Not too long ago, Rep. Blaine Luetkemeyer recalled Wednesday, he was meeting with Federal Reserve Chairwoman Janet Yellen over breakfast when he posed the question: “Chair Yellen, are you getting tired of being an ATM for the CFPB?”

Luetkemeyer, a GOP member of the House Financial Services Committee, was referring to the automatic funding the Consumer Financial Protection Bureau receives from the Federal Reserve—a setup that has long rankled Republican lawmakers who've advocated for subjecting the Obama-era agency to the congressional appropriation process.

The Missouri Republican shared that memory at an event the Financial Services Roundtable hosted on the heels of the Treasury Department's recent release of a 150-page report with recommendations for reforming financial regulation.

The report mirrored several of the reforms featured in the Financial Choice Act, which calls for putting the CFPB under the congressional appropriations process and allowing the president to readily fire the bureau's director. The House passed the bill earlier this month.

The CFPB's director, Richard Cordray, is in the midst of a five-year term that expires in July 2018. Republicans, including U.S. Rep. Jeb Hensarling, chairman of the House Financial Services Committee, have called for President Donald Trump to move to fire Cordray, a step that would be fraught with legal and political peril.

When asked about the CFPB, Luetkemeyer said Trump and Cordray are “kind of in a Mexican standoff.” It was an apparent nod to Trump and Cordray's respective dilemmas. For now, the president is prevented from installing a CFPB director of his own choosing; meanwhile, the agency faces the risk of seeing proposed rules—such as limits on the payday loan industry and the use of arbitration agreements—erased by the Republican-controlled Congress and White House.

“So both of them are kind of like two bulls circling each other in the arena and they really can't get any farther here. So what we'd like to accomplish, of course, is to change the dynamics of that agency completely,” Luetkemeyer said. “You look at the Choice Act, it tells you what our preference is.”

In a separate jab, Luetkemeyer highlighted the Financial Choice Act's proposal to curb the CFPB's so-called UDAAP authority to take enforcement actions against conduct it deems “unfair, deceptive or abusive.”


John Dugan

Photo: Diego M. Radzinschi/ALM

“They refuse to define the word abusive. And as a result, anything that they see out there they classify as abusive, whether it is or not,” he said. “They make the definition up as they go.”

This week, a leading consumer advocacy organization, the U.S. Public Interest Research Group, assailed the Treasury report as a “gift to Wall Street.”

But Covington & Burling partner John Dugan, who served as Comptroller of Currency from 2005 to 2010, said the report could help the legislative prospects of reforms to the Dodd-Frank Act.

“The question is really what can get through the Senate and get the 60 votes that's necessary to do this,” Dugan said.

“The report is creating a narrative that says it's OK to make some changes, that we're not necessarily trying to throw the baby out with the bathwater,” he added. “It makes it more possible for people to say we can make this change without being just horrendously criticized by constituents for being soft on the banking industry or what have you.”

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