Republicans are once again putting a big, red bullseye on the backside of the most useless agency in the government: the Consumer Finance Protection Bureau (CFPB).
Created in 2008 after the financial crisis, its primary mission was supposed to be to prevent another subprime mortgage crisis. Instead, as with every other federal agency ever invented, it ignored its primary mission and massively expanded its regulatory authority. The result was a bloated, overbearing bureaucracy that stifles innovation and wreaks havoc on the banking sector while avoiding accountability. The CFPB is a creature of the Federal Reserve and does not receive its funding from Congress.
Texas Sen. Ted Cruz has tried to get rid of the CFPB on several occasions and will try again this year. He will introduce legislation that eliminates the agency and this time, it very well may succeed.
This year, rather than trying to repeal the law that created the CFPB, Cruz has hit upon a novel approach of setting at $0 the amount of money that the Federal Reserve could transfer to the CFPB.
“The CFPB is an unelected, unaccountable bureaucratic agency that has imposed burdensome and harmful regulations on American businesses, banks, and credit unions,” Cruz said in a statement. “It is an unchecked Obama-era executive arm and the Federal Reserve should not be transferring funds to it. Enacting this legislation would save American taxpayers billions of dollars, and I call on the Senate to expeditiously take it up and pass it.”
Cruz mentioned the biggest reason Senate Democrats are likely to line up to oppose his bill. The sainted Barack Obama came up with the idea for the CFPB, and tarnishing the Light Giver's legacy is as close to sacrilege as Democrats get (for generally being unreligious people).
The difference this time is that Cruz will fold his measure to defund the CFPB into the Budget Reconciliation bill that's currently making the rounds of congressional committees. Reconciliation only needs a simple majority to pass in the Senate.
The reconciliation process is a highly technical exercise that requires a bill to pass the "Byrd Rule" to be included in the reconciliation package.
The Byrd rule prohibits the inclusion of “extraneous” measures in reconciliation, defining “extraneous” as follows:
- measures with no budgetary effect (i.e., no change in outlays or revenues);
- measures that worsen the deficit when a committee has not achieved its reconciliation target;
- measures outside the jurisdiction of the committee that submitted the title or provision;
- measures that produce a budgetary effect that is merely incidental to the non- budgetary policy change;
- measures that increase deficits for any fiscal year outside the reconciliation window; and
- measures that recommend changes in Social Security.
While it sounds like CFPB funding is right in reconciliation's wheelhouse, a possible roadblock is that the Federal Reserve funds the agency, not Congress.
The arbiter of what can go into the Reconciliation Bill is the Senate Parliamentarian, an obscure office that carries enormous influence.
The Senate parliamentarian, the arbiter of which provisions are eligible to be included, has disappointed the majority party on reconciliation before. In 2021, when Democrats controlled the White House and both chambers of Congress, she rejected an attempt to include a provision to raise the minimum wage to $15 an hour and a separate attempt to provide a pathway to citizenship for millions of immigrants living in the country illegally.
Last year, the Supreme Court rejected a challenge that could have dismantled the agency, ruling that Congress had authority, when it set up the bureau, to insulate the bureau’s funding stream from political interference. In 2020, the court agreed with a separate challenge, ruling that the Constitution entitled the president to remove the bureau director at will rather than only for cause during a five-year term.
Veronique de Rugy, writing in Reason.com, points out the biggest problem with the CFPB.
At the heart of the CFPB's misguided decisions is its leaders' apparent belief that consumers are helpless, irrational beings incapable of making good financial decisions without bureaucratic intervention. Armed with this condescending mindset, the CFPB justifies heavy-handed regulations based on what George Mason University professor Todd Zywicki calls "trendy behavioral-economics theories to 'nudge' consumers toward decisions central planners favor." The CFPB dreams up consumer biases and creates rules to fix problems that often don't even exist. Instead of relying on empirical evidence of actual harm, the CFPB crafts policies based on theoretical assumptions.
Creating "rules to fix problems that often don't even exist" sounds like every federal agency ever invented.
Go get 'em, Ted.
