SCOTT. Thank you very much. 

I certainly concur with much that has been said. And my friends 

on the other side of the aisle, it is important that we all try to work 

to try to bring some justice and reason and fairness and protection 

to the American people. 

But two of these measures—particularly H.R. 1355—are drastic 

overkill. H.R. 1355 goes right at the core of the agency to remove 

it from the Fed, put it under Treasury, to make it subject to lobbyist pressure. It takes away the very vital need of independence. 

Now, we talk about accountability. I think it is important for us 

to set the record straight. We have accountability now. Our ranking member, Mrs. Maloney, went through in detail with many of 

these areas of accountability. 

But I want to hit a couple of them so that the people will know, 

because some statements have been made that they don’t report to 

Congress—they must report to Congress. The Director must report 

to Congress, not once every year, but twice: every 6 months. And 

he has to appear before both committees; both finance committees 

in the House and the Senate. 

And at these hearings, he must not just talk. He has to submit 

reports to each of our committees and to the President. And not 

just any reports. These reports must include a justification for the 

CFPB’s budget, a list of the rules that the CFPB has adopted, and 

a detailed list of public supervisory enforcement actions in which 

the CFPB has been involved. 

Then, there must be an audit each year. The GAO must audit 

the total finances of the CFPB. It has to have access to all of the 

CFPB’s personnel, their data, their records, their papers. And this 

audit must be submitted, and all of the other numerous things that 

have been mentioned. 

30 

The accountability controls are there. So that is why you have to 

be—we must fight. This effort is not designed for greater transparency. How much more transparency and accountability can we 

have than what we already have? These efforts are here to basically gut the intent and the purpose and the effectiveness of this 

agency. 

And I don’t mind those on the other side of the aisle having their 

own opinions in their areas, but the American people must be told 

the truth about this. This is not an effort to increase accountability 

as if there is none there. This agency has the most oversight of any 

agency, as we have just gone through. 

Professor Wilmarth, let me just ask you, particularly in regards 

to this audit. As you know, the CFPB is subject to annual GAO audits of its financial transactions, its statements, and to the private 

sector, an independent audit of its operations and budgets. Are you 

familiar with these audits? 

Mr. WILMARTH. I am afraid that I am not an expert in that area, 

except to note that they are very extensive. 

Mr. SCOTT. All right. 

Let me just ask you, in terms of this overall committee, just for 

the record, our effort here is to promote accountability and transparency. Do you feel that these bills will achieve that goal any 

more than what we currently have? 

Mr. WILMARTH. As we have discussed, in structuring Federal financial regulators, there is a balance that has to be struck between 

accountability and independence. I think that has been a consistent 

theme for all the bank regulators, because we know that the banking system is so critical to the success of our economy. We also 

know that banks and politics have been entwined since the very beginning of this Nation. 

There is always political pressure involved where banks are involved. And so, if regulators can’t have a degree of independence, 

that can be fatal. 

Mr. SCOTT. And if H.R. 1355 were adopted, what would be the 

impact on the consumers? 

Mr. WILMARTH. A very severe one, in my opinion. I think some 

of the provisions we haven’t talked about are the direct taking 

away of any policy-making independence. So, if you put the CFPB 

under the Treasury, the Treasury could then veto rules, remove officers and officials, reorganize the agency, and interfere with enforcement proceedings. It would have none of the autonomy that 

the Office of the Comptroller of the Currency has within the Treasury. 

Again, my question is—the Office of the Comptroller of the Currency is an enormously powerful agency, headed by one person who 

regulates all of the largest financial institutions in this country. 

Many of them are also among the largest financial institutions in 

the world. And yet, there are detailed provisions giving the OCC 

all types of autonomy. So why are we taking away all the autonomy from the CFPB, but preserving all of it for the OCC? 

It was interesting that when the Treasury General Counsel criticized in a comment letter a proposed rule that the OCC put out, 

Members on the other side of the aisle leaped to the OCC’s defense, 

and told Treasury to stop interfering with the OCC. The Treasury 

31 

was strongly criticized for allegedly interfering with the OCC’s autonomy. So why is there so much solicitude for the OCC but none 

at all for the CFPB? 

Chairwoman CAPITO. Yes. 

Mr. SCOTT. Thanks. Thank you. 

Chairwoman CAPITO. Thank you. 

Mr. Canseco, for 5 minutes? 

Mr. CANSECO. Thank you, Madam Chairwoman. 

Today, we are talking about how the CFPB is supposed to be an 

agency that protects consumers. This is an agency that on top of 

so many rules and laws that are already designed to protect both 

State laws and Federal laws to protect our consumers. We have to 

recognize as the politicians sitting up here and as the legislators 

sitting up here, that there is a very delicate balance that needs to 

be maintained. 

