CFPB still too powerful? Blame Wells Fargo

by Ryan Smith16 Sep 2016
The recent Wells Fargo debacle, in which the bank was found to have opened 2 million unauthorized accounts, isn’t just a blow to the bank or its customers. It may well also have killed any hope of weakening the Consumer Financial Protection Bureau.

That’s the take of Brian Gardner and Michael Michaud, executives at investment bank KBW. Quoted in a Barron’s article, Gardner and Michaud said that the news about Wells Fargo’s sketchy behavior “will impact policy debates beyond the impact on the firm.”

“We think the news will affect efforts to change the structure and legal powers of the CFPB (all but killing the chances on making changes), increasing the chances of breaking up large banks, pressuring regulators to reject living wills, and pressuring regulators to toughen proposed rules on executive compensation,” they said.

Gardner and Michaud think the negative headlines from Wells Fargo’s $185 million settlement in the matter will kill congressional will to change the structure and authority of the CFPB. The bank’s behavior gives CFPB defenders “significant leverage to block any efforts to waken the CFPB’s regulatory powers, change its management structure to a commission, or require that its budget come from Congress rather than the Fed” – all longstanding demands of the agency’s detractors.

In fact, according to Gardner and Michaud, CFPB critics can only hope a federal appeals court in PHH’s current litigation with the CFPB finds the agency’s structure is unconstitutional. Otherwise, they said, “there is no chance that the CFPB’s power or structure will be altered.”
 

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