It was only three years ago that the Obama administration and the news media were using the language of Silicon Valley to describe the Consumer Financial Protection Bureau, the new independent agency and arm of the Federal Reserve charged with protecting Americans from products and services they want to buy.
The bureau “was designed,” according to the Washington Post, “as a Google-era regulator: a data-obsessed start-up, forever iterating, laser-focused on the safety of consumers rather than the soundness of banks,” with “a culture of creativity and corps of true believers.”
White House officials talked about cultivating this “startup culture” at the new CFPB. Aneesh Chopra, whom President Obama appointed the first “Chief Technology Officer of the United States,” praised the agency for “recruiting a small, nimble team of innovators and financial experts to design an innovative product.”
Three years later, the only things the CFPB seems to have imported from Silicon Valley are high salaries and a taste for very expensive headquarters. The cost to renovate its Washington offices now exceeds $215 million, according to an Inspector General’s report — $120 million more than was estimated just last year. This means the CFPB’s remodeling is costing roughly the same as the entire Louisiana Purchase, adjusted for inflation. And unlike the famously luxurious campuses that tech giants like Google and Apple enjoy, the CFPB’s mostly comes courtesy of taxpayer money.
Behind the “four-story glass staircase,” the “two-story waterfall” and the “sunken garden,” and underneath all the rhetoric about building a “startup agency,” the CFPB is still the same old bureaucracy, with all of the bureaucratic sicknesses that afflict the rest of the federal government, from the IRS to the Justice Department.
No one at the CFPB, for instance, can tell the Inspector General’s office who actually made the decision to renovate the building. So a board given the responsibility to protect the financial welfare of American consumers can’t even account for who authorized their own $215 million office space. Congress certainly didn’t.
That’s because the CFPB, unlike a typical government agency, does not have to return to Congress every year for budgetary and spending approval. When Democrats forced the Dodd-Frank bill into law with the support of just a few Republicans, they made sure the CFPB was funded out of a fixed percentage of the Federal Reserve’s budget. This essentially placed the agency beyond the reach of one of Congress’s core constitutional powers as well as the oversight the annual appropriations process provides.
This incredibly shortsighted decision left the CFPB with unprecedented power to interfere in the industries over which it has jurisdiction. No other federal bureaucracy enjoys this combination of budgetary freedom, broad mandate, and absence of effective oversight. And what startup has the luxury of an uncuttable budget with no accountability?
The predictable result has been an agency constantly trying to extend its powers in ways never imagined when it was created, like conspiring with the Justice Department to bully banks into cutting off service for industries the bureaucrats don’t like.
The CFPB has also been gathering enormous amounts of data on individual consumers, ordering financial institutions to hand over records on millions of accounts as well as purchasing consumer data on millions of Americans. A number of reports have alleged that the agency is demanding that credit card companies provide detailed summaries of customer transactions on an ongoing basis, but the CFPB has been less than forthcoming about just what data it’s collecting and the measures it’s taking to secure that information. Why?
Electronic surveillance by national security services for the purposes of catching terrorists is one thing, but a financial regulator collecting detailed personal data on millions of Americans is a little like the Department of Education having a SWAT team.
The CFPB, if it is to exist at all, needs a major overhaul, with a focus on accountability and respect for Americans’ privacy. First, it should be subject to the normal appropriations process that underlies all effective congressional oversight. Next, like the FTC, FCC, FEC and similar agencies, the CFPB should be led by a multi-person commission rather than by a single, unaccountable director. And finally, the CFPB should be prohibited from using a person’s personal financial information without his or her consent.
These steps would begin to bring accountability and common sense to the CFPB’s mission. But no matter what changes Congress makes, the regulator will always be unlike the startup in one important way: startups are about creating products people want to choose. Agencies such as the CFPB are about stopping people from buying the products they want to choose. In that sense, the CFPB’s business model may be fundamentally flawed.
Newt Gingrich is a former Speaker of the House and presidential candidate. He is an advisor to the United States Consumer Coalition, a consumer advocacy organization working to protect and expand access to free-market goods and services.