And every time that we flip that balance in any direction, whether it is in favor of the consumer or in favor of the financial 

servicers, we are always hurting the consumer. Because of that, I 

really need to stress the need for all of us as Members of this body 

that we understand the American economy and its financial systems. Because otherwise, we are going to trip into bad laws and 

bad rules. 

So with that said, I want to ask Mr. Hunter, the CFPB has a 

complaint handling process for banks with over $10 billion in assets. And this includes the reporting of general trends to Congress 

about complaints they are receiving about financial institutions. 

Given that the CFPB can essentially do whatever it wants, what 

concerns do you have over this complaint process? And is there a 

possibility that the wrong impressions could be given to consumers, 

thereby harming them? 

Mr. HUNTER. I am happy to answer that question, Congressman. 

I guess one of the most profound concerns—and as we say out 

West, ‘‘The livestock are out of the barn,’’ with regard to the delegation of authority to the CFPB in this area—but how this authority is exercised is what this hearing is about. I would like to confine my remarks to that proposition. 

With this much current authority vested in one person, that person’s style, that person’s approach to this job is going to be critical. 

And you could have somebody whose approach would be—as opposed to compliance and supervision—enforcement, which not to be 

too melodramatic, could involve scalp-hunting. You are punishing 

people to make an example. 

The tradition in banking is you have a supervisory and compliance approach. So as you say, because all this kind of authority is 

reposed in one person, the whim and caprice of that individual with 

regard to how he or she is going to approach this job is troubling. 

And it is something we are having a hard time getting our head 

around, which is why we are participating in this hearing, and why 

we suggest a better approach to how that authority is exercised 

would be a commission. 

Mr. CANSECO. Thank you. 

So, handling complaints is just one of the services that banks 

provide to their customers. Yet, the CFPB has decided to make a 

public display of all the complaints received from banks, and about 

32 

banks. Are you concerned that publicly, the CFPB is only focusing 

on negative aspects of banks’ relationships with their customers, 

and not seeing the whole big picture of all the good things and the 

efforts that they do? 

Mr. HUNTER. If there is going to be a public inventorying of complaints, it ought to be holistic; which is to say, if there are complaints that are determined to show that there is no fault of a 

bank, and there is a good story there, there ought to be a holistic 

approach to that. And our concern is it is going to be all of the bad 

and none of the good, Congressman. 

Mr. CANSECO. So it is going to paint financial institutions in a 

very bad light? 

Mr. HUNTER. Sure. 

Mr. CANSECO. And complaints are a natural concurrence, are 

they not? 

Mr. HUNTER. That is a concern we would have about the template that is in place. 

Mr. CANSECO. Thank you. Thank you, sir. 

Now, Mr. Pincus, I would like to ask you about the overall structure of the Bureau and revisit something this committee has been 

in favor of for a long time. This committee has been fighting for 

almost a year to create a five-member commission at the CFPB, 

only to be rejected by the Senate and the President. So I would like 

to point out some differences between the Board of Governors at 

the Federal Reserve, and the CFPB. 

The Fed’s Board consists of an academic, a former community 

banker, a State financial regulator, a former Fed District President, and a former Clinton Administration official. And by contrast, 

Mr. Cordray has spent his career suing banks and other private 

sector participants. What does this lack of diversity at the CFPB 

mean about the direction this agency will take in its relationship 

with the private sector? 

Mr. PINCUS. I think it is a real concern, Congressman. I think, 

given the very broad power that the agency has—and I know it has 

been labeled a bank regulator, but as you know from the legislation 

that is moving through Congress, this agency regulates much more 

than banks or even the financial institutions. It regulates really 

the whole economy, to a large extent. 

And so, giving that authority to one person, who by definition is 

going to have limited experience, is a recipe for disaster. And I 

think one interesting analogy—I do a little antitrust law. And if 

you compare the Antitrust Division of the Justice Department, 

which is headed by one person, to the FTC, which is of course a 

commission, most people would say that because of the input from 

multiple people and people from different backgrounds, the FTC 

has charted in the antitrust law a much more consistent, measured 

path, while the Justice Department has sort of swung back and 

forth, depending on Administrations. 

And I think that is a real problem here, and it is why every 

agency that you can think of, in which there are these restrictions 

on appointment authority, also have multi-member commissions for 

just that reason. 

Mr. CANSECO. Thank you very much. 

My time has expired. 

33 

Mr. RENACCI [presiding]. I recognize Ms. Velazquez. 

Ms. VELAZQUEZ. Thank you. 

