Zywicki in WSJ: Consumer Bureau Structure Unprecedented

Professor Todd Zywicki is quoted in a Wall Street Journal op-ed critical of Elizabeth Warren, de facto head of the new Consumer Financial Protection Bureau.

At a recent Capital Hill hearing, Zywicki expressed his belief that the consumer bureau's structure "may be unprecedented in American History." The bureau is structured such that it has a single director accountable only to the president, its budget is not subject to Congressional appropriations, and its regulations may be overturned by the new Financial Stability Oversight Council with a two-thirds majority vote.

A May 2 letter from 44 Senate Republicans to the president proposes three reforms: a board of directors to oversee the bureau; making the bureau's budget subject to Congressional appropriations; and letting other regulators assess the implications of new bureau rules on safety and soundness of the financial system.

Holding Mrs. Warren Accountable, The Wall Street Journal, May 25, 2011.

"The bureau's director can also set the agency's budget annually, with a ceiling of several hundred million dollars. As the Senators point out, there's no mechanism to ensure those taxpayer monies are used prudently. Other consumer protection agencies face annual Congressional budget scrutiny—an ever more important democratic check amid ballooning deficits. Mrs. Warren yesterday evaded this criticism by calling the bureau a 'banking regulator' and comparing it to the Office of the Comptroller of the Currency (OCC), which isn't subject to Congressional appropriations.

"But her bureau isn't a traditional banking regulator like the Federal Reserve or OCC that ensure the safety and soundness of the financial system. The bureau's mandate is to regulate consumer-financial products, while the impact on bank health is someone else's problem. For precisely this reason, House Republicans want to let the Financial Stability Oversight Council overturn a bureau rule with a simple majority, rather than two-thirds."