The collapse of Silicon Valley Bank sent shockwaves through the global economy and had the makings of another crisis. Depositors raced to withdraw money. Banks worried about the risk of contagion. I spent that weekend on the phone with small business owners in Ohio who didn’t know whether they’d be able to make payroll the next week. One woman was in tears, worried about whether she’d be able to pay her workers.
The Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve responded quickly, took control of the bank, and contained the fallout. Consumers’ and small businesses’ money was safe. That Ohio small business was able to get paychecks out.
The regulators were able to protect Americans’ money from incompetent bank executives because when Congress created the Federal Reserve in 1913 and the FDIC in 1933, it ensured that their funding structures would remain independent from politicians in Congress and free from political whims.
But now, as the U.S. Supreme Court considers the case of Community Financial Services Association v. CFPB, these independent watchdogs’ ability to keep our financial system stable faces an existential threat.
The Consumer Financial Protection Bureau is the only agency solely dedicated to protecting the paychecks and savings of ordinary Americans, not Wall Street executives or venture capitalists. Corporate interests have armies of lobbyists fighting for every tax break, every exemption, every opportunity to be let off the hook for scamming customers and preying on families.
“ The CFPB’s funding structure is designed to be independent, just like the Fed and the FDIC. ”
Ordinary Americans don’t have those lobbyists. They don’t have that kind of power. The CFPB is supposed to be their voice — to fight for them. The CFPB’s funding structure is designed to be independent, just like the Fed and the FDIC. Otherwise, its ability to do the job would be subject to political whims and special interests — interests that we know are far too often at odds with what’s best for consumers.
Since its creation, the CFPB has returned $16 billion to more than 192 million consumers. It’s held Wall Street and big banks accountable for breaking the law and wronging their customers. It’s given working families more power to fight back when banks and shady lenders scam them out of their hard-earned money.
The CFPB can do this good work because it’s funded independently and protected from partisan attacks, just as the Fed and the FDIC are. So why, then, does Wall Street claim that only the CFPB’s funding structure is unconstitutional?
Make no mistake — the only reason that Wall Street, its Republican allies in Congress, and overreaching courts have singled out the CFPB is because the agency doesn’t do their bidding. The CFPB doesn’t help Wall Street executives when they fail. It doesn’t extend them credit in favorable terms or offer them deposit insurance like the other regulators do. The CFPB’s funding structure isn’t unconstitutional — it just doesn’t work in Wall Street’s favor.
If the Supreme Court rules against the CFPB, the $16 billion returned to consumers could be clawed back. What would happen then — will America’s banks really go back to the customers they’ve wronged with a collection tin?
“ Invalidating the CFPB and its work would also put the U.S. economy — and especially the housing market — at risk. ”
Invalidating the CFPB and its work would also put the U.S. economy — and especially the housing market — at risk. For more than a decade, the CFPB has set rules of the road for mortgages and credit cards and so much else, and given tools to help industry follow them. If these rules and the regulator that interprets them disappear, markets will come to a standstill.
By attacking the CFPB’s funding structure and putting consumers’ money at risk, Wall Street is putting the other financial regulators in danger, too.
The Fifth Circuit’s faulty ruling against the CFPB is astounding in its absurdity — the court ruled that the authorities that other financial agencies, like the Federal Reserve and the FDIC, have over the economy do not compare to the CFPB’s authorities. In other words, the court is claiming that the CFPB supposedly has more power in the economy than the Fed.
That’s ridiculous. Look at the extraordinary steps taken to contain the failures of Silicon Valley Bank and Signature Bank — the idea that the CFPB could take action even close to as sweeping is laughable.
But we know why the Fifth Circuit put that absurd assertion in there — they recognize the damage this case could do to these other vital agencies, and to our whole economy.
“ Imagine what might happen if another series of banks failed and the FDIC did not have the funds to stop the crisis from spreading.”
The FDIC’s own Inspector General has stated that the Fifth Circuit ruling could be applied to their agency. If that happens, the FDIC and other regulators could be subject to congressional budget deliberations, which we all know are far too partisan and have resulted in shutdowns. Imagine what might happen if another series of banks failed and the FDIC did not have the funds to stop the crisis from spreading, or the Deposit Insurance Fund to protect depositors’ money. Imagine if politicians caused a shutdown, and we were without a Federal Reserve.
U.S. financial regulators are independently funded so that they can respond quickly when crises happen. It’s telling, though, that plenty of people in Washington don’t seem to consider the CFPB’s issues in the same category. Washington and Wall Street expect the government to spring into action when businesses’ money is put at risk. But when workers are scammed out of their paychecks, that’s not an emergency — it’s business as usual.
When Wall Street’s abusive practices put consumers in crisis, the CFPB must have the funding and strength it needs to carry out its mission — to protect consumers’ hard-earned money.
U.S. Sen. Sherrod Brown (D-OH) is chairman of the U.S. Senate Committee on Banking, Housing, and Urban Affairs.
More: Supreme Court to hear case that will decide the future of consumer financial protection
Also read: Senate Banking Chair Sherrod Brown sees bipartisan support for changes to deposit insurance