Mr. Pincus, I try to understand the argument as to why the 

budget for the CFPB should be—instead of being by fee assessment, it should be appropriated? And when we look at those regulators such as the OCC, the FDIC, and the Federal Reserve that 

in some ways have jurisdiction over consumer compliance laws, 

they were not subjected to appropriations. So, my question to you 

is, since Dodd-Frank transferred those jurisdiction and responsibilities to the CFPB, should Congress now defund all these Federal 

agencies and make them subject to appropriations? 

Mr. PINCUS. I think a couple of answers, Congressman. First of 

all, in terms of accountability, which is really—appropriations is 

one part, in all those other agencies. There are other accountability 

mechanisms. 

For example, with the OCC, although it is true that it is funded 

outside the appropriations process, there aren’t the restrictions on 

the removal of the Comptroller. The President has blanket removal 

authority, the Justice Department has said and also the Treasury 

Secretary has general oversight as well as authority over appointing deputies. 

So, there is a control there that doesn’t exist in the Bureau. And 

I think the critical problem is, with those authorities transferred 

to the Bureau, it is now an agency that has both no appropriations 

oversight and no policy oversight in terms of effective governance. 

And just one last point if I may, this is not any longer just a 

bank regulator. And so, I think the appropriate comparison is really other consumer regulators, as you said. And if you look across 

the government, the FTC, the CSPC, the Justice Department, all 

of those entities are subject to the appropriations process. 

Ms. VELAZQUEZ. As a regulator—the CFPB is a regulator. And as 

long as the National Bank Charter has been in the system—in fact, 

all the way back to 1864 when the OCC was established by a Republican, under a Republican President—the budget has been funded through assessment, not appropriation. In its wisdom, Congress 

passed the law that way, to give the independence to that agency. 

Yes, sir? 

Mr. WILMARTH. It seems to me that the experience of the FHFA 

is also very applicable. Congress determined that we needed a 

strong, independent regulator and a single regulator who would be 

accountable and would be strong enough to take effective action 

against these enormous, government-sponsored enterprises. In my 

view, the largest banks today, which the OCC regulates, have 

many similarities to the government-sponsored enterprises. They 

are widely viewed as being too-big-to-fail. 

And so why is a single-Director model good for the FHFA and not 

for the CFPB? The single-Director model focuses accountability and 

prevents the Director from saying it is somebody else’s fault if 

things don’t go well. 

Ms. VELAZQUEZ. Professor, prior to the Dodd-Frank Act, bank 

regulators often had to choose whether to use limited resources to 

enforce safety and soundness, or consumer protection laws. In your 

opinion, do the proposed bills undermine the advantages of having 

a separate regulator dedicated to each mission? 

34 

Mr. WILMARTH. Yes. Unfortunately, and I think everyone seems 

to have agreed on that point today, the Federal prudential regulators gave very short shrift to consumer protection; they didn’t 

seem to think it was that important. They didn’t seem to think it 

would have systemic effects. 

We now know that a systemic failure to protect consumers will 

eventually have a systemic negative effect on the financial system. 

Congress created this regulator to provide accountability and focus 

for consumer protection, but then if you take away the secure 

budget, you end up with the problems the SEC and the CFTC are 

dealing with. 

Ms. VELAZQUEZ. Thank you. 

Mr. WILMARTH. They have an important mandate that they can’t 

carry out. They have said so. They can’t carry it out because they 

don’t have enough money. 

Ms. VELAZQUEZ. Under the revised funding provided by H.R. 

1355, non-bank financial institutions like mortgage companies and 

check cashers could escape CFPB oversight if the agency lacks sufficient funding to extend oversight to these entities. What are the 

risks to consumers if these entities are not brought under Federal 

supervision in a timely manner? 

Mr. WILMARTH. I would expect the CFPB’s Director to focus on 

the largest institutions, for obvious reasons. They have the largest 

overall impact on consumers. But then we would go back to the 

same situation we had before the crisis when to some extent, banks 

were regulated, but there were large groups of non-bank providers, 

such as payday lenders, such as non-bank mortgage lenders, that 

were very lightly regulated and very inconsistently regulated. 

And without an annual CFPB budget, I think you will see something similar, because the Bureau will be forced to put more of its 

attention on the banks, and it won’t be able to put enough attention on the non-banks. And that actually won’t help the banks. It 

will actually be to their disadvantage. 

Ms. VELAZQUEZ. Thank you. I yield back. 

Mr. RENACCI. Thank you. 

I recognize Mr. Duffy for 5 minutes. 

Mr. DUFFY. I thank the Chair. 

We engaged in this conversation about transparency and accountability with the CFPB and my friends across the room here 

keep indicating that the CFPB has been in 14 times over the 

course of the last year. And they hold that up as a great example 

of the accountability that we have over the CFPB. 

