Key Takeaways
- Federal Reserve Chair Jerome Powell said “no other federal regulator” is conducting examinations of banks for consumer fraud after the Consumer Financial Protection Bureau stopped work this week on the orders of the White House.
- Democratic senators used Powell’s twice-yearly financial report to raise concerns about Republican efforts to dismantle the bureau, which serves as the government’s consumer watchdog agency.
- The bureau, established in the wake of the Great Financial Crisis of 2010, regularly examines big banks to look for violations of consumer protection laws.
With the government’s consumer watchdog agency off the job on the orders of the White House, Democratic lawmakers are wondering: who’s now in charge of policing the banks?
The Consumer Financial Protection Bureau (CFPB) regulates financial institutions, carrying out regular examinations for signs they’re breaking any consumer protection laws. The Bureau found itself in the crosshairs this week as Budget director Russell Vought ordered the bureau’s office closed, its employees to cease work, and asked for its budget to be reduced to $0.
No other federal regulator has taken on the role, Federal Reserve Chair Jerome Powell told regulators in response to a question Tuesday. Powell took questions from the Senate Finance Committee after delivering the Fed’s twice-yearly report on monetary policy to Congress.
The Federal Reserve funds the CFPB under the regulations that created the bureau, but the agency is independent from the central bank.
The Fight Over the CFPB
Powell’s hearing became a flashpoint in the battle over the future of the CFPB. Republicans have long criticized the agency as an impediment to business, while Democrats have championed the agency for its investigations into wrongdoing by banks and other financial institutions.
Republicans at the hearing noted that consumer protection laws were still in effect, and that other banking regulators, including the Federal Reserve, were still able to examine banks. They also said state departments of banking could respond to consumer complaints and reports of fraud.
Democrats argued that eliminating the CFPB would leave huge gaps in consumer protection laws. The Dodd-Frank Act, which established the bureau, made it the primary agency responsible for enforcing consumer protections, and the only one carrying out examinations looking for wrongdoing against consumers.
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