Federal Reserve Board Chair Janet Yellen was on Capitol Hill last week making her semiannual visit before the House Financial Services Committee. She submitted prepared remarks on a variety of topics and then took questions from Committee members. When those questions turned to basic information about the Consumer Financial Protection Bureau, Yellen appeared to lack basic knowledge of the Bureau’s budget. Her prepared remarks, which do not mention the CFPB, can be found here. Video of her CFPB exchange can be found here.
The 2010 Dodd-Frank Act stipulated that the Consumer Financial Protection Bureau would have oversight from the Federal Reserve Board. In an effort to make the CFPB more independent of Congressional control, the bureau was also designed to draw its baseline budget from the Fed, not from Congressional appropriations. To quell criticism that the CFPB would lack transparency and oversight, Dodd-Frank also stipulated that a new office, called Vice Chair for Supervision, would be created within the Fed. Yellen herself was testifying last week because President Obama has never nominated anyone for the post.
Addressing questions from the committee, Yellen stated that the appointment of a vice chair would be “welcome,” but she stopped short of admitting that the lack of a vice chair meant less oversight by the Fed. However, when Rep. Andy Barr asked her two fundamental questions about the CFPB, her responses suggested more oversight might be called for.
Barr first asked Yellen if the Federal Reserve approves the CFPB’s budget. Yellen was silent for several seconds and looked to aides for help. She finally answered, “I’m not sure.” Bar asked again, “Do you approve the budget?” Again, Yellen was stumped. “I don’t think so,” she said. “I think the answer is no.”
Next, Barr asked about oversight authority. “Can you veto specific allocation requests?” Barr asked. “I don’t think so,” Yellen replied.
Barr then asked if the Federal Reserve is prepared to act if CFPB exceeded its budget cap. Yellen answered: “I need to look at the details of what our obligations and limits are. I need to look at that more fully.”
Afterwards, Barr met with the press. “It’s stunning and disappointing that Janet Yellen was apparently wholly unfamiliar with the bureau’s budget,” he said. “She exhibited no oversight whatsoever of this bureau.” That is cause for concern, as the CFPB’s published budget is over $600 million.