But the bottom line is, they are coming in and having a congressional conversation. There really is no oversight when they come in 

and speak with us. There is no teeth that we have when they come 

and have a conversation with us. And I think that is one of our 

concerns. Though they come in and share in a question-and-answer 

session, we really can’t do anything if we have a concern about the 

activity of the CFPB. I think a great example of oversight is with the $350 million 

CFPB budget. How long was their disclosure? Seven pages—seven 

pages for $350 million; and we are supposed to clap our hands and 

say, ‘‘This is wonderful oversight, transparency, accountability; 

isn’t this great?’’ This is a perfect example of how we don’t have 

35 

any accountability here. There is no oversight. I think that is our 

concern on our side of the aisle. And I know there is a concern that 

we want to keep politics out of this. 

We want to keep it immune from political activity. But really 

what that means is we want it to be immune from congressional 

oversight. This body is made up of the elected Representatives in 

the country, and it is our responsibility to make sure we do our job. 

And if we don’t do our job, we are held accountable by our constituents. 

Mr. Wilmarth, would you say that you agree that we should have 

a single Director and we should keep the funding outside of Congress and just stay with the Fed? You would agree with that? 

Mr. WILMARTH. Yes, I have no problem with the current set-up. 

Mr. DUFFY. And your rationale, quickly, on the Director side is— 

versus a commission is what? 

Mr. WILMARTH. In my opinion, a single-Director model focuses 

accountability on the individual who is given the mandate. You can 

tell whether that individual is carrying out the mandate or not. 

When you have a commission, the responsibility is diffused. In my 

longer article that cited—administrative lawyers have gone back 

and forth about the merits of single directors and multi-member 

commissions. You can find both types of agencies. 

Mr. DUFFY. Wonderful. 

And to the rest of the panel, do you think that the Federal Reserve Board has been less effective because it is a board? To any 

of the three? 

Mr. PINCUS. Congressman, I think that brings great benefit in 

terms of bringing different experiences and different perspectives to 

bear on very important decisions. And just to respond for a minute 

to Mr. Wilmarth’s point about accountability, the problem is that 

the Director isn’t accountable to anyone. 

So, under the current structure, since the President can’t fire 

him and neither can Congress and the appropriations are protected, it is nice to know who the decision-maker is, but there is 

nothing anyone can do about it. And so in that situation, it is even 

more important to have multiple people with input into the decision, which is why all of these regulatory agencies that you can 

think of are structured that way. 

Mr. DUFFY. And I guess I also haven’t heard a lot of complaints 

about the FDIC having a five member commission as well; that 

they are pretty effective as a commission, though power is not consolidated in one Director. Mr. Hunter, would you disagree with 

that? 

Mr. HUNTER. I think that the current situation really, Congressman, underscores the fallacy if you will of placing all this responsibility on one person and deciding or arguing that that is a good 

thing because one person is responsible. 

If you are going to have an independent entity like this, which 

I think Congress should do in only exceptional circumstances, and 

this may or may not be one, but if you are going to have an independent agency, you ought to have a commission so that the power 

and authority, in this case which is virtually unprecedented, is 

shared between a group of people as opposed to one person. 

36 

So that person’s—and we are all human beings—idiosyncrasies, 

that person’s whim and caprice, don’t direct the administration of 

his authority and responsibility. 

Mr. DUFFY. And I want to—I only have a few seconds left. 

Mr. Wilmarth, did you follow the later Bush years; and did 

George Bush attempt to make some judicial appointments? But 

was he unable to do that because the Senate went into a pro forma 

session? 

Mr. WILMARTH. I am not familiar with that incident, I am sorry. 

Mr. DUFFY. You are not aware of that? 

Mr. WILMARTH. I am not familiar with it. It may have happened; 

I am not familiar with it. 

Mr. DUFFY. Okay. 

Mr. STINEBERT. Congressman, I just wanted to point out some 

other advantages to having a commission. One is I am sure there 

would be staggered terms. Continuity is a big issue. Right now, you 

have a single Director whose term is going to end. 

You are going to start completely over again with whomever the 

new Director is. If you have a commission or a panel, you are going 

to ensure some continuity; you are going to have some more balance; you are going to have some more thought-provoking experience to a commission. And I think that can only be to the advantage of this body. 

Mr. DUFFY. And one last comment, at some point there will be 

a Republican President who will appoint a commissioner and my 

friends across the aisle may not like that. I think it is important 

to share that power so we don’t have this continual divide in a very 

important agency. And I yield back the time I don’t have. 

Chairwoman CAPITO. Thank you. 

Mr. Green is recognized for 5 minutes. 

Mr. GREEN. Thank you, Madam Chairwoman. You are very generous with the time. 

Again, I thank the witnesses. I do want to look closely at the 

proposition that the Consumer Protection Financial Bureau has no 

oversight and this is of concern because I believe in oversight. I 

think oversight is of paramount importance. I think oversight helps 

to avoid arbitrary and capricious acts, so I stand with those who 

stand for oversight. 

So, perhaps I am incorrect. And one of the ways I try to find out 

exactly where I am is to pose questions to a panel, and I do so as 

lawyers do when they examine jurors—the process known as voir 

dire or voir dire, depending on where you are from. In Texas, it is 

voir dire. So I am a transplant, and I am a now voir dire person. 

So with this and 3 minutes and 50 seconds left, does everyone 

agree that there is an entity known as the Financial Stability 

Oversight Council? 

If there is disagreement, kindly extend your hand into the air. 

I ask that the record reflect that no hand has been extended into 

the air, hence I conclude that all agree that there is an institution 

known as the Financial Stability Oversight Council. 

If you agree that the Financial Stability Oversight Council has 

oversight in the sense that it can review and overturn any regulation of the CFPB, do you agree that it can review and overturn any 

regulation of the CFPB? 

37 

If someone— 

Mr. HUNTER. They would have to prescribe, if I can, Congressman— 

Mr. GREEN. If you would let me have my time— 

Mr. HUNTER. Yes. 

Mr. GREEN. —for just a moment, I may yield to you. 

But I just want you to tell me, as—by the way, as other 

Congresspersons ask their questions and they get answers, I would 

like to have a similar opportunity. 

Do you agree that the Financial Stability Oversight Council can 

overturn any regulation of the CFPB? 

If you differ and say that it cannot, then you should raise your 

hand. 

Let the record reflect that no one differs. The Financial Stability 

Oversight Council can review and overturn regulations of the 

CFPB. I think it is worthy of noting who is on the Financial Stability Oversight Council. The Treasury Secretary chairs the Financial Oversight Council, and it is composed of: the Chairman of the 

Federal Reserve Board; the Comptroller of the Currency; the Chairman of the Federal Deposit Insurance Corporation; the Chairman 

of the Securities and Exchange Commission; the Chairman of the 

Commodities Futures Trading Commission; the Director of the Federal Housing Financing Agency; the Chairman of the National 

Credit Union Administration; and a Senate-confirmed independent 

member with insurance expertise that will segue into something 

you and I might discuss in just a second, Mr. Hunter, if I have 

time. 

But these persons, all of whom have great expertise, sit in judgment of the Consumer Financial Protection Bureau. And it is ironic 

that the style of the entity that they happen to sit on has within 

it the word ‘‘oversight,’’ the Financial Stability Oversight Council. 

That is oversight. I don’t know how we can conclude that there is 

no oversight. 

Now, perhaps someone could make the argument that it is not 

enough to have all of these persons with all of this expertise, but 

I find it difficult to make the argument that there is none, zero, 

that is a difficult argument I think to make successfully. 

I wish I could go to you, Mr. Wilmarth, but I can’t. 

Mr. Hunter, you mentioned that you would like to see a banker 

on a given entity, did you not? Which institute was that, please? 

Someone representing— 

Mr. HUNTER. Our preference, Congressman— 

Mr. GREEN. Yes, sir? 

Mr. HUNTER. —is that someone with banking experience— 

Mr. GREEN. Yes, sir? 

Mr. HUNTER. —be added to the FDIC— 

Mr. GREEN. FDIC? 

Mr. HUNTER. —or to the Fed. 

Mr. GREEN. Okay, listen, I think you and I should have a conversation about this. I am not a person who opposes bankers having some influence and some opportunity to have their position 

known. 

I support banking. This country needs good banks, but we also 

need good oversight for the purpose of protecting consumers. But 

38 

I would dearly like to visit with you about it and perhaps we can 

find some common ground to stand on. 

And, Madam Chairwoman, thank you for the time. 

Chairwoman CAPITO. Thank you. 

Mr. GREEN. I want to yield back to you. 

You have graciously accorded me the time, so I surrender it to 

you. Thank you. 

Chairwoman CAPITO. Thank you. 

I would like to ask unanimous consent to have the following 

statements placed in the record: the Consumer Bankers’ Association; and the Credit Union National Association. 

The ranking member also has a unanimous consent request. 

Mrs. MALONEY. I ask unanimous consent that the statement of 

Americans for Financial Reform be made a part of the record. 

Chairwoman CAPITO. Without objection, it is so ordered. 

Mr. Luetkemeyer is recognized for 5 minutes. 

Mr. LUETKEMEYER. Thank you, Madam Chairwoman. 

Just to follow up a little bit on Mr. Green’s comments, I, too, 

have concerns about the CFPB Director on the FDIC and quite 

frankly, I am not a big fan of the Fed Chairman going on there. 

I really like the idea of a banker being on there, and the reason 

is this: We had testimony here last week with regards to an ombudsman program and the ability to connect back with the regulators. And there is a huge disconnect right now with what is going 

on in the field and what is going on with the regulators. 

And I think putting somebody who is more in touch with what 

is going on the ground would certainly enhance the ability of the 

FDIC to understand some of those problems. I am not trying to 

pick a fight here, but I think that it makes sense to have somebody 

who can add that connection; to be somebody who would add great 

value to the Board. 

So, that is just my first comment. 

My second comment would be, Mr. Hunter, can you tell me something about—something we haven’t talked about really is the privacy information that Mr. Huizenga is trying to protect here in his 

bill. 

Can you tell me how the banks have been protected in the past 

up until now; how this is going to impact not only the banks but 

the customers by what is going to be available to the public which 

really is probably some information that they really shouldn’t see? 

Mr. HUNTER. The privileges that attach to information that is 

shared with bank examiners now is important because it ensures 

that there is an orderly, highly facilitated flow of information between banks and examiners so that examiners can do their jobs 

and banks can participate in— 

Mr. LUETKEMEYER. That information is very specific to the individual customer, as well, is it not? 

Mr. HUNTER. It can be, very frequently. 

Mr. LUETKEMEYER. Yes. 

And that information then would be available to the public if this 

bill doesn’t go through? Is that a fair statement? 

Mr. HUNTER. We strongly support Congressman Huizenga’s bill. 

There does need to be a tweak so that information that is shared 

39 

with other Federal agencies is also provided that privilege. But yes, 

Congressman, we support the bill. 

Mr. LUETKEMEYER. So in other words, the average citizen who is 

doing business with an institution, his financial records can be 

open to the public for everybody to see, which is really an invasion 

of his privacy with the way the current law is structured for the 

CFPB, is that correct? 

Mr. HUNTER. Conceivably, and that is a great argument for why 

the— 

Mr. LUETKEMEYER. Thank you. 

Mr. HUNTER. —privilege needs to exist. 

Mr. LUETKEMEYER. Thank you. 

Another quick question here with regards to the fines and the 

penalties that are charged, is there any recourse with regards to 

an institution which would be charged a fine by the CFPB? Is there 

any appeals process in place? 

Mr. HUNTER. You have opportunities in Federal court in certain 

situations, but existence of an appeals process there— 

Mr. LUETKEMEYER. So there is an ombudsman’s program in this 

like there is with the Fed and those other groups that were talked 

about the other day? 

Mr. HUNTER. I don’t believe so. We can check. 

Mr. LUETKEMEYER. Very good. 

It is interesting. As we go through this process, some of the 

Members on the other side of the aisle seem to think that the entire financial debacle of a few years ago was caused by consumerfinance problems. 

And let us be straight about what consumer finance is here. Consumer financial products here that we are talking about—consumer 

financial problems are not loan quality; are not investment-quality 

problems. They are problems with disclosure, and whether an APR 

is correct or what the fees are for a particular loan—it is all of this 

discloser stuff that we are talking about. 

And so, how that is impacting the world of finance and causing 

things to go down is beyond me. I think it is a part of Dodd-Frank 

legislation which was an attempt to try and solve some problems. 

But let us be clear. Consumer finance is not going to cause the 

debacle of—or save us from another debacle down the road. However, it does impact the banking institutions and the lenders at 

heart. 

And Mr. Pincus, I am sure—you, a minute ago, made the comment in your testimony with regards to the regulations and how 

they restrict credit. 

This is another example of some of the stuff here if we continue 

to push this stuff, how difficult it is for institutions to continue to 

lend when their hands are hamstrung, why the many things have 

happened with consumer protections, is that not correct? 

Mr. PINCUS. Absolutely, Congressman, and it is a special concern 

because as you know, small businesses often rely exclusively or certainly principally on consumer lending services or products. 

Mr. LUETKEMEYER. Have you seen a restriction with your members with regards to access to credit as a result of some of these 

consumer finance problems or situations or regulations? 

40 

Mr. PINCUS. Absolutely. Small businesses right now are having 

real problems getting access to credit and a lot of it is the general 

tightening up of credit for consumers and they are sort of hit in the 

crossfire because they access consumer credit and our real fear is 

that rules that are focused on consumers will have this terrible effect in terms of small businesses which, as you know, are the engines of our economy. 

Mr. LUETKEMEYER. Very good. Thank you. 

And my time is up. 

Thank you, Madam Chairwoman. 

Mrs. MALONEY. Will the gentleman yield for point of information 

or the chairwoman? 

Chairwoman CAPITO. The gentleman was recognized for— 

Mrs. MALONEY. One of my amendments to the Consumer Financial Protection Bureau created an ombudsman. So there is an ombudsman there and they are in the process of putting that in place 

now in the 34 days they have been in operation. 

Chairwoman CAPITO. Thank you. 

Mr. McHenry, for 5 minutes? 

Mr. MCHENRY. Thank you. I thank the Chair. 

And thank you for your testimony. 

I know most of the questions have been asked, but I have not 

asked any questions. 

In my Subcommittee on Oversight and Government Reform, we 

had Mr. Cordray before us and he testified that he certainly has 

a significant amount of additional willingness to be open about his 

process than we have seen from other folks who held the temporary 

position over the last year. 

It is my opinion—but I think most folks can judge his testimony 

before the Senate and before my subcommittee, and additional testimony that he is going to give before a Financial Services Subcommittee—that he has been willing to answer questions. He has 

been willing to take in ideas. He is willing to add additional transparency. 

It still doesn’t fix the problem with the CFPB that you have one 

individual with an inordinate amount of power without restriction. 

And the only way that FSOC can overrule anything he or she does 

coming out of there, is if it poses a systemic risk across our economy. Basically, you would have to have one individual promulgate 

a rule that will bring a cataclysmic event the likes of which we 

have only seen once—we see once every half a century, in essence. 

So barring that, they are pretty safe to act. 

Now, I have asked in terms of transparency for the CFPB to put 

forward their rulemaking agenda for the year. The SEC does this. 

Other regulators do this. And that has gotten a favorable response 

and they have made some action in that regard. The additional 

question is the rulemaking process that they have at the CFPB. 

Mr. Pincus, I know you have studied this significantly. In terms 

of how transparent that process is, from your view of what the SEC 

does to promulgate rules versus what the CFPB seems to be 

doing—because I don’t think there is much clarity—is there a significant difference between that process? 

Mr. PINCUS. As you say, Congressman, we don’t quite know yet. 

And I think there is a little bit of good, but some considerable reaVerDate Nov 24 2008 18:36 Aug 21, 2012 Jkt 075071 PO 00000 Frm 00046 Fmt 6633 Sfmt 6633 K:\DOCS\75071.TXT TERRIE
41 

son for concern in how things are going. And I think, just to take 

an example, I think everybody agrees that disclosure around mortgages is a myth and has to be dealt with. And one of the things 

that Dodd-Frank does is it requires it to be dealt with. 

So, before starting a formal rulemaking process, the Bureau has 

engaged in lots of consultations, which is a good thing. I think the 

concern is the input that it has received on its sort of tentative 

ideas have not been made public. It has all been kept private. It 

has not, although the statute requires the so-called soprefa process, 

the process to protect small business as a critical part of rulemaking, it hasn’t been activated in this preliminary process. It 

hasn’t even been enacted yet, and so being sure that small businesses are protected, which Congress was concerned about, hasn’t 

happened yet. 

And I think the real concern is that this informal process, which 

doesn’t have a lot of protections in it in terms of disclosure, could 

become a substitute for the formal process and the real rulemaking 

process that the statute requires could become a rubber stamp. Everyone could have made up their minds, and so they have 30 days 

worth of comment and then they just promulgate the proposal that 

they had at the beginning. 

So, I think there is just a real importance in being sure that 

there is a lot of opportunity for input. The input is clear in how 

it is dealt with and responded to, is part of an interactive process. 

And that ultimately, all people do, as the Administrative Procedure 

Act requires, have an opportunity to be in there and participate. 

And just one more point, if I may? We are talking about rulemaking. Enforcement, a lot of agencies, consumer protection agencies and certainly Mr. Cordray’s predecessor in the temporary job 

said that it was her view that she wanted to use enforcement to 

set standards, rather than rulemaking, because that was more efficient and easier. 

And so, there is a real risk and we don’t know where this Bureau 

will find its balance. But enforcement decisions have none of those 

protections. An agency can bring an enforcement action, either get 

a settlement or get a decision—obviously, all legitimate companies— 

Mr. MCHENRY. It is basically regulation through lawsuit, and the 

Federal Government already has that authority. 

So as the small business panel, I appreciate you touching on 

that. It is highly important that with every major rulemaking, you 

impanel small businesses. 

Mr. Stinebert, harmonization among regulators to make sure 

that when you have a CFPB rule promulgated, that it is uniform 

across institutions and business sets and among the regulators; 

that there is agreement to that—can you touch on that as my time 

has expired? 

Mr. STINEBERT. Yes, Congressman, thank you for bringing that 

up. One of our primary concerns is the decades of State regulation 

and the expertise that has been built up at the State level. 

We want to make sure that there is cooperation from the CFPB 

with those State regulators and that some of that talent and that 

expertise is utilized and some of that history that was with the 

42 

State regulators. We want to make sure that there is a good mix 

of that going forward. 

We have not had an indication so far of that to a great extent. 

We are very helpful as we go forward we will more of that. 

Mr. MCHENRY. Thank you. 

Thank you, Chairwoman Capito, for holding this hearing. 

Chairwoman CAPITO. Thank you. 

Mr. McCotter, for 5 minutes? 

Mr. MCCOTTER. Thank you, Madam Chairwoman. And thank you 

for indulging our colleague, Mr. McHenry, in his 5-minute question. 

One of the interesting things that we find in politics is much like 

you learn when you grow up. Never judge a book by its cover. 

Interestingly, we are seeing the Democratic Party actually make 

a vehement argument in favor of creating an entity that is as far 

from the people and the democratic process as it can be. I only note 

that because I find it very odd. It is odd not only because they 

claim to want popular participation, people empowerment over 

their own decisions. 

It is actually contrary to the wave of the future. And it is in 

keeping with the founding principles of this country for us to oppose putting one person in power. After all, the first President of 

the United States stepped down, because he did not wish to be a 

king, because he understood Lord Acton’s Dictum that ‘‘absolute 

power corrupts absolutely.’’ 

And yet, here we find ourselves in the 21st Century saying that 

despite all the changes in our world, despite all the changes in our 

lives, despite all the changes in our economy, despite the ability to 

use the social network to make our own decisions to access information, to conduct our own personal transactions based upon that 

information in nanoseconds around the world, we continue to say 

that we need one person to save us from ourselves. 

That here in the United States of America, a country built upon 

self-government, in the 21st Century, we are relying on 18th Century concepts that one individual however enlightened and benevolent they may be are necessary for the running of the entire American economy, for the running of every American’s life so they can 

make financial decisions. 

Now, I would like to point out that having opposed the Wall 

Street bailout as absolutely the wrong precedent to set in the first 

crisis of our globalized economy, in many ways this regulatory 

scheme is the bitter fruits of misdeeds that occurred during that 

crisis and precipitated it. So, I have no sympathy necessarily for 

those who must suffer under the yoke of this new entity. 

But I would remind everyone that the central argument that we 

are really having here about this CFPB is whether or not you can 

govern your own life, is what is the proper role of government in 

the 21st Century? How do you match that government with an 

economy that has become flat, that has become horizontal, that empowers you every day to extents undreamt in human history? 

And unfortunately, the answer continues to be much what we 

heard when President Roosevelt rejected the calls to become a 

short-term dictator because only one person could get the American 

economy out of the Great Depression. We have always rejected the 

concept that it is a person who will save us. And instead of worVerDate Nov 24 2008 18:36 Aug 21, 2012 Jkt 075071 PO 00000 Frm 00048 Fmt 6633 Sfmt 6633 K:\DOCS\75071.TXT TERRIE
43 

rying about the person who holds it, be it a Democratic appointee, 

be it a Republican appointee, worry about the expansion of the 

powers of the State. 

Now, I know that back in the 1980s and 1990s when the Soviet 

Union was going under, there was a school of thought that said 

Communism would still work if Stalin hadn’t ruined what Lenin 

put in place. I only bring this up because it continues to reinforce 

my point. 

What we are concerned about here is the expansion of the power 

of the State. And we know that when you expand the powers of the 

State, regardless of who is going to be in charge of it, you are going 

to have problems somewhere down the road, because you have gotten away from the very principles which allow us to be a free people and have this debate. 

Now, there are those Members of the Congress who believe that 

having their duly elected Representatives have oversight over this 

entity, because we are so inherently corrupt, I would like to ask if 

they only exclude themselves from that? Or, if they are worried 

about their own temptation to sin and make the situation worse? 

I would ask them to go back to their constituents and say, those 

bureaucrats who are always so responsive when you have a problem, who always come through? We are going to make them even 

more powerful now, but the good news is there will only be one to 

tell us no or to ignore us, or to ignore you. 

No, the CFPB’s problem is that it is based upon an outdated, antiquated model of government that will not work, especially at a 

period of time when the wave of the future is individual freedom. 

It is empowerment. And that is going to continue whether big 

vertical government likes it or not. And I assure you, regardless of 

the outcome of this debate or these bills, big government is going 

to get flattened beneath the power of the people. 

I yield back. I have no questions. 

Chairwoman CAPITO. The gentleman yields back. I think our 

final questions have been asked. 

The Chair notes that some Members may have additional questions for the panel, which they may wish to submit in writing. 

Without objection, the hearing record will remain open for 30 days 

for Members to submit written questions to these witnesses and to 

place their responses in the record. 

I would like to thank all of you. And I think we have had a very 

productive hearing. 

This hearing is adjourned. 

[Whereupon, at 12:23 p.m., the hearing was adjourned.] 

(45) 

A P P E N D I X 

February 8, 2012 

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